When It’s Time to Throw Out Your Business Plan

Posted On April 26, 2012

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Successfully growing your business requires regular questioning of the key elements of your plan. Here are five tips for keeping your business model fresh.

Founders at Work:  Stories of Startups’ Early Days, “throw out the business plan” and instead focus resources on a newer, better alternative. Consider these two examples of radical strategy shifts that keyed future success.

  • We have five tips to help entrepreneurs keep their business model fresh:

1.  Don’t be satisfied.

Find a way to constructively challenge your ideas about what is possible and how your business can do better. If necessary, hire someone or bring in a coach to help you through this process. Karl plays that role at Avondale, constantly asking, “WTF are we doing?” We would not have built the successes and options we have today without Karl continuously challenging the team to re-think the business.

2.  Create a constant stream of options.

We make an explicit choice each year to reinvest some of our profits into exploring new business opportunities and building options for future businesses. Remember that the value of your business is determined by the value of current operations plus the value of the options you have created. If you invest all of your time and resources into current operations, you may be leaving a lot of value on the table.

3.  Invest with discipline.

We set explicit objectives and metrics for our new business investments. E.g., our objectives might be to build a large customer pipeline within the first six months, land one significant deal in the first year, and become self-funding in the second year. We then define metrics around those objectives (e.g., what constitutes a “large” pipeline? What constitutes a “significant” deal?), and we are prepared to cut off that investment if we do not achieve our metrics.

4.  Test and learn.

As an entrepreneur, you hold a significant advantage:  when you find ideas that work you can implement them more quickly than large companies can. However, to do so you must train yourself and your team to have a “test and learn” mentality. Every customer interaction, every product idea, indeed every business decision gives you the opportunity to test and learn. Embrace those opportunities to try new approaches and evolve your approach to the business.

5.  Exploit your successes quickly and wholeheartedly.

Since ours is a people business, we are constantly pushing the team to hire more people more quickly so that we can put additional resources behind our early successes. By hiring more aggressively than the current business supports, we are forcing ourselves to invest in building adjacent business opportunities that can profitably employ those new hires.

This is not to say that you should bet the company every day in every way. However, you should be disciplined about periodically questioning the key elements of your current plan and asking yourself and your team whether it is time for evolution (or even revolution)!

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