Category Archives: Business Planning

Why Management is Like Dribbling a Ball

Business Planning, Management, , , ,

This is interesting: Stanford Business School professor Charles O’Reilly on Why Some Companies Seem to Last Forever:

women soccer dribbling

What explains this longevity? Stanford Graduate School of Business Professor Charles O’Reilly calls it ‘organizational ambidexterity’: the ability of a company to manage its current business while simultaneously preparing for changing conditions. ‘You often see successful organizations failing, and it’s not obvious why they should fail,’ O’Reilly says. The reason, he says, is that a strategy that had been successful within the context of a particular time and place may suddenly be all wrong once the world changes.

So running a business right requires minding the details but also watching the horizon. Eyes down, eyes up. At the same time. 

Which reminds me that dribbling is one of my favorite analogies for business planning. In soccer or basketball, dribbling means managing the hand-eye or foot-eye coordination of the immediate detail while simultaneously looking up and watching opponents and teammates and plays developing. When I was coaching kids in soccer, I’d try to help them remember to also look up and not just down at the ball. The best players did this naturally. 

It’s a cycle. Plan, with metrics and milestones. Review once a month. Revise. Do it again next month. That’s the way to last forever, according to O’Reilly. It’s the right way to manage the details and the long term simultaneously. 

(Image: bigstockphoto.com)

A Pre-written Business Plans Is As Useful As…

Business Planning

Frustration: People asking me (via email) “where can I find a business plan for …” some specific type of business. I get that a lot. Prewritten business plans. 

Business plan concept prewritten useless bigstock

Sigh… Here:

  • A pre-written business plan is about as useful as somebody else’s year-old airline and hotel reservations. 
  • A pre-written business plan is about as useful as somebody else’s exercises already done. Like used pushups. 
  • A pre-written business plan is about as useful as last month’s fresh fish. 
  • A pre-written business plan is about as useful as last year’s calendar.
  • A pre-written business plan is about as useful as a medical prescription written for somebody else a year ago. 
And I have more: 
  • The value of a business plan is measured by the decisions it causes. 
  • Good business planning is 9 parts execution for every one part strategy.
  • A business plan has a shelf life of a few weeks at best. Famous quote (Eisenhower and Napoleon): “The plan is useless; but planning is essential.”
  • Whenever some expert says don’t do a business plan, ask that what he or she thinks about setting priorities, metrics, responsibilities, and milestones. Because that’s what a business plan is. 
  • Make it just big enough. 
  • Planning isn’t made useless by rapid change. Quite the contrary: the quicker the pace of change, the more necessary the planning. 
  • A business plan is to a business pitch the same as a screenplay to a movie. 
I feel better now. None of this is new for this blog. But it’s been too long. 

Willamette Angel Conference Invests More than $450K

Angel investment, Business Plan Contest, Starting a Business, , , , , ,

Yesterday’s Willamette Angel Conference (WAC) 2013 event invested more than $465,000 in four Oregon startups, highlighted by more than $250,000 in Portland-based Sonivate, which has developed a fingertip-mounted ultrasound probe that enables imaging while leaving both hands free to do work with simultaneous tactile feedback. 

Willamette Angel Conference

Three other startups got WAC investment at the event: Amorphyx, a Corvallis company with innovative technology that reduces manufacturing costs and increasing the brightness, speed and efficiency of LCD and flexible displays; DesignMedix, a Portland company addressing the rapid rise in drug resistance in multiple diseases; and Green Zebra Grocery, an innovative chain of small healthy-food grocery and convenience stores, based in Portland.

The event concludes three months of study (called “due diligence”) by the group of more than 30 angel investors, about half and half from the Oregon university towns Corvallis and Eugene. This year’s event was held on campus at Oregon State University. The event alternates between Corvallis and Eugene. I’ve been a member since it started in 2009. 

Earlier in the day, keynote speaker Diane Fraiman of Voyager Capital noted that Oregon companies have received more than $600 million in venture capital funding, and challenged us, the WAC members, to continue investing in our area. That might have influenced us — our deliberations are strictly confidential, so I’m not saying — that afternoon as we added more than $200,000 to the investment amount originally planned that morning. That also doubled our previous year’s investment, and — we think — made this WAC event the largest investment of any of the Oregon angel investment groups. 

