How does a undertaker sell his coffins?
- What a tragedy, I've already been told!
- Yes, that's why we're here. We need a coffin.
- Oh right, I have an exclusive option for you - gold-plated handles, mahogany, velvet... $10,000.
- Do you have anything cheaper?
- Yes, of course - this is the model. Cardboard covered with fabric, plywood inserts to prevent breakage - the perfect model for cremation. Only 20 dollars.
- Well, it's kind of...
- Alright, here’s a model for $2000. Oak, satin, forged hardware, with a lid and a door. A solid piece.
- Yes, I think we'll take this one!
At the same time, the undertaker “overlooked” a bunch of coffin options ranging from $1900 to $100 and ended up selling, in fact, the most expensive one after the “exclusive” model. The client’s reasoning was: “Well, we’re not buying the most exclusive coffin, but we don’t want a cardboard box either, so we won’t be embarrassed in front of people.”
Before we take a closer look at the process of “selling” yet another item that has all the characteristics of a coffin—solemnity and disposability—I’d like to share a joke about two blondes:
- Oh, if only I could find a wallet with 100,000 dollars on the street!
- Oh, why not a million?
- Well, a million is unrealistic!
Someone once told someone else that it was a good idea to create several versions of a business plan. An optimistic one, which might be dismissed as unrealistic or a “costly coffin,” a pessimistic one—”cheap coffin,” and a “realistic” one—a coffin that is “more or less.” Now, this is all presented with a veneer of scientific credibility, but in reality, it just gives a sense of “realism” to the version of the model that falls in the middle.
However, in reality, business plans are often not even checked for realism in the simplest way—by highlighting a parameter in a table and looking at its graph to see if it’s smooth or fluctuating. If it’s fluctuating, there should be descriptive explanations for that. It’s also worth occasionally just multiplying, say, the number of work units by the amount of product per unit—will the result give the total amount of output? And if it does, then… it’s wrong! 🙂 Because the number of work units changes all the time, and the figure at the end of the year is a final number, not an average for the year. They don’t even keep track of such trivial things!
I have a story from my life where I prepared a very serious business plan and handed it over to another person. However, we didn’t agree on the terminology used in calculating the most important component of the incoming cash flow. In the end, I was referring to a business that “would be,” while he was talking about a business that “was already on the books.” No big deal. The business plan was approved at the highest level, even without a close look at the numbers surrounding that parameter, which, if you carefully added and subtracted with a calculator, clearly showed that what was being proposed in the plan was complete nonsense. You know what? The “error” was discovered five months later (someone, with nothing better to do, glanced at that beautiful, colorful document in a hard cover and compared it to the accounting facts), and addressing it took about 100 hours of top management’s time in a sizable company. And it wasn’t worth it at all, because the business plan didn’t take into account—and couldn’t have taken into account—what happened three months later, which forced us to simply throw the entire plan in the trash.
I have reason to consider myself a specialist in creating business models and the calculations that accompany any business plan. However, I, along with others like me, will tell you that all these models aren’t worth a dime, as their purpose is to lend “realism” to the numbers at the end of the calculations. A little adjustment here, a little assumption there, tweak the settings, and voilà! It turns out just as needed. The level at which these polished business plans are approved can’t even handle more than three large numbers from a single document. They want a summary, and they trust the conclusions because they lack the time and resources to verify them.
How to write business plans? First of all, they always anticipate growth and profitability. If a business is meant to last, the plan should reflect the periods when the business becomes profitable, even if it means creating a five-year plan, which is absurd for a country whose entire history is less than 20 years. If growth isn’t accounted for, it implies poor management. I’ve never seen business plans where, for example, January is clearly marked as a “dead” month, even though that’s the reality. I’ve never seen even “pessimistic” models where things were actually not that bad. I’ve never seen business plans that consider the loss of a key client as a scenario (as if they are eternal), and so on.
A beautiful, thick business plan is often just an excuse for the credit inspector who has to make a decision for the bank’s credit committee—whether to grant a loan or not. Or it’s an excuse for an investment manager. Just like “focus group surveys” serve as an excuse for marketers. It’s like saying, “Look, it’s not me, it’s the focus group.” The same goes for “it’s not me, it’s the business plan.” When it comes to trusting someone with investments, you need to rely on completely different factors, not just a stack of papers filled with smart words and diagrams.
In the book Rework, there was… Chapter. about the idea that planning is like fortune-telling. Don’t call me an opponent of planning. I have a whole section on my website dedicated to it. article about the necessity of planning. It’s important to understand the value of the plans that have already been created. It is zero. I haven’t seen CEOs of companies looking at a business plan approved in November in April, asking themselves, “So, what should I do now?” However, I have seen many people contemplating the tactics and strategies of their actions while they were drafting or considering business plans, conducting SWOT analyses, looking at the horizon, and choosing a direction.