Page 138 - Business Plans that Work A Guide for Small Business

The Critical Risks and Offering Plan Sections • 129

clients, clean and package it, and return it. The company spent many
years figuring out how to do this more efficiently. The beta site was the
Syracuse location. Here, Dan learned whether they could replicate the
model to another geographical location (would Syracuse students react
and use the service in a similar way as Wisconsin students?). Adding more
company stores in Boston and Boulder was another test to see whether
they could hire managers to run those locations with oversight from a
centralized headquarters. The next step, and the one that the current plan
focuses on, is how to implement a franchising program to rapidly grow
the business. The moral of the lesson is that you can preserve resources by
incrementally testing your business concept rather than building an entire
franchise network at the outset.

Competitor Actions and Retaliation

Having the opportunity to work with entrepreneurs and student entre-
preneurs over the years, we have always been struck by the firmly held
belief that either direct competition didn’t exist, or it was sleepy and slow
to react. There have been some cases where this is indeed true, but we
caution against using it as a key assumption of your venture’s success.
Most entrepreneurs passionately believe that they are offering something
new and wonderful that is clearly different from what is currently being
offered. They go on to state that existing competition won’t attack their
niche in the near future, oftentimes because the competition is a large
company concerned only with the larger market. The implicit assumption
is that your smaller niche isn’t as interesting to the competition because
the potential profitability of the niche is lower than the broader market.
The risk that this assessment is wrong should be acknowledged. One
counter to this threat is that your venture has room in its gross margins,
and cash available to withstand and fight back against such attacks. You
should also identify some strategies to protect and reposition yourself
should an attack occur. One of the authors’ favorite entrepreneurs once
said, “Never underestimate the vindictiveness of a competitor.”

Time and Cost to Development

As mentioned in the development plan section, many factors can delay and
add to the expense of developing your product. The business plan should
identify the factors that may hinder progress and success. For instance,