Category Archives: Plan-as-you-go Planning

Planning and Paradox

Business Planning, Plan-as-you-go Planning, Planning Fundamentals, , ,

Business planning is full of paradox. It’s a matter of balance. Here are some interesting examples.

  • Business plans are always wrong, but nonetheless vital. Wrong because they’re predicting the future and we’re human, we’re fallible, so we don’t get it right. Vital because we need the plan in order to track where, how, and what direction it was wrong, which becomes planning process, which becomes management. I deal with this a lot.
  • You have to focus to survive, but you need new markets to grow. So which is it? Have you heard of the corridor principal? It says business strategy is like walking down a long corridor full of doors. Open every door to investigate and you never get anywhere. Ignore all the doors to just keep going and you never get any new opportunities.
  • I’ve written before: “it’s better to have a mediocre strategy consistently applied over three or more years than a series of brilliant strategies, each applied for six months or so.” So do you stick to the plan regardless, like running into a brick wall? Or do you revise? When do you revise? How do you know? There’s paradox, where the human judgment comes in to override the formulaic.

The solution to that paradox is the frequent plan vs. actual review, tracking results and assumptions, to put changing the plan into a real context. Set the plan, review it, and revise it, frequently, based on needs. It’s still a tough decision, at times, because of the consistency vs. pivot problem; but keeping on top of it makes it easier. For more on that, check out Lean Business Plan as Business Dashboard and GPS.

(Image: shutterstock.com)

Planning: Form Follows Function

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(Rounding up my business planning theme this week, this is another excerpt from my book The Plan-As-You-Go Business Plan, which is posted complete online.)

Your plan-as-you-go business plan is no more than what you need to run your business. In the beginning, it might be as simple as an elevator speech. Be able to talk through those key points: the customer story, what makes you unique, how you’re focusing and on what you’re focusing, and, if it comes to that, your close — what you want from whoever is listening.

Or it might be a simple sales forecast, and perhaps, a burn rate in the very beginning because you know what you’re doing — maybe you’ve been doing it for years already and you don’t need to verbalize it right at this moment — and you’ll set those figures down and start tracking them

Planning comes in many forms. Think of it as analogous to motion in athletics. In so many different sports, the winners practice economy of motion, repeated muscle memory. Another way to look at it: in design and mechanics, the fewer moving parts, the better. If you have to squint conceptually to see the key points, squint down on the elements you’ll be able to track and then revisit.

It’s not about the text, or the form of the thing, until that becomes related to the function. When you’re doing a business plan as part of a graduate business school class, then yes, it has to be complete and look good and read well; editing and format matter. When you’re doing a plan for an investment group that is going to pass it around among the partners, then it matters. But you don’t want to get bogged down in format when it’s just you and your spouse and you simply want to think through what’s required.

So the plan is a collection of concepts in the middle, surrounded by specifics that have to be done. Around the core you put a collection of metrics to be measured and tracked (lots of them are sales, expenses, and the like, but not all), task assignments and responsibilities for different people, dates and deadlines, budgets, and so on. That’s your plan.

From that core plan, you spin off various outputs. You take the highest highlights of the plan and 60 seconds or so to explain it in an elevator speech. That’s one output. Or you write it all out carefully, and add supporting information about the market and the industry and the backgrounds of the management team, and it’s a plan document. Or you create a 20-minute 10-slide summary with PowerPoint or Keynote slides, and that’s a pitch presentation for potential investors. Or you create a cover letter or cover e-mail, about a page or so, along with a 5- to 10-page written summary, and that’s a summary memo. Or you do none of these, you simply keep that plan as a collection of bullet points, of picture financial projections, and a list of things to be done by whom and when and for how much money, and share it with your team. In that last case you don’t ever edit or polish it, or sweat the page headers and page footers or font size. You just use it to manage your company,

Notice that none of these outputs stands as something you do instead of the plan. And none of these outputs is really the plan. The plan exists at the core, and you create the outputs as needed.

With all of these various iterations and outputs, always keep assumptions on top, where you can see them for every review meeting. Minding the changing assumptions is one of the significant advantages of the plan-as-you-go approach over the more traditional methods.

