Using AI to Draft a Business Plan
Don’t bet the house just yet, but there are some things it does well.
Good Morning!
Here are today’s highlights:
There’s a surprisingly easy way to discourage embezzlement.
The economy? Even the optimists weren’t optimistic enough.
Most companies are planning to improve their benefits offerings.
You’ll be happy to know that those higher rates you’re paying for insurance are working out quite well for insurance companies.
ARTIFICIAL INTELLIGENCE
Can AI draft a decent business plan? “We decided to find out by asking two different generative-AI tools to write a business plan for a fictional startup—a travel app focused on the U.K.’s Yorkshire region. What did these tools do well, we wanted to know, and what are their limitations? To get started, we provided the tools with a detailed prompt that specified what we wanted in the business plan. We also gave the tools permission to ask follow-up questions if they needed more information and to be creative if there were gaps in their knowledge. What did we find? In short: The business plans produced by AI were useful, but not quite ready for prime time.”
“The business plans we received adhered to the typical format and contained all of the sections we expected to see, including an executive summary, followed by a company description and then a detailed value proposition. This structure provided a solid foundation for a business plan, making it easier to expand and further customize the document.”
“AI also was good at identifying and highlighting the critical elements of a business, such as its unique selling points, target market and competitive advantages. For example, AI pointed to the unique approach offered by Yorkshire Tales in combining local history with modern technology.”
“AI currently lacks the ability to learn directly from real-time data and isn’t able to provide in-depth, nuanced analysis of market trends, competitor strategies or customer behavior as would be expected in a business plan. A human would have to get involved for that, at least for the time being.”
“Generative AI was able to produce a basic business plan, but without further prompting it struggled to personalize or adapt the structure to the business being described. That resulted in statements such as, ‘Initial funding will be sought from local investors and grants focused on promoting local culture and history.’” READ MORE
MANAGEMENT
Gene Marks suggests a surprising way to protect against employee theft: “Just in the past year, a hospital employee in Doylestown, Pa., was charged with taking more than $600,000. A tech company executive was accused of walking away with almost $3 million in stolen funds. An IT director at a Rhode Island fabricator pocketed more than $1 million. A manager at a Pennsylvania Wendy’s was arrested for allegedly taking more than $20,000 after creating a fake employee. A car dealership employee in Atlanta walked away with $27,000. A payroll accountant at an Ohio company stole a whopping $26 million. There are many more incidents like this.”
“We tell our clients to keep valuable inventory locked up, require multiple approvals for disbursements, and make sure that there’s a proper segregation of duties over cash so that there are different individuals who receive, deposit, and record the money. We also like to have an independent person outside of the organization reconcile bank accounts because, hey, you never know what turns up.”
“I’m also betting that all the companies that I’ve mentioned above could have easily and much earlier uncovered fraud if they required that their financial employees take vacation. Doing so not only helps cross-train others to do their work (which can come in handy if an employee is unexpectedly absent) but also helps to put a pair of fresh eyes on transactions.” READ MORE
THE ECONOMY
Far from a recession, growth accelerated over the past year: “The U.S. economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled and a widely predicted recession never materialized. Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said on Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval.”
“For the full year, measured from the end of 2022 to the end of 2023, G.D.P. grew 3.1 percent, up from less than 1 percent the year before and faster than in any of the five years preceding the pandemic.”
“There is little sign that a recession is imminent this year, either. Early forecasts point to continued — albeit slower — growth in the first three months of 2024. Layoffs remain low, and job growth has held steady.”
“‘It’s hard to imagine how things could look better for the soft landing,’ said Brian Rose, senior economist at UBS. ‘Looking back at last year, the combination of growth and inflation that we had was not considered in the realm of possibility by most people. To have such strong growth, low unemployment, and to have inflation coming down that quickly, even the optimists weren’t that optimistic.’” READ MORE
RESTAURANTS
Want to know where restaurants are headed? Their menus reveal a lot: “Last year, as the New York Times Food team traveled the country to scout candidates for our annual list of favorite restaurants, we also set out to understand, more broadly, what defines eating out today. After years of plexiglass dividers, curbside delivery, masked servers, and, yes, QR codes, one thing was immediately clear: Physical menus aren’t just back. They have more personality than ever. We visited hundreds of restaurants of varying styles, cuisines, and price points — and left with 121 menus in hand. Together, they provide a snapshot of the distinctive new shape of dining right now.”
“The Caesar salad isn’t just a steakhouse fixture. You’ll find it at Mexican restaurants. And Thai restaurants. And Cuban restaurants. Some have miso or fish sauce in the dressing, while others are sprinkled with fennel pollen or replace romaine with snow peas. And you’ll pay for those flourishes. The average price for a Caesar on these menus was $15.42, with the most expensive one clocking in at $22.”
“Many restaurants favor a vertical, half-page menu — just the right size for holding in your hands, with no pages to flip through and, often, fewer items to choose from. But beyond that stricture, anything goes. ‘There is a lot more openness to be unique in their brand and not look like what everyone else is doing,’ said Lisa Peteet, a founder of the design agency Atlas Branding in Asheville, N.C., who creates menus for restaurants across the country.”
