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Business Design – A Look into the Future

When the Developer of an investment project, on the instructions of the Customer, is working on the next business plan, as a rule, the “depth” of calculations, forecasts, business development strategies does not exceed three to five years, in rare cases more.

And no one, no one, in principle, wants to look “beyond the horizon”, look for a longer period … But what will happen to this “conditional investment project” in 10-15 years? Devastation or prosperity? Will this business exist in the future? If so, in what form? And the most interesting … And how much can it (business) cost in 5, 10, 15 years?
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Not … such a “flight of thought”, as a rule, is not characteristic of either the Developers or the Customers. Not peculiar for various reasons: this is the lack of culture and forecasting skills, and planning and running a business in principle. Of course, there are other reasons.

Nevertheless, the planning horizon for most representatives of small and medium-sized businesses 1-2 years – this is the maximum (or rather – the ceiling)!

Immediately I write that this article does not claim to be “scientific.” And, nevertheless, let’s approach this issue, so to speak …. logically / methodologically. We will try to answer the above questions.

I propose to dwell on only a few aspects that it is desirable to use when … getting possible, I repeat, possible answers to the questions posed. Questions that logically should be reflected in the business plan. But, as a rule, they are not even mentioned in it, as if they had been taboo! Moreover, not a single “recommendation” on the preparation of a business plan requires additional disclosure of this issue … But in vain!

In some cases, for example, the development of a quarry or the production of another product with an insignificant “life cycle” period, I really want to know what will happen to the business in 10 years? At what stage will the business end? Why is this question so important, you ask? But because very often in the cost price they do not include additional costs for … so to say, “closing a business.” These costs include reclamation of quarries, dismantling of buildings / structures, equipment and networks, cleaning the territory of harmful substances, etc. … And this is also money and they must be taken from somewhere.

This question is not an idle one, since it is necessary to clearly understand whether the project is profitable or not (if one considers the indirect costs associated with the “completion of the project”)?

It’s not very pleasant to look at unfinished or collapsing real estate just because it is someone’s “miscalculation” and they did not fit into the “market”. Anestend?

What are these aspects that may affect the business in the future? We single out the main ones, and these are:

No one will argue that technological equipment does not last forever. No, we are not talking about any particular lathe or production line, although some machines have been working fine since the Second World War, having been given to us by indemnity. We are talking about specific equipment purchased for a specific project. Let’s suppose that after 5-7 years, the equipment purchased under the project:

a) It will be worn out both physically and subject to other types of wear: functional and economic.
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b) It may require significant investment costs for its “restoration” and ongoing, operating costs for its maintenance.

c) The manufactured products will not meet the changing requirements from the side …. government agencies, yesterday’s buyers, etc.

And the buildings with the current quality of construction, alas, are clearly not Egyptian pyramids. Then the foundation cracked, there the beam bent …

In other words, the equipment is gradually failing, real estate needs repair, and what next?

An interesting question … In the 4th year everything paid off, and in the 5th year the line was covered and … where is the gesheft?

How much will such a business cost in 5-6 years?

For reference:

The cycle of equipment change in different countries and industries is different, however, in the 70s, in the USA it averaged 9 years, in Japan 5 years. Of course, this problem will not affect hairdressing salons, retail boutiques and other business services …

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There are, of course, “eternal values”, for example, women’s perfume “Chanel No. 5”. There are “eternal values” such as sand and gravel, but these are special cases. For the most part, product trends can be very different. There are many factors influencing these processes: from the change in consumer preferences to the time shift of certain macroeconomic indicators … No one would ever think of mass-producing pagers today …

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