I ran a business for years during which the plan was shared only between me and my wife, mostly, enhanced by sales forecasts and burn rate. During those formative years there was no need for anything else. When it was time for an elevator speech, either one of us could do it. When there was need for a written business plan — it came up first when we first set up the merchant account to be able to accept credit cards, in 1988 — then we settled down for a while and wrote it out as it was, conceptually, at that time. We always knew what we wanted to do, but we also knew our key assumptions, and we tracked them as they changed, and revised the plan. A lot of that was verbal, between two people.

As the business grew, the verbal plan with the forecast stopped working. Things became more complicated. Employees needed to know about the plan and join in its formation and then its implementation. So we moved it into bullet points on the computer, and tied those to forecasts, and began tracking in a group, in more detail.

We then began to do annual plans more formally, writing out chapters, and conducting review meetings every month. With each annual plan we’d go out and take a new fresh look at the market. We had people doing nothing but marketing, and they developed segmentations and forecasts and supporting information. It was part of their job.

Are you recognizing yourself somewhere along this line?

Eventually we wanted to bring in outside investment. That was during the dotcom boom when valuations were very high, so we thought it would be a good time to lock in the value with some cash out. We produced very formal plans every three months during that period.

The speech isn’t instead of the plan, and the pitch isn’t instead of the plan, but that doesn’t mean you plan or don’t plan if nobody outside your company is going to read about it. Your plan should always be there as the source of these outputs, so you’re ready to produce them when you need to.

Planning: It’s About Management and Accountability

Back to Fundamentals, Business Planning, Plan-as-you-go Planning, ,

(Note: this is an excerpt from my book The Plan-As-You-Go Business Plan, which is posted as a web site where you can read it online.)

Every small-business owner suffers the problem of management and accountability. It’s much easier to be friends with the people you work with than to manage them well.

Correct management means setting expectations well and then following up on results. Compare results with expectations. People on a team are held accountable only if management actually does the work of tracking results and communicating results, after the fact, to the people responsible.

Metrics are part of the problem. As a rule we don’t develop the right metrics for people. Metrics aren’t right unless the people responsible understand them and believe in them. Will the measurement scheme show good performances and bad performances?

The metrics should be built into the plan. Remember, people need metrics. People want metrics.

Then you have to track. That’s where the plan-as-you-go business plan creates a management advantage, because tracking and following up is part of its most important pieces. Set the review schedules in advance, make sure you have the right participants for the review, and then do it.

In good teams, the negative feedback is in the metric. Nobody has to scold or lecture, because the team participated in generating the plan and the team reviews it, and good performances make people proud and happy, and bad performances make people embarrassed. It happens automatically. It’s part of the planning process.

And you must avoid the crystal ball and chain. Sometimes — actually, often — metrics go sour because assumptions have changed. Unforeseen events happened. You manage these times collaboratively, separating the effort from the results. People on your team see that and they believe in the process, and they’ll continue to contribute.

Planning and Paradox

Business Planning, Plan-as-you-go Planning, Planning Fundamentals, , ,

Business planning is full of paradox. It’s a matter of balance. Here are some interesting examples.

  • Business plans are always wrong, but nonetheless vital. Wrong because they’re predicting the future and we’re human, we’re fallible, so we don’t get it right. Vital because we need the plan in order to track where, how, and what direction it was wrong, which becomes planning process, which becomes management. I deal with this a lot. 
  • You have to focus to survive, but you need new markets to grow. So which is it? Have you heard of the corridor principal? It says business strategy is like walking down a long corridor full of doors. Open every door to investigate and you never get anywhere. Ignore all the doors to just keep going and you never get any new opportunities.
  • I’ve wrote in my Plan as you Go Business Plan book: “it’s better to have a mediocre strategy consistently applied over three or more years than a series of brilliant strategies, each applied for six months or so.” So do you stick to the plan regardless, like running into a brick wall? Or do you revise? When do you revise? How do you know? There’s paradox, where the human judgment comes in to override the formulaic.

(Image: shutterstock.com)

I’m Loving the New Version of Business Plan Pro

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If you’re a regular reader you know I don’t normally do sales pitches here on this blog, but this is special. Last week Palo Alto Software introduced a brand new version of Business Plan Pro incorporating (finally) my Plan-as-You-Go Business Planning ideas into the mainstream of the software.

