Category Archives: Business Planning

Planning Principle: Continuous Process, Not Just a Plan

Business Planning, Lean Business Plan, Planning Fundamentals, Planning Process

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.

True Story: My Worst-Ever Business Plan Consulting Engagement

business plan, Planning and Consultants, Planning Fundamentals

In more than 30 years with business planning, my worst-ever business plan consulting engagement was for a startup that should have been funded but wasn’t. It was a good business plan. But the business plan process became the fatal flaw.

A good plan, excellent team, good startup

worst business plan consulting

I learned this lesson while sitting in a series of meetings, sitting in venture capital offices at 300 Sand Hill Drive, Menlo Park, CA. That office complex has been the epicenter of venture capital for four decades. It’s a rangy maze of stylish and expensive two-story office complexes. I was the business plan writer for a startup looking for funding. It was a long time ago, in Silicon Valley, in the early 1980s.

The three startup founders formed an excellent startup team. All three were Silicon Valley veterans. One was a marketing guy, another a technical guy, and the third a deal-maker salesman.  They had about 40 years of computer company experience between them. They had a good idea and, much more important, a market window, differentiation, and experience to make it happen.

I had done the plan, built the financial model, written the text, shepherded the document through the painful coil binding and the whole thing, but I wasn’t part of the team. I didn’t want to be. I was still at grad school, getting my MBA, and my part of this venture was writing the plan, period. I needed the money to pay tuition.

My three clients had good connections and managed to get meetings with several leading venture capital (VC) firms in the Sand Hill Drive offices in Menlo Park, just outside of Stanford.  in the heart of Silicon Valley.

But there was a problem with business plan consulting

In meeting after meeting, at key moments, as the venture capital partners asked critical questions, all heads turned to me. I would answer.  I knew the plan, backwards, forwards, and inside out; but I was the only one who did. It was my plan. And the meetings made that obvious.

The three of them never really got into the plan. They thought of the business plan as a hurdle; and they paid me to jump that hurdle. Every meeting generated new changes, so I would go back to the basement computer at the business school, and re-run the financial model. The team of three didn’t include a financial person to learn and manage the model, so I did the financial projections alone, tweaking. Which meant I was the only one who knew the plan. I’d re-run my financial model, edit the text, and publish a new version of the plan. They read paragraphs here and there, glanced at the numbers, but they stayed with the big picture, and left the details to me.

Details that, in fact, they didn’t read. They trusted my faithful recording of their ideas, and my financial modeling. They assumed, I guessed at the time, that these were functions that could always be delegated to somebody with special skills, while they generated high-level strategy.

And time after time, when questions came, I was the only one with answers. It was my plan, not their plan.

They never got funded

They did not get financed. I was disappointed. When you develop the plan and revise it dozens of times and support it and defend it through the long series of meetings with supposedly interested investors, you want it to take flight.

All these years later, memory of that disappointment is still fresh. I did learn my lesson, though, and I changed my strategy as a business plan consultant. From then on I made sure that any plan I worked on belonged — and I’m talking about intellectual ownership here, conceptual ownership — to the real plan owners, not the consultant.

How to work with a business plan consultant

If you have the luxury of a budget to pay an outside expert, consultant, or business plan writer, then maybe you should use them. This might be a good use of division of labor, and perhaps you can lever off somebody else’s experience and expertise. However, that will not work for you unless you always remember that it has to be your plan, not the consultant’s plan. Know everything in it, backwards and forwards, and inside out.

It’s not for nothing that I always say a business plan has to be your plan and nobody else’s. It can’t be your consultant’s plan. You must know it backwards and forwards and inside out, or it won’t work.

By the way, I still do some business plan consulting. And I highly recommend LivePlan, the web app, to do it yourself.

Involvement vs. Commitment and Planning as Management

Planning Process

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

Baconandeggsistock_000001083916smal

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.

 

Understand The Essential ‘Why They Buy’

Business Planning, Marketing, Planning Fundamentals

Close your eyes. Step away from the daily routine. Answer the essential ‘why they buy’ questions. Why does anybody buy what you’re selling? What do they get out of it? What need does it fill? Do you offer identifiable benefits? What are they?

Drills vs. holes

Some 30 years ago Harvard marketing professor Theodore Levitt said: “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!” That illustrates the ‘why they buy’ that we all need to understand and remember. iStock_000000331264Small

For examplle, one thing I’ve learned from 30-some years in business plan software is that people want the plan, not the software.

It seems obvious but we quickly forget. You think about features, not benefits.

Benefits not features

For example, think about affordable luxuries like the latte at Starbucks, the lobster dinner, the fancy mustard. Starbucks sells a lot more than a cup of coffee, and Gray Poupon mustard is a lot more than just mustard.  iStock_000000370316Small

Look at hamburgers. McDonald’s and Burger King sell fast and easy and reliable. On Saturdays they’re full of parents with kids between soccer games. It’s not a hamburger, it’s a quick solution to a lunch problem. Then there are the gourmet hamburgers. You can pay 4-5 times what the cheapest hamburgers cost. That’s another affordable luxury.

