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Plan Your Business Model for Hard Times

When you present your business model to investors, they don't want to hear you say, "My business plan calls for…" This issue is also known as “assuming the hard part.” Every business plan calls for rapid increases in sales, low costs, hiring of outstanding employees — a general euphoric state.

The real world tends to have finicky customers, hard-to-close sales, problem employees, and more. Particularly in the area of sales forecasts, business plans are nothing more than guesswork.

Be prepared to explain to investors why your business model will work in the worst case scenario as well as the best. A wise real estate investor once said, “I always have six or seven exit strategies for a building.”

Most investors have only one strategy — sell the building for a profit. This successful investor had Plans A, B, C, D, E, F, and G. He not only had a graceful exit no matter what the circumstances, but also analyzed each deal based upon all the strategies. If he couldn’t find enough viable exit strategies, he passed on the deal.

The same holds true for your business model. Of course your model will work well if everything goes as planned, but it won’t go as planned. Work to make your business model strong enough to handle a variety of scenarios.

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