In my previous post, I explained how getting an outside perspective improves your chances of raising capital.
There is a second, equally important, benefit of retaining a business planning consultant to develop your business plan: it improves your business strategy.
Let's start with some facts...
Fact #1: There are 24 million businesses in the United States alone.
Fact #2: History tends to repeat itself.
What I mean is, if you have an idea, whether it's a marketing idea, operations idea -- anything really -- chances are it's been tried before. Chances are also that if it failed the first time, it will most likely fail again.
That's not to be discouraging, because there's a decent chance that it wasn't executed properly the first time, or lacked the nuances you bring to the idea. Regardless -- if your idea has been tested before, I bet you want to know about it.
When you are aware of the earlier attempts of an idea, you can quickly learn from them and either 1) Determine that it won't work (and cut your losses) or 2) refine the strategy and make it work. But, if you never know about those other attempts, your chances of failure are increased.
A competent business plan advisor can provide a lot of value during this research and discovery phase. Reputable business plan consultants not only perform market research, they leverage their existing knowledge and experiences regarding their own businesses and the businesses of their colleagues. This positions them to point out those potential pitfalls and strategies which have failed in the past, as well as strategies that have been proven to work.
This is very important, because unrealistic assumptions can kill a business.
To explore this, let's take an example from a company I just spoke with yesterday. This firm is about to launch a new division offering BPO (business process outsourcing) services. When I asked about their expected sales cycle (the time it takes from when they contact a prospective customer to when they secure the client) they answered 3 to 6 months.
Well, 3 to 6 months is a reasonable sales cycle in this industry. But what if they told me 3 to 6 weeks? Worse yet, what if they went out and succeeded in raising financing -- expecting revenues to come in within a 3 to 6 week period?
Most likely, they would have raised too little money and gone bankrupt while anxiously waiting for prospects to become customers.
There's another piece to business strategy consulting, which involves taking interesting (or even seemingly mundane) ideas from other industries and finding creative ways to adapt them to your business. These types of insights are frequently offered by outside advisors and have been known to result in breakthroughs responsible for transforming entire industries.
Consider roll-on deodorant. The "roll-on" part was inspired by the ball-point pen. Before that, deodorant was packaged in cream form. Or, consider Fred Smith's Fedex. Smith applied the banking industry's method of clearing overnight checks to the overnight delivery of packages. Each of these cross-industry breakthroughs resulted in billion dollar industries.
I'll admit it... As a kid, I hated history class. I couldn't imagine information less relevant to my life than what happened in Europe 600 years ago. But you can't be ignorant about what has happened in the past or what is happening around you -- even half-way across the globe -- because it does affect you. Knowing what other companies are doing, what's working and what's failed -- that's the information that will prevent you from repeating failures and allow you to replicate success.
Who knows? A well-researched busines strategy might just result in a breakthrough that establishes your place in business history.
Related post: How Business Plan Writers Help You Raise Capital