Realistic business planning – a how to
Thursday, August 19, 2010/
“When you’re starting out in a business, you actually can’t plan for a lot of the things because you just don’t know enough. But I think there is sort of a halfway house which is actually thinking about the business in terms of what you are bringing to the business.”
“Maybe I’m bringing my technical skills or maybe I’m a person who’s very good at selling or maybe I’m a person who’s very good on finance or maybe I’m a person who’s a very good manager. But what are all the other things that the business needs that I don’t bring to it? And I think that’s the number one thing that people don’t thing about. “
“The other part I think is actually the money model – how are we actually going to make money out of doing this? And I think that’s the big thing that people don’t do ahead of time. “
“So it’s less about the sort of formal business plan and big analysis. Because people who do big analysis of markets always go “wow, look the market is $20 million and we only need this tiny percentage of that so we’re going to be rich because we’re going to get $2 million straight away”. But they don’t think what’s the actual cost of marketing to those people, what’s the cost of producing, what’s the cost of distributing, what’s the cost of this and that and everything. “
“So they don’t actually put together what I call just a simple money model of how are we going to make money out of doing this and what’s the value that we’re adding?
“One of my favourite sayings is from the cook Nigella Lawson. She always says a cake demands mathematical respect. And I think the same with starting a business. A business demands mathematical respect, you need to have a look at it from a numbers point of view and that’s the key thing that people don’t do. I’ve seen lots of businesses start up and they actually weren’t ever going to be able to make money out of it because there is a huge chunk which they’ve missed in the process.”