Category Archives: Planning Process

Planning Principle: Good Business Planning Empowers Accountability

It’s easier to be friends with your coworkers than to manage them well. Every small-business owner suffers the problem of management and accountability. Good business planning empowers accountability.

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Good business planning sets clear expectations and then follows up on results. It compares results with expectations. People on a team are held accountable only if management actually does the work of tracking results and communicating them, after the fact, to those responsible.

This is the fourth of my five principles of business planning. The first is do only what you’ll use. The second is that planning is continuous process, not just a plan. The third is that planning helps manage change and is not voided by change.

Good business planning develops metrics

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 and bad performances?

Remember, people need metrics. People want metrics. You and your business need metrics.

Then you have to track. That’s where the lean 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.

Good business planning develops expectations and feedback

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. Besides, guilt and fear tactics are the worst kind of fake management.

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

Planning Principle: Continuous Process, Not Just a Plan

Plan Run Review ReviseDon’t think of planning as just a plan that you do once. Planning done right is a process of continuous improvement. Keep your business plan always fresh and current. Never finish a business plan, heave a sigh of relief, and congratulate yourself that you’ll never have to do that again. Don’t use it once and throw it away. You don’t store it in a drawer to gather dust.

This is the second of my give main planning principles. I posted the first a few weeks ago as planning principle: do only what you’ll use.

With good planning process the plan is always up to date

This kind of regularly updated planning is clearly more useful for real business than a more static elaborate business plan. I refer to it as lean planning because with this kind of planning for management, the plan is smaller and streamlined so that you can update it easily and often, at least once a month. Your lean plan is always current, always being tracked and reviewed, frequently revised, and is a valuable tool for managing.

You run your business according to priorities. Your tactics match your strategy. Your specific business activities match your tactics. And accountability is part of the process. People on the team are aware of the performance metrics, milestones, and progress or lack of it. Things get done.

Furthermore, even back in the old days of the elaborate business plan, it was always true that a good business plan was never done. I’ve been pointing that out since the 1980s, in published books, magazine articles, and blog posts. That’s not new with lean business planning. It’s just more important, and more obvious, than ever before.

A business plan is not a single thing.

Don’t think you can find, or buy, a pre-written business plan. You don’t do it and forget it, and you don’t find a business plan or have one written for you. If you work with an expert, consultant, coach, or business plan writer, realize that in real use a business plan lasts only a few weeks before it needs to be reviewed and revised. So your value added from the expert has to help you in the long term. If you don’t know your plan intimately, then you don’t have a plan.

Involvement vs. Commitment and Planning as Management

In a bacon and egg breakfast, the chicken is involved, the pig is committed. That old joke goes a long way towards illustrating the difference between involvement and commitment. And that’s where you get the benefit of proper business planning.

Good business planning develops commitment

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In the business planning process, commitment is essential. ChickenPlans need to be implemented, and implementation means commitment.  There has to be accountability, and peer pressure.  You have to follow up on what was planned to make sure that it was actually carried out. Here are some ways to develop commitment within your team:

  • Use the SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) to start discussion. SWOT brings team members into the  strategic discussion. It makes strategy understandable. Your managers have to be part of the team that discusses strategy.
  • Make the budgeting elements of the planning process visible. Managers should see what their peers are spending and should hear why. One of the best things I ever watched, as a consultant, was a management group that argued over the activity budgets during the planning process. Each manager had to defend his or her budget, showing what sales and marketing budgets would come out of it. There was a lot of peer pressure.
  • Make sure people know that actual results will be compared to plan.  With time, in a company that uses the planning process, this becomes second nature.  In the beginning, however, it is extremely important that the main company owners and operators set the standards by scheduling plan review meetings each month and attending them. This has to be important.

Planning process is essential management

Pigistock_000000873019smallThe bottom line here is that planning process, for a growing company, is about the people more than the plan. Not only does everything have to be measurable, but it also has to be measured, after the fact, and tracked, and managed. Your people must be committed to your plan.

 

10 Myths vs. Reality on Business Plans and Startup Investment

I gather from a stream of emails I’ve received that there are a lot of misconceptions on the relationship between a business plan and getting seed money and/or angel investment. So here’s a list of reality checks to apply to all those lists.