With this new version, when you start a new plan, Plan as You Go is the first choice for setting up a simple, practical, management-oriented business plan. Not the whole big formal document plan, but just what you need to run a business with. That’s the key screen above (with my annotations in red):

Now the new built-in option is exactly what I suggested in the book: a streamlined, practical outline, shown here on the right. Of course you can add more later and eventually make a larger business plan, but you do that as the business plan events happen, not before. So you add the embellishment, like description of management team, or exit strategy, only when you need it. Which is great, because a lot of people really don’t need it.

I wrote the book in 2008, but because we’ve been busy with liveplan, the new online web business planning, our mainstream software had to wait. So now I’m celebrating that it’s finally here.

We’ve also added a lot of video at many different points, so that – if you’re online – you get me talking about what you’re looking at, in very short snippets. That’s hard for me to watch, frankly, because I’m as self-conscious as anybody else … but as an author, I love the opportunity to talk to you while you’re working with what I wrote.

This is the 12th version of Business Plan Pro since the first one was published late in 1994, and actually hit the shelves in 1995. We’ve come a long way since the first one – it’s still my business planning advice, but I wrote a third of the code in the original, and now there’s a team of a dozen programmers – which makes it way better.

And, by the way, if you prefer an online version, or you’re a Mac user, there’s also a lot of my methodology and my instructions in the new online planning web app at www.liveplan.com.

For more information click here for the website or call them toll-free at 1 (800) 229-7526.

Business Planning for the ‘Lean Startup’

Business Planning, Plan-as-you-go Planning, Starting a Business, ,

(Note: I wrote this first for my business planning column at entrepreneur.com. I’m reproducing it here, with permission of the publisher, for the convenience of my readers here. Tim.)

There’s lots of talk these days about the so-called “lean startup.” Most would think that just meant a startup without a lot of outside capital. According to thought leaders Eric Ries and Steve Blank, a lean startup is one developed along a build-test-revise-build-more-test-more strategy. It’s closely related to what they call agile (or rapid) program development. It’s product development that doesn’t mean spending forever planning a project before getting started. Instead, it’s a cycle of build, test, correct, then build, test and correct.

And that idea, the cycle, the test and revise, the small correction, and the quick pace, is ideal for a next-generation style of business planning. So I’d like to explore here what kind of planning might be related to the lean startup. And I hope, as you read this, that it sounds like a better planning process for a lot of organizations, not just the lean startups.

  1. Keep the planning simple and practical.
    The plan should live online, not on a document printed out somewhere. It could be in the cloud, on an online application, or a local area network. The key players can grab it from where it is, work on it and put it back.
    It doesn’t need any extra frills of editing for the sake of appearances. It doesn’t include an executive summary or a description of company background or management team. It’s a plan, not a sales brochure. If you need that document later on, you can start with the plan and add the extra descriptions, summaries and editing required for showing it to outsiders.
    Your plan should include strategy, steps, dates, deadlines, metrics, accountability, and basic projections, plus a review schedule. The review schedule is critical: When will we review and revise? This keeps the plan alive.
  2. Grow it organically.
    The worst thing you could do is develop a plan before you take any action. Start with the heart of it–what’s most important–and build it like an avocado grows, from the heart outward. Don’t put anything off for planning; plan as you develop your business.
    What comes first? Probably strategy, but not necessarily. Some people build their plan all around a sales forecast. It’s all modules, like blocks, and you do it in whatever order fits your personality.
  3. Think it, plan it, test it.
    It’s not like you’re not going to plan, manage and steer your company just because it’s a lean startup. On the contrary, you need to stay on top of the quickly changing plan, managing your assumptions as the reality emerges. As assumptions withstand tests–or don’t–you can quickly make adjustments.
    That agile development website took off even faster than hoped? Cool. Your plan tells you how those dots were connected so you can adjust everything else. Did it take longer than expected? Same thing: Go back to the plan; look at how everything related.
  4. Match your agile development with agile planning.
    I love all the similarities between rapid development and plan-as-you-go planning. So let’s bring the vocabulary together. Real-world business planning, particularly in this rapidly changing real world we live in, should also be pretty damn agile. And rapid.
    Plan it, build it, revise it, plan it again. That’s called the planning process, and without it you don’t control your destiny. You can’t move quickly enough. You’re always reactive and you’re not optimizing.
  5. Lather, rinse, repeat.
    Planning has to be like steering, a matter of constant small corrections within a broad navigational plan. The details change, but all within context of the long-term direction. A good planning process is cyclical. You’re always reviewing and revising.

To me, all five points seem to be a pretty good way to build planning into your business, whether you’re a “lean startup” or not.

