Is your business plan feasible?

In 1812, Napoleon Bonaparte was at the height of his powers and controlled most of continental Europe. 

That year, he led his army of nearly 600,000 men on an invasion of Russia. Though he captured Moscow, by the time he returned to Paris, only 10,000 soldiers of the main army remained and he had lost the war.

Napoleon’s ill-conceived battle plan led to the defeat. He advanced his troops rapidly into enemy territory, hadn’t prepared for the harsh Russian winter, and chose the wrong route for retreat. 

It goes to show how even the greatest military strategists are not immune to making battle plans that are infeasible.

Business plans are no different. 

How many times have we been guilty of making overly optimistic plans that have fallen short of targets? 

So, how does one make battle-tested plans? How do you evaluate plans for their viability and practicality while ensuring it provides a path to achieve your company’s goals and targets?

The importance of building feasible plans

A business plan is a blueprint on how your company’s resources will be used to achieve specific outcomes. 

It also provides a baseline to understand if the plan is working.

A critical requirement here is to establish the criteria for measuring its effectiveness. Otherwise, 

1. Capital might be wasted (either overspending or allocating expenditures suboptimally)
2. It could lead to missed opportunities 
3. It could delay making course corrections to the plan as bottlenecks are identified much later

These criteria also help with evaluating the plan’s feasibility.

Once established, following the practices recommended below help in creating feasible plans.

1. Start with a simple model

Everything should be made as simple as possible, but not simpler.

Starting with an overly complex model tends to give a false sense of confidence. Such plans are quite fragile and it’s often difficult to identify the underlying problem factors when course correcting.

Thus, starting with a simple model is more actionable. You can quickly gauge the performance of the plan, understand which of the initial assumptions were wrong and can even uncover problems in formulas, metric definitions and data.

You can then progressively build more complex plans. 

This approach helps you plan faster and more efficiently.

2. Make realistic, data-driven assumptions

Many of us operate our business on assumptions and build financial plans on what we think will happen. The assumptions generally tend to be quite optimistic and not necessarily anchored in reality. 

However, assumptions are the building blocks of your plan. If they are not strong, the plan will crumble. 

Thus, ensure your assumptions are accurate, free of biases and data-driven. Avoid using random assumptions as much as possible. 

One technique is using base rates which allow you to plan based on trailing data. 

The base rate (or baseline values for your KPIs) indicates how your business has grown in the past for that metric, and how it can be used to inform and plan ahead. 

We recommend using Jason Lemkins’ Last Four Months (L4M) model to pick feasible base rates. Going further back into the past to compute base rates might reduce its predictive power. 

3. Know your constraints

Making feasible plans is a collaborative exercise. After all, planning is a huge balancing act across teams. 

When there’s coordination and alignment between teams, the business constraints (say, internal constraints such as cash in the bank or external ones such as total addressable market) come to the fore much faster. Without knowing these constraints,  over-budgeting, overstaffing and other planning errors can be avoided.

4. Plan for scenarios

If the only tool you have is a hammer, it is tempting to treat everything as if it were a nail.

Even if a hammer is not the right tool for a situation, if it’s all you have, then you will try and fix everything with it. We rarely look for better alternatives. 

We tend to use the same tools to solve new problems which might need new tools or a different approach.

It’s important to know which route to take towards reaching an objective. So, plan for various scenarios and come up with a range of possibilities. Such alternate scenarios will inform you about possible outcomes and help you course correct.

It’s also equally important to not be too rigid on any one goal or target and be willing to change the target itself. The takeaway here is to be flexible enough to change your plan and target if needed as it will affect the way you run your business.

Conclusion

There’s no hard science when it comes to creating plans.

Effective and feasible plans start with a well-informed strategy that brings your data and stakeholders together with clearly defined and measurable outcomes.

To reiterate, planning is an ongoing exercise that you should consistently measure and reassess with your success criteria.

Drivetrain can help you create feasible plans and run your SaaS business predictably with greater visibility and control. 

It does this by understanding your current business performance with centralized metrics, identifying bottlenecks quickly and helping you make faster, confident course corrections based on accurate forecasting.

Reach out to us at learn@drivetrain.ai to know more.