  1. business managementBusiness plans are necessary but not sufficient. Even a great business plan won’t get any investment for any startup. Investors invest in the team, the market, the product-market fit, the differentiators, and so forth. And they evaluate the risk-return relationship based on progress made, traction achieved, and market validations. The plan gets information the investors need; it doesn’t sell anything. One of the most serious misconceptions is the idea that the quality of the writing and presentation of a business plan is going to influence its ability to land investment. Sure, if you consider the extremes, a poorly written plan is evidence of sloppy work. If it’s hard to find the important information, that’s a problem. But barring extremely bad plans, what ends up being good or bad is the content – the market, product, team, differentiators, technology, progress made, milestones met, and so forth – not the document.
  2. All businesses should be using business planning regularly. They should have a plan to set strategy and tactics, milestones, metrics, and responsibilities, and to project and manage essential numbers including sales, spending, and cash; and they should keep that plan alive with regular (at least monthly) review and revisions. Business plans are for business planning, and management; not just for investors.
  3. Nobody has ever invested in a business plan, unless you count what they pay business plan writers and consultants. People invest in the business, not the plan. Just like people buy the airplane or car, not the specifications sheet. The plan is a collection of messages about past, present, and future of the business. It’s past facts and future commitments. People invest in milestones met.
  4. The normal process goes from idea, to gathering a team, doing a plan, and executing on the early steps to develop prototype, wireframes, designs, and ideally traction and market validation. And the plan is constantly rewritten as progress is made.
  5. Investors come in only after a lot of initial work is already done. 
  6. The startup process does not – repeat, NOT – go from idea to plan to funding and only then, execution. You don’t go for funding with just a plan. That’s way too early.
  7. Investors do read business plans. Regarding the myth that investors don’t read business plans, I’m in a regional group of angel investors, we’ve had maybe 80 people as members during the eight years since it started, and the vast majority of us would never even consider investing in a company without seeing the business plan.
  8. But investors don’t read all the business plans they get; and they often reject deals without reading the plan. To reconcile this point with the previous, note that investors read the plans during due diligence, as a way to dive into the details of a startup they are interested in. They don’t read them as a screening mechanism. So a lot of startup founders who don’t get investment are telling the truth when they say investors didn’t read their plan. Investors rejected them based on summary information or pitch.
  9. On that same point, the process with angel investment today starts with an introduction or submission through proper channels (gust.com, angellist.co, incubators, 500 startups, and so forth). Investors screen deals based on summary information in the profile or a summary memo. The deals that get through that filter will be invited to do a pitch in person. Those that still look interesting, after the pitch, will go into due diligence, with is a lot of further study of the business, customers, market, legal documentation, and the business plan.
  10. Business plans are never good for more than a few weeks. They need constant revision. Things are always changing. People don’t expect the big full formal plan document anymore, not even investors. Keep a plan lean, review it often, revise it as necessary, and use it to run your business. Use it to steer the business and keep making course corrections. That’s what a plan is supposed to be these days.

5 Management Benefits of Lean Business Planning

Don’t think of a business plan as a formal document that’s hard to do, useful only for startups, bank loan applications, and seeking investment. Think of it as lean business planning that’s just lists and tables and is vital for optimizing business management. You plan, run, review, and revise. It’s a process. A constant cycle.

1. Manage strategy

Business ManagementStrategy is focus. Most small businesses have trouble setting and maintaining focus on priorities because there’s always a new crisis interfering, or a new opportunity, real or perceived, distracting them like a shiny new thing.

Not that opportunity is bad. But a lot of the shiny new things that seem like opportunities are just distractions. Pursuing them dilutes the focus and weakens the business. Trying to do everything is too often a quick path to failure.

What to do? Manage strategy with planning. Set strategic priorities thoughtfully and use a simple planning process to manage them. Have a monthly plan review. Take time to reflect on results and assumptions and change and adapt carefully.

That starts with a plan that sets the key points of strategy. Make it a lean plan, just bullet points, extreme summaries. You do it for yourself, not outsiders. So keep it simple. And then add the entire lean planning process for regular review and revision.

2. Align strategy and tactics

It happens so often. You set back to develop strategy, but get back into the routine and don’t follow up with real tactics, real business decisions and activities, to execute strategy. For example, the computer store decides to focus on small business owners who appreciate service, but continues to advertise low prices, doesn’t insist on installing every system, and doesn’t offer good training and frequent upgrade reminders. The tactics don’t match the strategy.

To manage strategic alignment, do a lean business plan that lists tactics in simple bullet points. Tactics include pricing, channels, messaging, product and service mix, and so forth. Make sure the tactics execute the strategy.

Then review tactics and compare plan to actual results every month in a planning review meeting. Check strategic alignment as strategy, tactics, and assumptions change. Expect to revise often.