With high-tech products we’re lured into thinking of features, details, bells and whistles. This is okay for a lot of the market. Some of the market, however, doesn’t buy for features but rather status or prestige or peace of mind or some other intangible. iStock_000001206970Small

This kind of thinking is essential for better planning. It helps you build your strategic positioning. Some people buy for price, some for location, some for ease of use, fast delivery, or because their annoying neighbor said they should.

Why do people buy expensive beautifully-packaged sweet-smelling bath soaps? Most of the time they don’t, but imagine it’s February 14. You plan better when you really dig into the buyers’ real motivation.

Whether you’re planning for a start-up or to grow an existing business, start with buyer motivation. Why do they buy from you? What do you do better, or at least different, from your competition? How can you build that difference into strategy?

Video: 5 Fundamental Principles of Business Planning

Planning Fundamentals

I’ve been doing business planning professionally since the 1980s. It’s change a lot. These days I very much advocate the lean business plan for managing all businesses, for all business owners, regardless of whether or not you need the full formal traditional business plan used for seeking investment or business loans.  Through the decades, what I recommend for real business planning has changed a lot; but these five fundamental principles of business planning remain constant, from then straight through until today.

This Friday video is an excerpt from the online course I’ve developed for Learning.ly, hosted by The Economist Group. The course itself focuses on lean business planning, not traditional business planning.

For the Lean Business Planning online course on Learning.ly

Five Principles of Business Planning

Do Only What You’ll Use

Lean business means avoiding waste, doing only what has value. Therefore the right form for your business plan is the form that best serves your business purpose. Furthermore, for the vast majority of business owners, the business purpose of planning is getting what you want from the business – setting strategy and tactics, executing, reviewing results, and revising as needed. And that purpose is best served with lean planning that starts with a lean plan and continues with a planning process involving regular review and revision. You keep it lean because that’s easier, better, and really all you’re going to use.

It’s a Continuous Process, not Just a Plan

With lean planning, your business plan is always a fresh, current version. You never finish a business plan, heave a sigh of relief, and congratulate yourself that you’ll never have to do that again. You don’t use it once and throw it away. You don’t store it in a drawer to gather dust.The PRRR cycle in lean business planning

 

However, this kind of regularly updated planning is clearly better for business than a more static elaborate business plan. With lean planning, the plan is smaller and streamlined so you can update it easily and often, at least once a month. Your lean plan is much more useful than a static plan because it 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.

It Assumes Constant Change

One of the strongest and most pervasive myths about planning is dead wrong: planning doesn’t reduce flexibility. It builds flexibility. Lean business planning manages change. It is not threatened by change.

People say, “Why would I do a business plan? That just locks me in. It’s a straitjacket.”

And I say: wrong. Never do something just because it’s in the plan. There is no merit whatsoever in sticking to a plan just for the plan’s sake. You never plan to run yourself into a brick wall over and over.

Instead, understand that the plan relates long term to short term, sales to costs and expenses and cash flow, marketing to sales, and lots of other interdependencies in the business. When things change — and they always do — the plan helps you keep track of what affects what else, so you can adjust accordingly.

It Empowers Accountability

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

Lean 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.

It’s Planning, Not Accounting

One of the most common errors in business planning is confusing planning with accounting. This is true for lean planning too. Your projections, although they look like accounting statements, are just projections. They are always going to be off one way or another, and their purpose isn’t guessing the future exactly right, but rather setting down expectations and connecting the links between spending and revenue. Then when you do your monthly reviews, having made the original projection makes adjustments easier.

They are two different dimensions.

Accounting goes from today backwards in time in ever-increasing detail. Planning, on the other hand, goes forward into the future in ever-increasing summary and aggregation.

On Lean Business Planning

All five of these principles apply to all business planning, not just lean business planning. However, it’s important to note that lean business planning emphasizes all five. It’s a reflection of the best in business planning.

10 Myths vs. Reality on Business Plans and Startup Investment

Angel investment, Business Pitch, business plan, Lean Business Plan, Planning Process

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 Things Entrepreneurs Need to Know About Valuation

Back to Fundamentals, Business Financing, Business Planning, , , , ,

Valuation is one of those four-syllable business buzzwords you’re going to have to deal with, eventually, if you either want to start a business or own a business. If it doesn’t come up when you start, it will come up later. Here is what I think you need to know, in five short points.