Hallspot, a Eugene company that started on campus at the University of Oregon, was awarded a $2,500 Palo Alto Software prize for the best concept-stage company. 

Save the Patient. Make Exorbitant Profits. Is This Okay?

Business Ethics, Business Planning, Current Affairs, , , ,

How do you feel about projecting excessive profitability in a health care business plan?

Over the weekend I saw the pitch for a brilliant business plan, with great technology, for developing medical electronics that could significantly reduce some kinds of complications in some kinds of surgeries.

Soaring Health Care Costs Time Magazine Bitter Bill

“The world needs this,” I thought. “I hope these people succeed. I hope they get the investment they need.”

But then they got to the financial projections.

Their sales forecast soared to tens of millions of dollars, but their technology was so good that it seemed credible. They had PhDs and patents and a strong team. No problem there. 

But they also projected 80-85% EBIT (earnings before interest and taxes). And that got my attention. It’s not just my chronic skepticism about absurdly high projected profits in business plans; it’s also about intentions, exploitative pricing, what Wikipedia calls price gouging. And about ethics. 

It reminded me of the Steven Bill cover story in Time Magazine a couple of months ago, called Bitter Pill. Or if you want the short version, watch this Jon Stewart interview with Steve Brill. He says: 

It’s the people who organize the care, who sell the equipment, who sell the drugs; they’re the ones making the money. 

Later I asked the inventor about the ethics of pricing. He understood the problem. He gave me a sensitive respectful answer. He said he trusted his more-businesslike co-founders who set the prices. He explained that pricing is set by the whole system, pretty much what Brill’s piece suggests. He didn’t say that profits from this one product would go straight back to research for other products, more inventions, and more improvement in surgical equipment. Insurance companies set the price. His company can beat the existing costs with something much safer. So, if they can execute their plan, they’ll make huge profits. 

Medical costs will still go down, if it works, because it reduces complications. Patients will benefit too, with less pain, illness, and death. But according to their own numbers, they could charge a third of their planned price and still make healthy profits. 

What do you think? 

(Editorial note: I’m not giving specifics on purpose. I don’t want to make this about a specific company. And at this point it’s all hypothetical anyway, just a few numbers in a business plan.) 

Q&A: Keep Your Business Plan Simple and Short

Business Planning, Q&A

I received this question on my ask-me form at timberry.com

I have a question about writing a business plan for my [business]. How do I write a business plan reflecting very little start up costs and a loss so far? I have been putting off writing a business plan, but I feel as if I need to set specific goals in writing to strive for.  Most of the business plans seem so complicated for my very small business. Since I am trying to keep my costs very low, I’m wondering if it’s worth paying the monthly fee to create a plan or there another more economical (free) option?  Thank you for your time.

My answer:

Questions ask Tim Berry

Thanks, I’m glad you asked. Coincidentally, I just posted Business Plan Yes, But Comprehensive and Detailed, Not So Much earlier this week. But I’m happy to go over this again because it’s so important for real businesses to plan, but the myth of the big formal business plan so often gets in the way. What a shame.

That’s what my last book, The Plan-as-you-go Business Plan, was about:

  • The plan is for you, to help you manage, to set specific milestones and manage results with plan vs. actual analysis. 
  • It’s a collection of modules. Simple strategy summary, milestones, basic numbers, and so forth. Start anywhere. Get going. 
  • You do only what you need, just before you need it. Only what you’re going to use. 
  • Let it grow organically. 
  • When you have the business plan event, which means you need to show it to somebody outside your business, then you dress it up. Keep it on your computer until you have to print it. 
And regarding that monthly fee question, I have two points:
  1. I’m biased. You’re talking about LivePlan, published by Palo Alto Software. I’m the conceptual author. I believe everybody should be using it. 
  2. Does “keeping your costs low” mean you want to save $20 a month on a planning tool that makes the planning easier, simpler, and better? How much is your time worth? How many hours do you want to spend to save $20 per month?  