3. Manage execution

Thing of ongoing business management, and strategy and execution, as a process of taking steps towards goals. Goals include short- and medium-term goals you can call milestones. In your lean plan, you set the milestones you can see for the near future. You list important milestones for the team. You assign dates, deadlines, budgets, performance expectations, and responsibilities.

Then you manage progress towards milestones during the monthly lean plan review meetings. Bring up the milestone schedule, discuss progress, revise as necessary, and manage the ongoing flow from plan to meaningful activities to results. Review and revise as needed.

4. Manage people

People work better when objectives are clear and measurements are specific. People like to control their own performance numbers (also called metrics) so they can see their own progress towards goals and level of performance. Which would you rather have for yourself: an objective numerical goal you can see and share, or the subjective approval and review of your supervisor?

With lean planning, you have the regular review of expectations and results. It’s an easy forum for reviewing performance of team members, revising expectations, and applying both management and, where appropriate, peer pressure. Once a month you review results and compare them to expectations. Sometimes the plan was too ambitious and expectations too high, so you revise the goals. Sometimes the review turns up problems in execution and poor performance.

That’s where management comes in. Make expectations explicit, review results, and make people accountable for performance. All of which is built into a healthy planning process.

5. Manage cash

Cash flow is critical to a healthy business and it’s not always as simple as profits. Businesses that manage products and inventory can be profitable on paper but have all the working capital tied up in inventory. Businesses that sell to other businesses can be profitable on paper but have all their working capital tied up in Accounts Receivable, waiting for their business customers to pay their invoices.

A good lean planning process lays out expectations for money coming in and money going out to manage cash flow. Each money you have a plan vs. actual review to highlight developments, re-allocate spending as the need comes up, and make sure the cash flow is running as expected.

Conclusion: Planning is Management

Forget the myth of the big formal business plan that makes most business owners grateful they don’t have to have one. Instead, think of business planning as a simple lean business plan – bullets and tables for strategy, tactics, milestones, metrics, and essential projections – with a process that includes regular review and revision.

(Note: this post appeared first on the SBA Industry Word blog, as 5 Things Business Owners do Better with Lean Business Planning. This is a slightly modified version.) 

Business Plans are Always Wrong

Yes, I admit; I’ve used “business plans are always wrong” a few times in slides, blog posts, and even in both of my two latest books. It’s an important concept. Way too many people misunderstand the point of business planning and assume that because we can’t predict the future, we shouldn’t plan.

Which prompts me to ask: does the fact that flights are often delayed and sometimes cancelled suggest you shouldn’t make reservations to fly? Does the fact that weather or traffic jams might change the optimal route mean you don’t want to plan a driving trip? How can you justify not planning your business with the fact that things change?

I say take that a step further: business plans are always wrong.

That’s because we’re human. Business plans predict the future. We humans suck at predicting the future.Istock_000000549056small_2

Paradox: nonetheless, planning is vital. Planning means starting with the plan and then tracking, reviewing progress, watching plan vs. actual results, correcting the course without losing sight of the long-term destination.

Planning is a process, like walking or steering, that involves constant corrections.

  • The plan sets a marker. Without it we can’t track how we were wrong, in what direction, and when, and with what assumptions.
  • Use this marker to manage the constant conflict between short-term problems and long-term goals. You don’t just implement a plan, no matter what. You work that plan. Use it to maintain your vision of progress towards the horizon, while dealing with the everyday problems, putting out fires.
  • So the plan may be wrong, but the planning process is vital.

The truth is that forecasting is hard. Nobody likes forecasting. But Istock_000000408066smallone thing harder than forecasting is trying to run a business without a forecast.

A business plan is normally full of holes, but you fill them, after the fact, with the management that follows. That’s what turns planning into management.

Good planning is nine parts implementation for every one part strategy. And you heard that one from me first.

 

Business Plan Software Then and Now

I was shocked, over the weekend, to discover that it’s been more than 10 years since I posted The Future of Business Planning Software here on this blog. I wrote then:

As time goes on, more people are going to use planning as process to manage their businesses better. More will see the power of regular plan review, regular plan-vs.-actual analysis, regular milestones management, and using it all to manage teams and priorities. As this happens it will improve the quality of business planning software as well as of business planning. We’ll all start to look at built-in plan-vs.-actual analysis, regular plan reviews, and software that makes that happen.

Future of Business Planning 2006Okay, so I’m an optimist. Instead of what I predicted (yeah, rose-colored glasses, I suppose), business planning is still, 10 years later, obscured by myth and misunderstanding. Experts who should know better are still advising people against business planning when what they mean is the wrong kind of business planning, the use-once-and-throw-away formal business plan full of painfully-perfected summaries and descriptions.