  1. The word has vastly Different meanings: don’t you hate it when the same words mean different things? Valuation means at least three different things:
    1. What a business is worth to accountants for legal purposes, such as divorce settlements, inheritance taxes, and gift taxes. A certified valuation professional, usually a CPA, makes a guess. Most of them use financial statements and analyze financial details.
    2. What a business is worth to a buyer. Small businesses go up for sale with  business  brokers. Hardware stores, for example,  get about 40-50% of annual sales plus inventory, as a starting point. Plus a bonus for growth and special strengths, or a discount for lack of growth and special problems.
    3. The pivot point in an investment proposal: it’s simple math, but tough negotiations. If you say you want to get $1 million for 50% of your company, you just proposed a valuation of $2 million.
  2. What’s anything worth? Like your car, your house, and a share of IBM stock, something’s worth what somebody will pay for it. The valuation in A is theoretical, hypothetical, but legal. With B and C, though, valuation is as real as agreeing to buy a house. It’s not what the seller says it is; it’s what the buyer is willing to pay. And this cold hard fact drives many entrepreneurs crazy.
  3. For Small businesses, there are guidelines and rules of thumb. If you do a good search, or work with a business broker, you can find general rules of thumb for what your long-standing small business is worth. For example, a hardware story is worth roughly half a year’s sales plus inventory, with bonuses for positive factors like  recent growth,  and discounts for negatives like lack of growth. You could read up on it in bizbuysell.com, bizequity.com, or business brokerage press. Or do a web search and check the ads for valuation experts.
  4. For Startups, it’s what founders and investors negotiate. Startups and investors and culture clash over valuation.  Investors care about valuation. Founders often misunderstand valuation. And never the twain shall meet. I’ve seen these kinds of problems many times:  Founders walk into the valuation discussion full of folklore and fantasy like stories of Facebook and Twitter. They want lots of money for very little ownership. Investors see two or three people with no sales history thinking their dream startup is already worth $2 or $3 million.
  5. Irony: sometimes traction, and revenues, make things worse. It’s easier to buy the dream than the reality. The same investors who’ll seriously consider a $2 million valuation for a good idea, business plan, and a credible 3-person management team – but with no sales ever — might just as easily balk at a valuation of $600,000 for a company with three years history, 20% growth, and annual sales of $300,000.  Despite the irony, it makes sense: few existing businesses are worth more than a multiple of revenues, but, still, before the battle, it’s easier to dream big. Or so it seems. I’ve been on both sides of this table, and I don’t have any easy solutions to offer.

If it hasn’t come up yet, it will. Every business deals with valuation eventually. The place any business sees it is during the early investment phases; but most businesses don’t get investment, so they can ignore it at that point. But then if it survives, or grows, valuation comes up again, because even if the business is immortal, the people aren’t: so eventually you either sell it or pass it on to a new team, an acquiring company, or your own family. And there’s the divorce and estate planning elements that require valuation. So every entrepreneur and business owner should have some idea what it is.

(Image: courtesy of wordle.net)

5 Management Benefits of Lean Business Planning

Lean Business Plan, Planning Process

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.) 

How to Start a Business Plan

Back to Fundamentals, business plan, Lean Business Plan,

MarketingHow do I start a business plan? It’s a common question. And you can find lots of definitive answers. People answer with outlines, prescriptions, and recipes. Unfortunately, most of these misunderstand how people are different, and the way they approach the business plan ought to reflect that difference.

Let me explain with some examples of how your own preferences might determine the best way to start your business plan. See if you fit with one of these general patterns:

  • Mission-driven. Some people tend to build the concepts first and go from there to the specifics. So they start with a general concept like a statement of purpose, often called mission. That’s a matter of words only, but it seems to work for some. The downside of this is that these are way too often just empty promise words, vague marketing hype, in which case they are pretty much a diversion, or waste of time. For more on this: How to Write a Mission Statement in 5 Easy Steps – Bplans Blog
  • Problem and solution. Starting with the problem the business solves, and how it solves it, can be a useful way to get going. These two are the core of strategy and market analysis. And don’t think of that problem too narrowly either. Many successful businesses address what people want – prestige, confidence, status – more than what they really need. For more on this: Don’t Just Describe Problem and Solution in Your Business Plan; Make People Care – Bplans Blog
  • Strategy and tactics. Strategy is focus: I recommend a simple framework that considers the interaction between your identity (unique differences, strengths, goals, etc.), your market market, and your business offering. Then add tactics to execute, aligned with the focus. For identity: Strategy Step 1: Understanding Identity. For market: Strategy Step 2: Market Focus. For the three factors together: How to Develop Your Business Strategy
  • Numbers first. I’m one of these. I prefer to develop the sales forecast first (How to Forecast Sales). Thinking about the sales forecast helps me to imagine the whole business, and to think about what will work and what won’t work. In fact, I often to the financial forecast all the way to cash flow, before working on the words and concepts. Numbers help me to think about the whole business. I’m sure I’m not the only one, but I’m also sure a lot of people prefer to do concepts first.

Conclusion: Get started. Get going. Do first whatever seems easiest, or most natural, to you.

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)