(Image: iStockphotos.com)

Business Plan Yes, Comprehensive and Detailed, Not So Much

Business Mistakes, Business Planning, , ,

Funny how sometimes what sounds like good advice isn’t. I was browsing online when I caught the alleged business plan tip shown here (although I added the red circle over it). It says you should write a “comprehensive, detailed business plan.” And I say probably not; only in special circumstances. 

business plan tip, business plan, agile and flexible

Instead, develop a streamlined, flexible, agile, lean, just-big-enough business plan and use it as the start of a forever-after business plan process. 

Set a schedule to review it and revise it at least once a month. Understand that it gets obsolete in weeks. 

Keep it on your computer where you can refer to it easily and keep it up to date. 

Focus on metrics, accountability, priorities, strategy, without a lot of text. For example, don’t ever write text describing your company or management team in a plan that won’t be read by anybody outside your company or your management team. That’s a waste of time. 

Of course you should know your business, your team, your strengths and weaknesses, and your market. That’s absolutely essential. But do you take the business time to describe it in comprehensive detail, with edited text, statistics and formal research? No. Not unless you have to communicate it to outsiders. If you’re jumping through hoops for a bank or investors, then maybe there’s an underlying business value to the extra description. 

But this kind of hype about big scary masters-thesis-weight business plans does a disservice to all the real business people out there who could use business planning to manage their business better — set priorities, develop accountability, move forward strategically — who unfortunately put off planning because of the mythology of the big formal document that feels as inviting as a high-school term paper. 

It’s business: Form follows function. If you don’t know why you need a comprehensive, detailed business plan document then you probably don’t. But don’t let that off-putting tippery keep you from using business planning to manage your business better. 

(Note: I posted this on Huffington Post this morning)

The Dribbling Metaphor for Business Planning

Business Planning, , ,

Think of basketball or soccer. In both of these popular sports, dribbling is what the players do to move the ball in the right direction. It’s not the point of the game, it doesn’t score baskets or goals, but it’s an important skill, right? I think of dribbling as a great analogy for business planning. And here are some reasons why—and some lessons I suggest we can take from that.

girls basketball dribbling

  1. Dribbling is a means to an end—not the goal. Planning is like that too. It’s about results, running a business—not at all about the plan itself. Good planning is measured by the decisions it causes. It’s about managing, allocating resources and accountability. I’ve written this in several places: “You measure a business plan by the decisions it causes.” And this: “Good business planning is nine parts execution for every one part strategy.” 
  2. Think of the moment when the player gets the ball in the wrong end of the court or field. That’s either a defensive rebound in basketball or a missed shot on goal in soccer. The tall player gets the basketball and gives it to the one who normally dribbles up court. Or the goalie gets the ball and gives it to a defender. At that moment, in a well-coached team: 1) there is a plan in place and 2) the player knows the plan but is completely empowered to change the plan instantly depending on how the play develops. Business planning done right is very much like that. The existence of a plan—take the ball up the side, pass to the center—helps the team know what ought to happen. But changes—the opponents do something unexpected—are also expected. The game plan doesn’t lock the players in to doing the wrong thing or not responding to developments. It helps them make the instant choices, changing the plan correctly…and when they do, the other players can guess the next step better because of the plan. 
  3. Dribbling involves simultaneously looking up, at the field, and developments going on; and down, at the ball, hands, and feet, to manage the details. Proper business planning, in very much the same way, requires looking up at the figurative horizon—¬threats, opportunities, competition, market developments, etc.—and down at the details: tasks, deadlines, budgets, accountability, and of course cash flow and plan vs. actual. 

I’ve always liked this analogy because it dispels the myth that having a plan reduces flexibility to react to developments. Planning isn’t voided by change; on the contrary, having a plan makes reactions easier. There is no virtue in following a plan just because it’s the plan. Proper planning means regular review and revision.

(Note: Yesterday I posted this 3 Ways Business Planning is Like Dribbling a Ball on the Industry Word blog on the SBA community site. I’m reposting it here today)

(image: istockphoto.com) 

I Can Find Research to Prove Anything

Business Mistakes, Business Research, Social media

One of these days I’m going to start a new consulting company based on the sad truth that in today’s world a good search turns up nice-looking data to prove anything. 

For example, you want eggs to be bad for you? We’ll find research to prove it. No? You want eggs to be good for you? We’ll find research to prove that. 

