Tag Archives: Business Plan Pro

Has a Business Plan Saved Your Business life?

Many thanks to Lora Kolodny for this question she asked me in a comment to my post here yesterday:

But I have to ask — any other cases? Has a business plan ever saved your (company’s) life? (cue song: Last Night a DJ Saved My Life)

Yes, many times. With apologies for what might seem like tooting my own horn, it’s a real question, and it deserves a real answer. So these are real saved-by-business-planning experiences I’ve lived through first-hand.

  • During the early stages of Borland International, after sales had taken off but before there was any working capital, good business planning saved founder Philippe Kahn, his main administrative executive Spencer Ozawa, and the whole company, from a disastrously premature adventure into retail distribution. They stayed with direct sales until there was working capital to support sales through distributors to channels. This isn’t my credit, but I was on the board of directors and I saw it close-up. Philippe and Spencer used planning to see the cash flow and working capital implications, and to postpone the sales to distributors. That probably saved the company, which went public in less than four years from its founding.
  • At the end of 1993, with Palo Alto Software, my wife and I faced the disastrous results of getting into mainstream retail channels with a software product that didn’t sell out from the channels to the consumers. The valuable input we got from buyers in the channel was pretty much “your boxes suck.” But we also knew that our customers weren’t happy with business plan template type products (think of them as Word and Excel files, instead of a stand-alone application). So we did invest in expensive professional packaging design, but, much more important, we went back to the drawing board to develop our first stand-alone business plan application. It was tough at the time because we had no capital left and no outside deep pockets. So we — my wife and I — had to go out on a very long and scary limb with three mortgages and $65K credit card debt (at the worst of it) to pay for repackaging, product development, new channel sales reps, and other elements of a serious business plan. We should have called it a recovery plan. And because we had a plan, with milestones, we were able to survive the risk at the darkest times. We had the plan and the specific milestones to give us hope. Happily, it worked. The first Business Plan Pro was a big success. And amazingly, after all that, we’re still married. To each other.
  • By late 2008 and early 2009, as the recession dug deeper into sales, some of us (me included) wanted to lay off some of our people to prepare for financial troubles. Our CEO, Sabrina Parsons, stuck with the plan, and because of that, as things got better again last summer, as we started actually recruiting more people for a growth period. We hadn’t laid off anybody as cost cutting. The plan worked.
  • When sales tripled in 1996, our business plan showed us in advance how the rapid growth in accounts receivable was going to absorb about a million dollars of working capital that we didn’t have. We were able to go to the bank months in advance, with bar charts showing the projected sales and the resulting cash shortage, and arrange a comfortable line of credit before we desperately needed it.
  • In truth, the plan has served us for years to manage the company.  My wife and I started in the middle 1980s with a plan to “sell products, not hours” that took a long time coming to reality in the 1990s. As the company grew in the 1990s, we got to 36 employees and $5 million annual sales without a penny of outside investment; and that took careful business planning to manage the credit lines and working capital without ever spending money we didn’t have. Since we hired our first employees in 1993, through today, we’ve had an annual refresher of the business plan and a monthly plan versus actual review on the third Thursday of every month. Sabrina’s been running the company for three years now, and she does the same thing. And here we are with 45 employees now, multimillion dollar sales, no outside investors, and no debt. That has as much to do with business planning as with anything else. We do practice what we preach.

And again I feel like I should apologize because there’s so much about my company in this; but Lora’s point in the comment yesterday was very important:

People think plans are just for “beauty pageant” purposes, or certain kinds of competitions that are varying in worth. I like that you shared this example of where you were required to pony up a plan in the real world beyond competition and awards shows: “We did that to get the merchant account initially, to set up a commercial line of credit with a bank, and when we were looking at possibly taking on investors.”

So I’ve taken that literally and given these examples because I believe that every company should have not just a business plan, but a planning process that starts with a business plan and continues through the rest of the company’s life, with regular review and constant change. And the examples I know best are ones I lived through.