Seth Godin on Rethinking Business Plans

Business Planning, Plan-as-you-go Planning, Planning Fundamentals, Weblogs, , ,

It’s about time that business writers, assorted experts, entrepreneurs, academic and the rest start focusing on the huge damaging and wasteful misunderstanding that most of us have contributed to: that completely out-of-date idea that a business plan is a document, done once, related to raising money.

Seth's blogSo I’m delighted to see Seth Godin jumping onto this issue with a good restatement of the problem and an infusion of new ideas to shake us up. His modern business plan post on his blog Monday starts with a quick but very real problem:

It’s not clear to me why business plans are the way they are, but they’re often misused to obfuscate, bore and show an ability to comply with expectations.

The most important word there is “misused.” Because that’s the myth of the business plan. Case in point: last week a journalist asked me if we had “an official business plan” for Palo Alto Software. That was his phrase, not mine: “official.” As in formal. Static. Left somewhere in the drawer.

Somebody on Twitter asked me what I thought of Seth’s post, thinking, I’m only guessing, that I’m in favor of the more traditional business plan. No way. I love the new thinking. It’s right in line with what I’ve been posting for several years now.

There’s no such thing as an official business plan, but the idea highlights the misuse. People spending months developing documents instead of businesses. That’s waste.

It should be business planning, a process, reviewed and revised regularly, a tool for managing and steering a real business.

Seth’s recommendation is excellent. Let’s shake the old expectations up, change the expectations, change the arrangement… and what he recommends doesn’t do anything but enhance the real business purpose of business planning.

His recommendation? A new standard order of plan documents:

I’d divide the modern business plan into five sections:

* Truth
* Assertions
* Alternatives
* People
* Money

He goes on, in the post, to talk about each of those sections. Excellent suggestions. His new order would make a great business plan.

From my point of view, this suggested reordering is nothing but positive. The business plan is just step one of planning; it’s about managing change. It’s not a sales brochure. It’s not a pitch to investors. It’s not even a plan; it’s planning. It’s about managing change. It’s about optimizing, prioritizing, setting long-term goals and short-term steps, with metrics and tracking. Why not put it in this order?

If nothing else, at least it shakes up that mythological business plan that so many people are tempted to misunderstand and misuse. And there’s no downside to it.

Read his post. See what you think. And if you read my stuff on business planning, I think you’ll find I’ve always been in favor of flexible one-of-a-kind business plans, as part of planning process. It fits perfectly with my work on business planning, including the two highlights of my recent work:  Plan-As-You-Go Business Plan and Business Plan Pro.

The Best Business Email Might Be a Phone Call

Baby Boomer, Back to Fundamentals, Personal Productivity, Plan-as-you-go Planning,

This morning I picked up Finding the Right Words for Business Emails, a recent post by Bradford Shimp on his Allbusiness Answers blog. Bradford’s a smart person, and he has good advice here. Use language you’d use for a friend. Be careful with the subject line. Avoid phrases that sound like spam. And this, my favorite:

You can’t control how a reader will interpret your email, but you can work hard to find the right words to communicate your message clearly. Avoid murky language. Instead, go for crisp, clear sentences. If you want to make a point, repeat it a couple of times in the email. One thing to avoid in email is sarcasm. It just doesn’t translate. Satire may be pretty hard to pull off as well.

Even so, Brad’s good advice about email notwithstanding, the post reminds me how I’ve come full circle on email in 25 years. I used to love email, but these days I say dial the phone.

In the beginning of email (I was on Applelink, CompuServe and the Source in the middle 1980s) it was a fabulous productivity booster. My favorite business relationships were the people I could reach in email.

Lately, however, every day I see more of the occasions when email is a weak second-best alternative to dialing the damn phone and talking to somebody. Talk, and more important, listen. Have a conversation. You have the benefit of two-way conversation, tones of voice, inflection, and so forth. Email gets lost, quarantined as spam, misunderstood, and misinterpreted. It’s dangerous. Once you send something in email, that person has control of it, forever. It gets forwarded without context to the wrong people.You can’t get it back. And if it’s misunderstood, you might never get to explain it.

I find email seems like an easy way out sometimes, because I’m too lazy to talk to an actual live human being. When it matters at all, use the phone, talk, and listen.

