The link between business planning and combat readiness

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Rumor has it that anyone who has visited a sausage factory will never agree to eat one again, after seeing how and what it is made of. This seems to be true for other things in general as well.

When people discover a process or system from the inside out, they discover the gaps between their formal outward appearance and the chaos behind the scenes. Lawyer Avigdor Feldman once said that the justice system and the justice system are two distant cousins, who once or twice a year have no choice but to meet. In business, of course, there is a big gap between the orderly, systematic outlook and the often messy everyday reality. One place where this is most reflected is the preparation of business plans and future forecasts of revenue and growth.

We operate in an industry whose economic right to exist is based on the aspiration to rapid growth. Investors are willing to risk their capital in businesses that require millions and typically between two and five years, before they generate any income, let alone operating profit or return on investment for investors. Therefore, from the early stages of business life, even before a team is formed or a product is developed, the entrepreneur needs to think about the future business model and revenue expectations.

At the very beginning of the life of the company, even before a team is formed or a product is developed, the entrepreneur must think about the future business model and income expectations. Photo: Pixabay

Experience shows that startups go through many upheavals during their first stage, and generally change their product plan, business model, and sometimes even target market or global business area. Therefore, a single cohesive business plan, accurate sales forecasts, accurate pricing of the future product, or a detailed model that shows the sales value chain and where exactly every penny will go, is more of a dream than a reality. .

And yet, the wait arises, and the entrepreneur is invited to face it and at least to prove a future business logic to a product which is still several years away from meeting its first customer. Even further, before additional capital raising or ongoing budget planning, entrepreneurs worked overtime to make detailed economic forecasts, even before reaching the stage where the assumptions on which those forecasts are based were. actually tested. So why exactly is this thinking and planning needed if everyone involved understands that they are nothing more than a collection of guesses and wedge cuts designed to produce the appearance of an operational plan?

I have two answers. The first is that you don’t go into battle without a plan. It is clear to everyone that on the battlefield, things will happen unexpectedly, simultaneously, without necessarily knowing what is going on, or where we are being attacked from, and without having a perfect answer to all of them. possible scenarios. That being said, it is also clear that if we reach the battlefield without any plans, we will have no chance of surviving. So even if our business plan and forecast are unfounded, it’s best to start with the basics and adapt as you go.

The second answer is that the pre-planning process requires the entrepreneur to explore, ask questions, delve a little into a future world of market and sales dynamics before even experiencing it on a daily basis, acquiring thus a richer perspective of the business environment in which it will operate, while showing initiative to investors. This upfront planning, while most of it will be lost, has value in getting things done.

A few weeks ago, I was invited to give a lecture, and on the agenda of the conference, I saw that before me there would be a lecture by Dr Yossi Maaravi, from the University Reichman, on building a business model. I arrived early and sat in the corner of the room during his lecture. When asked why I had come, I replied with embarrassment that I had never studied economics or business, so I had never heard a lecture on building a model of business. ‘business.

I have built many models as an entrepreneur. As an investor, consultant, or board member, I have looked at models built by others, however, never heard a speaker explain the topic. During Dr Maaravi’s lecture, I heard a lot of things that I already knew or at least that corresponded to the experience I had gained. I also heard new things, especially about the different theories and the different approaches that exist in the field.

The lecture was intended for inexperienced people who must have gotten a lot of value out of it, being exposed to the topic for the first time, but I was also glad that I took the trouble to come and listen to this lecture, besides having refers to coming back to this during my session, discussing other aspects of entrepreneurship. It was interesting to be exposed to the subject in a methodological way and to see how many things that I have learned simply by experience and that I do naturally, without calling them by name or knowing how to explain them in detail, were analyzed in detail and integrated into a structured and organized action plan.

And here, a few weeks later, I find myself again in the familiar position of building a revenue and sales forecast for a product that has just been launched, and it’s still unclear what its revenue model will be. In conversations with existing investors and potential future investors, we openly talk about the fact that the business model is still not clear and that in the coming year we intend to explore several directions. possible to find the right model for us.

Still, I opened up an excel sheet, added statements of income, selling expense, marketing cost, fringe profit, net profit and everything, and started typing in the numbers. It forces me to go out and explore again. Find out from my colleagues what exactly are the dominant profit margins in the market today, understand in depth the differences between platforms and the common metrics used on them, ask me how exactly to build the sales teams and the process sales so that the numbers will adjust correctly, leading to operating profit. In short, predict the near and far future and try to make sense of the chaos. What, if any, will remain of this detailed plan? It’s not clear. But it is clear that thanks to these actions I can go into battle better prepared.

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