Articles
9 February 2012

Beyond Templates and Guides

Executives Must be Willing to Change Business Plans

by Linda Kennedy

09 February 2012—

 Numerous templates, guides and programs can guide new entrepreneurs when writing their business plan. But two local success stories say there is one thing that you won’t find in any guide or class that is pivotal to success: you’ve got to have the ability to change your plan.

“Don’t fall to in love with your idea,” says Dallin Larsen, founder, president and chairman of MonaVie, a Utah company that distributes acai-based fruit juice. After 5 years in business, MonaVie has become the 13th largest direct selling company in the world. But, the company didn’t start out selling fruit juice—it was Monarch Health Sciences, a weight loss company for which Larsen had endorsements from top weight loss physicians, but no successful results.

“Rather than saying ‘we know we’ve got the best, we’re going to stick with this,’ we said, ‘let’s figure out what we need to do to get the business going.’ We basically shelved that whole weight loss company—threw everything away and started with a nutritional beverage.” 

Larsen says business leaders don’t quit, instead they quit things that don’t work. He adds that without being flexible and adaptable, entrepreneurs won’t survive in today’s changing world.

Rachael Herrscher, CEO of TodaysMama.com, an online parenting resource publication, found success in a similar way to MonaVie. “The most important item about my business plan is that it changes. Your business plan needs to be a working document,” she says, adding that if your product or service isn’t thriving, generally the simplest solution is the right one.

But Herrscher also says that the first and foremost business plan element an entrepreneur needs to pay attention to are projections. Even though she says projections will likely be wrong, it’s valuable to understand the revenue structures. “This can be difficult because a lot of entrepreneurs are not number crunchers, especially the passionate, creative people. But it will always be an important exercise,” she says.

It’s an exercise that’s part of market research, something that entrepreneurs often pay the least amount of attention to, says Rex Falkenrath, Salt Lake regional director of the Small Business Development Center (SBDC) and director of the Miller Business Innovation Center. Consequently, it’s often catastrophic for early ventures. 

“The one thing you need to do before you step out in business is gain an understanding of what the business is going to be,” he says. “That means determining who your market is, who your competitors are, what the total market size is geographically and where the product or service is in its life cycle.” For instance, Falkenrath says if you want to start a DVD rental business, it has a good chance of being eclipsed by live feeds into people’s home computers or entertainment devices. Market research identifies trends like this, allowing entrepreneurs to modify their business plans. You may, for example, along with DVDs, have servers that consumers can stream downloads of movie titles from your Website to their devices. Falkenrath says many entre-
preneurs start businesses without performing market research because they are not skilled to do it themselves and have a hard time finding sources to do it for them. But experts at the SBDC in Utah and at locations throughout the United States will conduct the market research at no cost. 

The center also offers free mentoring, called CFO solutions, in which outside financial experts help entrepreneurs understand how their business plan will affect their profitability. 

“They are specialists in understanding ‘this is what the business plan is, this is what the profit of the last statement looks like, but where is the cash coming from, where is it going out, and does this business plan have the positive cash flow based on what the business plan says?’ Most people don’t understand that relationship and they need some assistance there.”  

Most of the time, Falkenrath says, entrepreneurs receive their market research and cash flow answers within a few hours of counseling, but if they need more, it’s available to them. 

“When people come to us and they have a need to understand [the answers to] those two questions (market research and cash flow) that are unmet in their business plan, we help them get the answers at no charge,” he says, explaining that the counselors are paid from federal SBA and state funds, and the SBDC host institution, Salt Lake Community College. “Fortunately, in this marketplace, we are able to do it as a freebie to the client.”   


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