“In structuring menus, many restaurants have strayed from a traditional course-by-course layout in favor of fresher and more expansive sections and formats. They’re also trying to better communicate their values. If the farm-to-table movement inspired menus that listed every local supplier, this era’s emphasis on workers’ rights has spurred owners to credit every employee or note that they provide health insurance.” READ MORE
LOGISTICS
Retailers are returning to old-school, just-in-time inventory management: “Merchants have worked through the excess inventory that piled up on store shelves and in warehouses over the past 18 months, and are now focusing on replenishing items rather than stocking up on goods to have on hand in case of supply-chain disruptions. The shift marks a return to the ‘just-in-time’ inventory management strategy many companies had employed before pandemic-driven product shortages and volatile shifts in consumer demand prompted a switch to a ‘just-in-case’ stockpiling approach.”
“Retailers have been working to get inventories back in line with sales after bringing in too much merchandise that was no longer in demand in 2022 as consumers shifted spending from items such as home decor to office apparel and then toward travel.”
“The ratio of inventories to sales at general-merchandise retailers, which tracks how much companies have in stock compared with what they sell, fell to 1.36 in November from a pandemic-era peak of 1.5 in August 2022, according to the Census Bureau. That compares with 1.33 in November 2019.”
“‘We’re basically right back in line with where we were in 2019, which I think is where folks want to be,’ said Jason Miller, a logistics professor at Michigan State University.” READ MORE
HUMAN RESOURCES
Most companies are planning to offer better benefits: “Many of the nation's companies plan to boost their leave and vacation policies in the next two years, with newly available research indicating those adjustments are likely to include unlimited time off and increased bereavement leave for workers. According to a study from global advisory firm WTW, about 84 percent of U.S. companies plan to make changes to their various parental, bereavement and vacation policies over the next two years. About 72 percent of employers said they want to enhance the employee experience. That percentage was consistent among respondents ranging from companies with 100 employees up to businesses with 25,000 or more workers.”
“While 86 percent of respondents said they offer paid maternity leave, and 82 percent provide paternity leave, about 20 percent of the surveyed companies said they plan to increase the value of the programs they offer. Similarly, while 95 percent already offer some kind of bereavement leave, about 25 percent said they plan to increase the value of that leave, including expanding its reach and extending the time offered.”
“More companies also plan to move to an unlimited time off vacation policy. While just 12 percent of the surveyed companies report having such a policy now, that percentage is up from 9 percent two years ago — and 16 percent of employers anticipate offering unlimited PTO within the next two years.” READ MORE
The backlash is sending DEI programs under the radar: “Kenji Yoshino, the director of the Meltzer Center for Diversity, Inclusion and Belonging at NYU School of Law, has been advising managers at Fortune 500 companies to code their DEI programs as either green, yellow, or red. A red program indicates an initiative that has a high risk for potential litigation, such as a hiring process that provides an advantage to candidates of color; on the other hand, a program that offers mentorship widely to anyone at the company may be categorized as green.”
“Mr. Yoshino noted that some DEI critics had a limited view of what the programs consisted of. Many corporate diversity programs extend beyond hiring processes to touch on mentoring, training and career development.”
“‘The pessimists say, This is a terrible moment for DEI, DEI is over, the sky is falling,’ Mr. Yoshino said. ‘I want to ask people what they think DEI actually is.’” READ MORE
INSURANCE
Guess what? Insurance companies are doing quite well: “After suffering some of the worst years in their history, insurers say they now see a path to profitability for home and auto policies. Big rate increases are driving up revenue, while the inflationary pressures that pushed up repair and replacement costs appear to be easing. Losses from extreme weather tied to climate change remain a wild card, but the short-term outlook for insurers appears more favorable. ‘We’ve started seeing the potential for light at the end of the tunnel,’ said Josh Esterov, an insurance analyst at CreditSights.”
“The industry’s stock-market sizzle contrasts with the experience of millions of homeowners and drivers. Policyholders are facing sharply higher prices, reduced coverage, and fewer, if any, choices for coverage. Companies are pulling back from disaster-prone areas across the country, leaving California wrestling with what regulators called an ‘insurance emergency’ last month.”
“‘Insurers kicked their rate hikes into high gear in 2023, which has been thrilling to investors,’ said Douglas Heller, director of insurance at the Consumer Federation of America. ‘But for everyone who has to buy coverage, it has been very difficult.’” READ MORE
THE 21 HATS PODCAST
We’re Making Good Money. I’m Not Sure How: This week, Jay Goltz, Jennifer Kerhin, and Liz Picarazzi discuss their efforts to get a better grasp of what drives their profits. They ask how much they should manage their finances themselves, and how much they should rely on an accountant or a fractional CFO. When does delegation become abdication? Jennifer says she’s benefitted from hiring a fractional CFO who has taken an active leadership role, including setting up a database that helps Jennifer see in real time whether the fees she’s charging cover the labor she’s deploying. “Whatever she's charging me,” says Jennifer of her CFO, “it's absolutely worth it.” Liz, meanwhile, thinks she should be doing more herself. And Jay says he was paying big bucks for a full-time CFO until late last year. “And it was a complete waste of money,” he says, which is why he’s decided not to replace her.
Plus: Liz reveals her secret strategy for marketing directly to municipal government officials, some of whom have started to use the term “Citibin” generically. And the owners respond to a question from the head of a cost-reduction service who wonders why she’s struggling so much to get business owners to try her risk-free service.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren