Seth Godin’s blog is the only blog that I read every single day, without fail. His thought-provoking tidbits are a great way to start the day. This morning he wrote about the flawed nature pharm buy discount of business plans and presents a new structure which will help you think through the hard issues more clearly. While reading through it, it was clear to me that this structure can be applied to real estate development projects. I’ve bolded what I think are the most important points, but check out his entire post below:
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It’s not clear to me why business plans are the way they are, but they’re often misused to obfuscate, bore and show an ability to comply with expectations. If I want the real truth about a business and where it’s going, I’d rather see generic drugs something else. I’d divide the modern business plan into five sections:
- Truth
- Assertions
- Alternatives
- People
- Money
The truth section describes the world as it is. Footnote if you want to, but tell me about the market you are entering, the needs that already exist, the competitors in your space, technology standards, the way others have succeeded and failed in the past. The more specific the better. The more ground knowledge the better. The more visceral the stories, the better. The point of this section is to be sure that you’re clear about the way you see the world, and that you and I agree on your assumptions. This section isn’t partisan, it takes no positions, it just states how things are.
Truth can take as long as you need to tell it. It can include spreadsheets, market share analysis and anything I need to know about how the world works.
The assertions section is your chance to describe how you’re going to change things. We will do X, and then Y will happen. We will build Z with this much money in this much time. We will present Q to the market and the market will respond by taking this action.
This is the heart of the modern business plan. The only reason to launch a project is to change something, and I want to know what you’re going to do and what impact it’s going to have.
Of course, this section will be incorrect. You will make assertions that won’t pan out. You’ll miss budgets and deadlines and sales. So the alternatives section tells me what you’ll do if that happens. How much flexibility does your product or team have? If your assertions don’t pan out, is it over?
The people section rightly highlights the key element… who is on your team, who is going to join your team. ‘Who’ doesn’t mean their resume, who means their attitudes and abilities and track record in shipping.
And the last section is all about money. How much do you need, how will you spend it, what does cash flow look like, P&Ls, balance sheets, margins and exit strategies.
Your local [investor] might not like this format, but I’m betting it will help your team think through the hard issues more clearly.
Do you think this is a good approach for real estate developers?
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