(Note: this is the fifth of a 10-part series listing my revised top 10 business planning mistakes. The list goes from 10, the least important, to 1, the most important.)
Planning is a lot more than just market numbers; its about what’s supposed to happen. The market numbers are nice when you have them, sure. But they’re about why, and planning is about what.
Showing there’s a billion dollar market isn’t enough. Showing hockey stick projections isn’t enough. Tops-down doesn’t usually cut it. Build it from the ground up.
I’m not advocating ignorance. Yes, your planning should deal with your real market, customer demographics, customer stories, customer needs and wants, and why people buy. Target marketing is critical. You have to know that market extremely well. I love it when a plan is built on real stories of real buyers, how they found a business, what they wanted, and why they wanted it.
But numbers aren’t the opposite of ignorance. Big market numbers are easy to hide in. Producing a huge market doesn’t mean you’ll be able to sell into it. In summary, my post here last week: Don’t aim for a tiny piece of a huge market. Create your own new market. Divide and conquer.
Beware of fake, contrived, unbelievable numbers. Sure, investors and analysts and professors want to see projected growth shoot up like a hockey stick. But not if it’s not believable.
So what makes market numbers believable? Market knowledge. Segmentation. Understanding the market need. Understanding the competition. And, by far the best validation, actual sales. People spending money.
When I read a business plan I look for the bottom-up projections that start with something very real, and build up from there to a larger potential. Don’t hide in big numbers.
(Image: Nicolas McComber/shutterstock)