Planning Fundamentals 5: Planning Is To Manage Change

(This is the fifth in a series of posts reviewing the fundamentals of planning, with an eye for how they’re changing over time. Part one was Form Follows Function. Part two was All Business Plans are Wrong. Part three was Cash Not Profits. Part four was Planning as Accountability)

brick wallSome of the strongest and most pervasive myths about planning are dead wrong: planning doesn’t reduce flexibility. It builds flexibility.

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

And I say: wrong. The dumbest thing in the world is to do something just because it’s in the plan. There is no merit whatsoever in following 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’s not like change undermines planning; actually, planning is the best way to manage change.

Planning Fundamentals 4: Its About Accountability

(This is the fourth in a series of posts reviewing the fundamentals of planning, with an eye for how they’re changing over time. Part one was Form Follows Function. Part 2 was All Business Plans are Wrong. Part 3 was Cash Not Profits.)

I predict accountability is going to be an increasingly important issue as we head into this new decade. The old-fashioned tools of accountability, mainly physical presence, as in hours in the office, or days on the road, are fading. If for no other reasons, it’s because the world can’t continue to support needless commuting, an average of 51 minutes per day in the United States, and way worse in some of the larger cities in the developing world.

So what’s going to happen? We’re going to look increasingly for accountability as part of our real-world business planning process. The plan establishes the metric, and the regular plan review and tracking establish progress towards the metric.

It’s not just sales, costs, and expenses. It’s more metrics for more people, including lines of code, calls, blog posts, tweets, unique visitors, page views, minutes per call, presentations, proposals, emails processed, and so on.

Our tools will give us ever increasing metrics to use. I’m very biased about Email Center Pro, I admit, but if you’re curious you should look into the wealth of metrics it provides on team-managed emails and email addresses, like the [email protected] or [email protected] And everybody knows about Google and Web analytics, paid search, etc. And telephones and miles are completely trackable.

All of this becomes the concrete specific portion of the business plan, and it is then managed as part of the business planning process. That means that the plan lasts barely a month before results are reviewed. Managing the metrics is a multiple win when there’s regular review, because all the members of the team can easily look on together and see where things have to change. And why.

And that’s the future of planning: management.

True Story: Good Idea, but Hard to Explain

Almost 20 Years ago I developed a software product called Forecaster. You start with an empty chart. Then you assign values to vertical and horizontal. Then you draw a line with your mouse, and Forecaster generates the numbers that correspond to the line.

It was built as something you could use in a business plan. Grab the chart as an illustration, put the numbers into your clipboard, and paste them into Excel (or Lotus 1-2-3, because this was 1989).

But: it took three sentences to explain Forecaster.  And that, I’m sure, was the problem.

Forecaster wasn’t successful in the market. It didn’t sell itself. On the contrary, it took me explaining to sell it. We didn’t have a marketing budget; in fact, we back then was just me and my wife, with no outside financing. Not even the reviewers understood what it did.

One comment that came up a lot: "but that’s cheating." As if getting the numbers from the line was morally wrong. You’re supposed to draw the line from the numbers, and vice-versa. Say, what? Why? 

The Moral of the Story

  1. It’s very hard, and expensive, to market something that you can’t explain in a simple sentence. It’s like rowing upstream.
  2. Competition can be good for you. It’s nice to have competition to help you explain what you’re doing.  Jeff Atwood had a good piece on that earlier this week, riffing on the idea of the arch enemy.
  3. With that next great new thing you want to build a business around, test yourself: can you explain it in a sentence? No? That’s a worry.

The Rest of the Story

  • I took it up to a small exhibition of Excel add-ons up in Redmond, WA. Microsoft product managers saw it and liked it. It was built into the next version of Excel. (And, lest you read this as an accusation, there was no violation of copyright, nothing illegal or immoral, they just liked the idea and added it in. It’s called progress.) And, as far as I can tell, nobody got it. Nobody used it. I never saw it commented in a review, or in some expert lesson.
  • Years later, we built Forecaster into Business Plan Pro. It’s still there, still as powerful as ever; and still hard to explain.