3 silly reasons to quite social media

Yesterday over at smplans.com I posted 3 Silly Reasons to Quit Social Media in 2013, quoting a post on Forbes.com offering the following:

… a UK study from the fall found that over 50% of social media users evaluated their participation in social networking as having an overall negative effect on their lives. Specifically, they singled out the blow to their self-esteem that comes from comparing themselves to peers on Facebook and Twitter as the biggest downfall. 

In defense of the author of that post, she’s obviously making fun. Another reason is blood pressure. She says there’s bad behavior in social media that will make your blood pressure rise. 

And negative, or contrarian headlines, like 3 reasons you should quite social media, get more readers. I understand. When it’s surprising, I’m more likely to click. 

But seriously: When something starts with “a study found that…” do you pay attention?

I used to, back in the old days, before the Internet, when information was hard to find. These days I don’t have the same respect for “a study found that” because there are studies to find anything you want to say. No matter how preposterous.  

Facts? Truth? 

Can Research Make You Dumber?

Business Research, Social media, , ,

(Reposted with permission from my social media business plans blog)

Can research make you dumber? It can if you believe it.

I just read Can Facebook Make You Fat and Poor? on Mashable. It’s a post by David Mielach, of BusinessNewsDaily.

In particular, the researchers found that social media users were more likely to binge eat and have a higher body-mass index. Frequent Facebook users also were more likely to have certain financial problems, including a lower credit score and higher levels of debt.

But wait. It says the research was based on the responses of 541 Facebook users in the United States. So what does that really mean? What does this research really mean? And to be fair, I haven’t gone into the actual research. I’m just commenting on the coverage. Maybe they did everything right and avoided the problems I see. And maybe not.

First, who’s in the sample? Is it Facebook users, really, or Facebook users who answer surveys? Those are different sets of people. Is it balanced for age, demographic, technology, geography?

Maybe people who answer surveys have less self control, which is part of the reason they answer surveys. And maybe people who answer surveys have less money, caused perhaps by the behavior that finds time to answer surveys. Maybe they are just younger, on average, and that causes the money difference.

Research depends on the sample. So that’s a good reason to be skeptical.

So maybe what it really shows isn’t about Facebook users but rather about people who answer surveys. Maybe they — survey answerers have less self control so they couldn’t resist taking the survey really know is that people who answer surveys on Facebook have less self control — that’s why they took their time to answer the survey. And maybe people who answer surveys have less money — because they waste their time answering surveys.

And there is that whole issue of causation and correlation: Could we just as easily say living in a large house makes you rich, or attending college makes you young? That’s as logical as saying Facebook users have less self control and less money. Right?

Here’s a direct quote from the research:

These results are concerning given the increased time people spend using social networks, as well as the worldwide proliferation of access to social networks anywhere, anytime via smartphones and other gadgets. Given that self-control is important for maintaining social order and personal well-being, this subtle effect could have widespread impact.

So now it’s widespread impact. The emphasis above is mine. Wow: Is this looking for a news lead, or rather reaching out, stretching to the ultimate, to look for a news lead? Or what?

I’m not saying that information is bad. Misinformation is.

I’m not saying that research is bad. Believing it is. Question the research, question the assumptions, look through it, and then take what’s valuable in it. Never just believe it.

The Real Use of the One-Page Business Plan

Business Planning, , ,

The question is: 

There’s been quite a bit written recently about the value of a 1-page business plan. What are your thoughts on this type of plan vs. a thorough document?

And my answer:

The only problem is confusing the two as if one replaces the other. The 1-pager is a summary of the plan. You can’t have real information on it — milestones, sales growth, headcount, etc. — without a plan that develops that information.

I love a one-page summary of a business plan, which is extremely useful as long as it isn’t instead of a plan. Investors will use the summary not to invest in companies, but to rule out those they don’t want to know more about. Investors don’t invest in companies without having a business plan, except for those rare exceptions where they know the people thoroughly.

The plan is a necessary but not sufficient condition. And while generalizations on what investors think are dangerous, because they are diverse people, my above thoughts are a summary and aggregation of what I know from my role as the head (fund manager) of our local angel investment group.

That’s from an interview in Startup Nation appearing today, titled (me, blushing) Success Tips from Business Planning Giant, Tim Berry.