Define Action Thresholds in Business Plans

Action thresholds define the point where additional planned action must be taken.

A proper business plan is a description of the business model, revenue model and marketing model, as well as how you're going to develop all this into a real company. That's where the action plan, or description of the build-out, and your contingency plans come in. The action plan lists the steps you go through to develop your business idea until it's ready for launch, then how you'll launch the company, followed by how you'll grow the company. Each step of the build-out is triggered by an action threshold. Action thresholds also trigger elements of your contingency plan, which is a description of what you'll do under certain positive or negative scenarios.

Business Description

Your first action threshold, figuratively, is the point at which the business idea is fully developed and you begin your process of launch. While you go through stages in developing your business idea, the activities are primarily research, analysis and decision-making. The threshold is when you have the business, revenue and marketing models defined and you've finished your action plan for the build-out of the company in preparation for its formal launch date.

Action Plan

The action plan is a road map that describes the steps you'll take in building toward launch, such as creating contracts and forms for transactions and employment, negotiating vendor agreements, establishing banking relationships, creating marketing collateral, renting facilities, purchasing equipment and hiring employees. Action thresholds may involve the receipt of funding or credit lines, the hiring of key staff, the acquisition of facilities or anything that's a contingency for further action.

Contingency Plan

Along the way there will be both good and bad surprises, which you can use scenario planning to identify. How you'll take advantage of potentially good situations and survive the bad situations makes up your contingency plan. Your action thresholds include financial triggers, such as certain levels of cash that trigger borrowing from a credit line or paydown of a credit line. Other thresholds involve levels of business that would require additional hiring, additional equipment or facilities, and, conversely, triggers for downsizing.

Total Quality Management

Action thresholds also apply to pest control in agriculture, where the term originated. The thresholds relate to a specified tolerance level beyond which action must be taken to prevent a damaging infestation. Thinking about business plan action thresholds in this way makes them much easier to understand and implement. Action thresholds are a function of total quality management theories because they define the tolerance levels beyond which management must alter processes and procedures.

References

• Federal Aviation Administration: Post Implementation Review
• Department of Health and Human Services: Practices Guide, Quality Management
• Wired.com: How to Build Scenarios