Old Economy >>> New Economy Transformation — Planning

Big Red Car here.  Up early to cope with SXSW here in the ATX.  Some folks attending SXSW want to take a drive through the Hill Country for some BBQ tonight and I am hoping to get the nod.  I love a good roll through the Hill Country on a Spring night.

Yes, folks, it is almost Spring here in Texas.  The azaleas are just coming out and it is wonderful.

Background Old Economy >>> New Economy Transformation

So now you have been studying the Old Economy to New Economy transformation.  You have read some of the other posts on the subject.

Huge Investment Opportunity <<< link

Marketing <<< link

Finding Old Economy Companies <<< link

Underwriting the Numbers <<< link

Reputation Assessment <<< link

Read all of these as a basis for discussing today the issue of basic business planning.

Basic Business Planning

Many readers of the Musings are from the startup world.  The startup world has begun to drift toward a notion that basic business planning is not an essential ingredient in the conceptualization of a web based product.  Venture capitalists provide a bit of support in that they often are willing to fund “ideas” whose conceptualization is communicated in a more minimalist way.

Good elevator, taxi cab and board room pitch?  Short, sweet pitch deck.  Need a small amount of money to try out your hypothesis?  Serial entrepreneur?  Platform?  Disruptive? Scalability?

A quick road to funding and off to the races.  That process looks a lot like this graphic at the end of the day.

Product development graphic Wisdom of the Campfire

Buying and transforming an Old Economy company into a New Economy company is a bit different and the Big Red Car stands for the proposition that it is essential to the long term success of the New Economy company to prepare an extensive and “proper” business plan.

Why do you need a “proper” business plan, Big Red Car?

Do not toy with the Big Red Car.

The Old Economy company is a going concern and you are buying and transforming a business which has long since advanced beyond the notion of “proof of concept”.

It is highly likely that there is no extant business plan in the company’s files and if there were one it is an Old Economy view of the marketplace.

One of the elemental transformational actions is to create a modern business plan — in scope, in tone, in focus, in concept with specific focus on process documentation (operations), marketing, finance and growth.

It is also a great opportunity for the New Economy leadership and management to deliberately plan and plot the transformation itself and to ensure that there is, in fact, a real transformational opportunity lurking beneath the surface.

Business Planning

A good business plan is like a good novel — it tells a story.  Perhaps a story of differing amounts of complexity or length with plot turns and twists.

It is time consuming to do it right and it takes some hard work and a lot of revisions to get it just right.

When finished, it requires constant review and revision.

But when done well — particularly in a transformational environment — it provides a constant road map, communication tool, training program and vision for the company.

The basic elements of the business plan

The business plan should encompass the following big ticket items:

1.  Description of the business;

2.  Marketing;

3.  Finances; and,

4.  Management.

 Of course nothing is ever really that simple, is it Big Red Car?  No, it is not.

Drilling down into the business plan

You can embrace whatever degree of complexity you desire but here is a quick list that The Boss has used for years and it is a good start.  Goober it up as you see fit but try to hit all of these notes.

Introduction to the business plan

Cover sheet
Statement of purpose or hypothesis of the business (remember yours is an existing Old Economy business) — executive summary
Vision statement
Mission statement
Table of contents

The Business

Description of the business
Marketing wiith a particular emphasis on the use of technology, social media and other modern marketing techniques
Competition with a particular emphasis on how the transformation will impact the competitive position
Operating procedures with a particular emphasis on how technology will be used in the transformation process
Key strategic and tactical alliances
Risks and risk management, mitigation

Financial Data

Asssets used in the business
Assets to be acquired in transformation process
Historic financial statements (income statement, balance sheet, statement of cash flows, cash receipts journals, cash disbursement journals)
Proforma one (monthly), three and five year financial statements as above plus a breakeven analysis
Documentation of all assumptions supporting the proforma financial statements
Organizational development including staffing assumptions
Cap table showing ownership and invested equity
External funding requirements to drive transformation and growth

Performance measurement

Key performance indicators
Measurement methodology
Targeted performance — dashboard and graphs

The above outline are the basics and you can make them more complex or less complex as it suits your purpose.  But, please, do it and get it in writing and spend some real time focused on producing a quality result.  You will applaud yourself in the future.

Once you have completed the Business Plan have it reviewed by a cross section of folks whose opinion you respect.  Then publish it and communicate it and train it into your management and senior staff.  Bring every member of your team into the “know” and draw their reactions out and get their buy in.  Basic communications and training.

And that’s all there is to it.

But, hey, what the Hell do I really know anyway? I’m just a Big Red Car!