And what I said would happen was, definitely, what should have happened; and what should happen still. Better late than never. These things seem self evident to me:

  1. All business owners and startups have enormous benefits to gain from proper planning. Lately I’ve been writing about it as lean business planning, but it’s basically still today what has been fundamentally good planning for all of my lifetime. Short, concrete, specific, trackable, used for regular review and revision, part of a process that is heavy on plan vs. actual analysis.
  2. The ideal business plan, today, is smaller and more concentrated than the formal business plan we did in the Silicon Valley heydays of the 1980s. It’s a lot more lean.
  3. If those experts who say don’t do a business plan would say don’t do an old-fashioned formal complete business plan, just a lean plan, then they’d be right.
  4. Apply the general business rule of form follows function to business planning. Do only what you need. Do only what you’ll use. For business owners, you rarely a real business reason to do a full formal plan, but having a lean plan is golden, as long as you track it and use it to steer the business. Sometimes a bank will require a business plan, but usually a lean plan is good enough for that use too. Startups may need a business plan for investors who want to do due diligence on them before investing; that may or may not require more than a lean plan.

My most recent post on this, in the blog, is The Lean Business Plan as Dashboard and GPS. And there’s a category here called Lean Business Plan.

Will businesses finally pick up on this idea? I hope so. If you want to improve management and steer your business better, the right kind of business planning develops focus, priorities, accountability, and execution. And business plan software is going there already.

In regards to software, I’m happy to report that Palo Alto Software has made my 2006 predictions self-fulfilling prophecy. LivePlan connects to your QuickBooks or Xero accounting software and does plan vs. actual analysis automatically; plus this year vs. last year too.

The Lean Business Plan for Small Business Owners

“What? No, I don’t have a business plan. I’m not a startup.”

Too bad so many small business owners think that way. A good lean business plan for small business owners ought to be a great tool for running a business. Set strategy, tactics to match, major milestones, metrics, tasks, responsibilities, and essential business numbers. Keep it lean, review and revise it every month, and you’re way better off. Whether you’re a startup or an ongoing business. Just like planning a trip makes the trip better, so too, planning a business makes the business better.

That myth of the business plan for start-ups only gets in the way far too often. If you own or run a company, you probably want to grow it.  And if you want to grow a company, then you want to plan that growth. And the planning is only the beginning; you want to use the full planning process to manage growth.

Think for just a minute about how many different reasons there are for an existing company to plan (and manage) it’s growth. There’s the need first of all to control your company’s destiny, to set long-term vision and objectives and calculate steps to take to achieve vision. Without planning the company is reacting to events, following reality as it emerges. With planning, there’s the chance to pro actively lead the company towards its future.

For an existing company that wants to grow, planning process is essential. Everybody wants to control their own destiny.  The planning process is the best way to review and refresh the market and marketing, to prioritize and channel growth into the optimal areas, to allocate resources, to set priorities and manage tasks. Bring a team of managers together and develop strategy that the team can implement. Work on dealing with reality, the possible instead of just the desirable, and make strategic choices. Then follow up with regular plan review that becomes, in the end, management.

This normally starts with a plan.  The plan, however, is just the beginning.  It takes the full cycle to make a plan into a planning process. Here’s my view of the business plan for small business owners:

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Interested? Download my new book on the Lean Business Plan: Lean Business Planning with LivePlan

I’m Loving the New Version of Business Plan Pro

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.

10 Lies About Business Planning (Video)

Business plans are a waste of time? That’s a dangerous lie. Don’t bother, because nobody’s going to read it anyhow? That’s another lie, because it’s about running your company, not whether somebody else reads your document. The lies matter because they interfere with business planning, which ought to be part of your management. Planning is supposed to be a tool to help you control your own destiny. Instead, many of us don’t plan right because we let some of these lies get in the way.

The list of 10 is included in the video here, a recording of the webinar I gave as part of Global Entrepreneurship Week, earlier this week. And what’s more important is that I talk about what you should do, instead of believing the lies, to make business planning part of your business management. The goal isn’t just listing lies: it’s steering your company, managing better, and having a better business. Control your destiny.

Would you take a trip without planning it? Would the plan be a big honking document? Would it matter to you whether anybody else read it? Would having a plan mean you couldn’t change it when a flight got cancelled?

This webinar was sponsored by bplans.com (an entirely free site, which you are on as you read this) and Palo Alto Software, publisher of Business Plan Pro.

(If you don’t see the video, you can click here for the original on YouTube)