Want Real Strategy? Mind the Damned Gap

Business Strategy, Plan-as-you-go Planning

Mind the gap. It’s written all over the London tube (subway). They mean the gap between the trains and the platform.

Mind the gap. It should be written wherever somebody is doing strategic planning for small business. It means that extremely common gap between the brilliant strategy cooked up in the meetings and the actual day-by-day work of all the people in the company.

The gap is  lack of strategic alignment. It’s basic, like alignment between what you say and what you do.

You come out of the strategy meeting all enthused about the new strategy with new emphasis on new priorities. Then you get back to the office. The phone rings. Problems arise. You put out fires. And go back to doing what you’ve always been doing. Strategy hasn’t changed anything. It hasn’t been implemented.

One of the most important benefits of a good business planning process is strategic alignment. You set the strategy and develop the steps, agree on metrics to track progress, then follow up on those metrics with plan vs. actual analysis that can end up showing how the daily doings inside the business match (or don’t match) the larger strategy.

In most cases, its not quite as academic as it sounds. It’s about spending the time and money where your strategy says your priorities should be. I ran up against this basic truth hard in one of my favorite consulting engagements, years ago, which I’ve posted here as this true story of how the strategy pyramid helped one group in Apple Computer track actual spending and activities to enforce the implementation of the strategic plan.

Without planning processes, metrics, and tracking, that gap becomes a gigantic fissure separating your strategic from what you’re actually doing. This is one of the biggest, and most common, problems in small business.

I’m pleased to see the same things showing up in this week’s Harvard Business School Working Knowledge site:

“Explicit” strategy is the one you read about in your company’s planning memos and PowerPoint slides. The second, “implicit” strategy, is what emerges when middle managers and line employees attempt to execute the explicit strategy.

That’s the beginning of One Strategy: Aligning Planning and Execution. Noah Parsons tipped me off to that one. It’s a very interesting interview with Marco Iansiti, Harvard business school professor, co-author of One Strategy. It looks like a good book.

Moral of the story: mind the damned gap.

(Images: JMOliver, Slavoljub Pantelic/Shutterstock)

Which Comes First: Plan or Pitch?

Business Planning, Plan-as-you-go Planning,

It’s not exactly the same as the chicken or the egg, but it has some similarities.

I get this question a lot lately, so I decided to take it here to my blog.

Don’t pitch a business without planning it first. That’s a lot like trying to film a movie without having a screenplay. You have to know what’s going to happen before you start.

And I do see people, websites, even some smart people and good websites, confusing the issue by presenting a pitch as if it were something you could do without having a plan. Sorry, bad idea.

Yes, you can summarize a business idea without detail. You can summarize a strategy. Maybe you can put up a picture of a business model, and focus on a target market, and narrow the business offering. And that’s certainly a useful exercise. But it’s just a concept piece, a rough sketch.

Before you have a pitch you simply must have a rough idea of estimated startup costs, sales, expenses, and cash flow. Without that you can’t possibly talk about scale, financial vital statistics, and feasibility. It’ s not that you accurately predict the future. It’s that without those basic numbers you really don’t know what the business is. They’re wrong, but they’re vital. They pull apart the relationship between sales, spending, profits, investment, and strategy. How many employees are needed? How much space? What kind of space? Does the marketing strategy match the target market and the focused business offering?

You should never, ever put a pitch in front of investors or bankers or bosses without having a plan behind it. Just ask yourself the questions your target audience will ask. Do you want to say “I don’t know” or “we haven’t figured that out yet?” Or would you rather say what your plan says.

And of course your plan will be a living, constantly changing plan. But don’t confuse flexibility with not having a plan. Flexibility is having a plan so you know how changing one assumption or variable effects all the others.

Special reminder: maybe a lot of the confusion is caused by people who think you don’t have a plan unless you have a full formal business plan document, coil bound, edited, printed, and mounted on a pedestal. Not so. Having a plan means milestones, basic numbers, task responsibilities, review schedules, and listed assumptions.

Final thought: my favorite process is having the plan — the real plan, not the formal output document plan — and working it interactively with the pitch. It has to do with the way we humans think. Summarizing something (the pitch) often sharpens the focus, and generates new ideas. Plan and pitch, interactively, working them both. And expect them to change almost daily. That’s life in the real world.

Which, by the way, is what I say in The Plan-As-You-Go Business Plan. (Sorry, I couldn’t resist).

(Image credits: Veranis, Archman/Shutterstock)