Plan B, if things don’t work

DFN: I used to manage the group at SBC which evaluated all new products, processes and / or services. The one thing I can guarantee you about a business plan, a Plan A, is that it won’t happen. The actuals will ALWAYS be different from the projections. Actuals within +/- 25% of targets established by a business plan should be considered successes. Actuals within +/-200%, have to be considered failures and will conceivably mean you’ll have to shift from "Plan A to Plan B". John Torinus article regarding Plan B, nicely tees up the issues and gives some great examples that are very easy to understand, and extrapolate to different situations you maybe facing, or will face in the future.

John Torinus | Business Issues
Posted: Oct. 17, 2009 6:41 p.m.
http://www.jsonline.com/business/64651307.html

Start-ups need humility, Plan B if things don’t work

When Mike Harris and Joe Bartolotta realized that Plan A for their new ventures was not working up to expectations, they quickly switched to Plan B.

They explained the need to be nimble to a crowd of would-be entrepreneurs at a meeting sponsored by We Energies and BizStarts Milwaukee last week. It was the first in a series of monthly Inspirational Entrepreneur meetings to celebrate and promote successful new ventures that drive the regional economy.

The need to reshape original business models, more often than not, is the subject of a new book called "Getting to Plan B" by John Mullins, a professor at the London School of Economics, and Randy Komisar, a venture capitalist.

They advocate to entrepreneurs that they stress test their business models once they get up and running to see if the original assumptions are holding up. If not, make radical changes if necessary.

They cite numerous examples, like Google, Starbucks and PayPal, where major adaptations were necessary for success.

In Bartolotta’s case, he returned from learning the restaurant business in New York City and tried a number of dining motifs as he launched his business. He cited his brainchild of starting with a rustic French menu at Lake Park Bistro.

He quickly realized his customers were intimidated by the fancy French terms on the menu. One customer thought a Tuscan steak was a Tucson steak, Bartolotta chuckled.

"The minute I switched to English, they totally got it," he said, and the restaurant was off and running.

In another start-up with only 90 seats, he pegged the food offerings and prices too low and had to switch to a format that had a higher check average. "You have to appreciate the art of humility" and make the necessary changes as reality comes to bear on a business, he said.

Bartolotta now owns 10 businesses and employs 450 people.

Continuous adaptation

Harris, a serial entrepreneur in the staffing field, puts a lot of stock in a well-written, well-communicated business plan. He believes in vetting your business theories with a lot of smart people. That includes his wife, who is not a business person.

Even so, his first venture, AuditForce Inc., required an early makeover. From his kitchen table, he launched the company as a provider of finance professionals for internal auditing. He quickly came to the conclusion that he had not targeted a broad enough market and went to Plan B.

That included a wider range of accounting services. The change provided the growth he was looking for. In five years, he grew to 24 offices around the country, 1,500 employees and $175 million in revenue. He and his investors sold the business to Manpower in 2001 for $174 million.

Manpower has taken the broader business model international and has doubled the number of offices.

The old adage in the military is that no battle plan survives contact with the enemy. The corollary in business is that no business plan survives contact with the marketplace. Hence, the need for decisive and continuous adaption.

That doesn’t mean that supreme effort shouldn’t go into the original business plan.

Mullins and Komisar advocate comparison to as many analog businesses as can be identified to learn as many lessons upfront as possible. Successful models in related or parallel industries can be useful.

Learn from failures

They also recommend looking at what they call "antilogs," or failures in related businesses.

Harris had been chief financial officer for a successful start-up in information technology staffing and knew its business model intimately. Still, he urges getting "lots opinions, lots of advice, lots of feedback" for developing or altering any business plan.

Bartolotta, who learned his trade at Tavern on the Green and Maxwell’s Plum in New York – his analogs – and urged the aspiring entrepreneurs, including a busload of students from the University of Wisconsin-Whitewater, to "please do the research and really understand what you are getting into."

There were other areas of agreement for the two men. Both preach enthusiasm for the particular business. Bartolotta: "You need a hospitality gene." Harris: "Enthusiasm will get you a long way."

Both take pains to find the best people. Bartolotta personally interviews all employees hired for the front of the house. He "looks into their hearts, into the souls, for the hospitality DNA."

Harris warned, "Watch out for the naysayers." He wants people who continually ask not how things are going to go wrong, but how is this going to work.

Both urge focus on the mission, but realism as well. That invariably means a Plan B when Plan A falters.

John Torinus is chairman of Serigraph Inc. of West Bend and a founder of BizStarts Milwaukee, a nonprofit organization dedicated to fostering entrepreneurship in southeastern Wisconsin. Contact him at torcolumn.


Doug

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One Response

  1. Assessing the cash flow is one more essential element in the organization strategy format, so as to sustain a regular cash flow to meet the important capital needs. Probability of monetary crisis and also the methods of crisis management should be pointed out in the structure. The company technique should consist of the advertising plans and strategy leading to the expansion from the company.

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