Determining the Response

April 13, 2006

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Once you've identified the factors that you believe are causing your business to deviate from the course you charted in your business plan, the next step is to consider your options. In some cases, you'll be able to directly address the problem. For example, if a vendor is consistently late in delivering needed materials, you can look for an alternative source.

Unfortunately, you won't always be able to respond directly to the source of a problem affecting your business. For example, consider a small business located in a shopping mall. Assume that the business plan relied on the existence of an anchor store to create a sufficient amount of traffic to support the business. If that store leaves, a fundamental assumption on which the plan relied becomes invalid. There is no direct response that the business owner can make. It doesn't matter than the assumption was reasonable when it was made. The business plan needs to be reexamined in light of the changed external circumstances.

If you can't respond directly, as in the preceding example, be sure to get as much information as you can before determining what your options are. Will there be a new anchor store coming in to the mall soon? If not, perhaps the business should be moved to a new location. Or, if it appears that a new anchor store will be opening soon, perhaps it would be worth it to wait out the period during which the mall lacks an anchor store. By adjusting the financial projections to reflect the reduced revenue for that period, the owner can determine whether the business can survive such a temporary downturn.

Consider a small business that launches a new product with an expensive advertising campaign. But the product doesn't sell well. What does the owner do? One set of options involves the advertising. Maybe the ads aren't quite right and new ads should be created. Or, the ads may not have reached as large an audience as expected and the advertising campaign should be stepped up. Another set of options is available with respect to the product itself. There may be some characteristic or feature of the product that can be changed to make it more popular. Yet another set of options relates to the marketing of the product. Perhaps the price should be lowered or the packaging changed.

It is at this point that you will realize the full advantage of having a written business plan available as a modeling tool to help you assess your options.