Developing a map of possible stepping stones

Given the way in which business plans are prepared and written, they almost inevitably set out the future development of the business in a linear fashion. The earlier approach of thinking in terms of stepping stones seems to reinforce this. This linearity does not do the entrepreneur justice.

No business is linear. It is a living entity full of possibilities and dangers. There are many possible destinations and many possible sequences of stepping stones for getting to each destination. The prize being sought by Creditica in Q2 2008 might not end up being the prize attained in 2012 and beyond.

If there were only one way for Creditica to pursue its business plan, investors would be concerned. Every entrepreneurial business goes through a series of existential crises. The best-laid plans often don't survive the first contact with customers or competitors. Executing strategies in the real world takes longer than it does on paper. It is extremely difficult to predict the future for a business five to seven years down the road. If the path being pursued terminates (eg, because of the emergence of a dominant competitor), the business could die.

What is needed is a map of possible stepping-stones rather than a deterministic single path. A good map will excite an investor much more than a path. A map should communicate options and possibilities. As any financial theorist will tell you, options have value. All investors usually ask themselves the following questions:

• What are the big things that could go wrong (and how will the business handle them)?
• What are the big options that might open up further down the road (and how might the business take advantage of them)?
  

Big Things That Could Go Wrong

If there are a few big potential roadblocks ahead - even if there is only a small chance of them happening - investors will want to see a plan B. In fact, they will want to know that there are many plan Bs.

An investor might look at Creditica and see the following potential roadblocks (no doubt you will see others):

• Credit card issuers might view their proprietary algorithms as so fundamental to their competitive advantage that they will not utilize 3rd-party algorithms from a company such as Creditica.
• Creditica's algorithms are a black-box giving out results (target customer names). The results, although accurate, are hard to rationalize simply. Therefore, the results might not be trusted.
• New personal privacy legislation might prohibit sharing of data from one company to another.
• The bank from which the team originated might change its mind and attempt to block the business.

All businesses have inherent risks. The business plan should establish how to mitigate the likelihood of them occuring, but it should also establish the possibilities that might still be open to the company in the event that they materialize.