Tag Archives: business plan

Top 10 Business Plan Mistakes, #10: It’s Not a Hurdle

Business Planning, , , , , ,

I’ve decided I need a new top 10 list for business planning mistakes. This isn’t the first I’ve done and I hope not the last either, but it’s a good thing to give these lists a fresh look every so often. And this morning I do a workshop on this topic as part of the Bend Venture Conference in Bend, Oregon; so it seemed like a good time to do it.

I’m doing it like Letterman does, starting with number 10, least important, and counting up to number 1, most important.

No, a business plan isn’t a hurdle you have to get over. That’s just wrong. It’s not a one-time thing. You don’t want to finish your business plan ever. When your business plan is done, your business is done.

A business plan isn’t a thing, like a document, that has lasting value when it’s built. It’s a process. The first plan is the first step in the process. You should review it every month, and revise it as often as your assumptions change.

My first business plan book, written in the late 1990s, carries the title Hurdle: the Book on Business Planning. My bad. Sorry about that. It’s no coincidence that my second one, done two years ago,  is The Plan-As-You-Go Business Plan.

I still like that first book, although not as much as the more recent one. But I hate its title.

(image: istockphoto.com)

3 Things Acrobats Teach us About Business Planning

Business Planning, , , ,

Maybe I’ve overdosed on Cirque du Soleil when I’m thinking about the net and business planning instead of the show. But I did. I was watching the beautiful trapeze artist spin gracefully through the air, twisting and turning, then tuck and land in the net. And that (the net, not the artist) made me think of good business planning.

1. How the Net Absorbs Change

The net changed instantly as she dropped into it. It reacted to her weight, lowering the surface on one side, but all the connections, the cords and knots and such, remained connected.

Business planning, done right, does the same thing for your business. When change hits, if you have a plan, then it has already connected the interdependencies, so you can see them better and respond to change faster.

When the big recession hit in 2008, companies with business plans and good business planning process were able to adjust to the drop much more quickly than their competition. Sales dropped suddenly. The companies with good planning process turned to their plans and quickly adjusted costs, expenses, marketing, and so forth to deal with the change. The ones without good planning had to dig into their business details during the crisis to develop and understand the connections. With planning, the connections are there, so you adjust them.

As we climb slowly back out of the recession, planning will help again. This time it will be positive adjustments, as assumptions change for the better. I hope.

2. The Soft Landing

With the Cirque du Soleil shows, the net isn’t just a safety net sitting there in case somebody messes up; it’s part of the routine. It’s the landing. It’s like the pool for the high divers.

Good business planning is an easy landing for managing your business better. Like the net, it connects the various parts of the business. It also builds you the metrics and accountability you need to keep on top of all the moving parts, and the tasks and the people.

As change happens, you compare it to the plan, so that you can see it happening, work with it, and move with the change. You capitalize on opportunities and avoid threats. That’s a lot like a soft landing.

3. Artistry and Beauty Take Planning

I’m glad to report that I broke my reverie and turned my attention back to the show. They do it so well, so artfully, that they seem to be graceful flying creatures by their very nature. But no. Planning, rehearsals, choreography, more rehearsals, working it out over and over, every step of the way; that’s what makes it so beautiful.

And it all works very well. Like we want our businesses to work.

(Image: copied with my thanks from www.barry.ca, website of Barry Cordage Ltd., which sells the nets in the picture.)

On Teaching Business With Business Plans

Business Education, Business Planning, ,

Remember that old saying about teaching people to fish, instead of giving them a fish? That applies to business planning as well: don’t give a person a business plan, help them do their own instead.

I’m in San Antonio Texas today attending the annual conference of the Association of Small Business Development Centers (ASBDC), where I did a workshop yesterday on using the business plan as a teaching tool. It reminds me how I got into this business planning specialty in the first place. It was because the business planning brings together everything that’s important in a business, from strategy to market to metrics to numbers.

All of which reminds me once again that what works to help people with business planning is to help them develop their own plan, to teach them how, rather than just to do a plan. What you want as an end result is somebody who can use planning process to run the business. It’s not about having a one-time-use document, it’s about planning over the long term, which means regular plan-vs.-actual review, course corrections, and management.

Keep it on the computer. Update it often. And when you need to show it to somebody, that document you print: that’s output, not the plan. It’s an image of what the plan was on the day that you printed it.

And, for teaching entrepreneurship, the business plan is a great way to give a student a full view of what it takes to start and grow a real business.

Business Plan, Marketing Plan, or Both?

Business Planning, Marketing, Planning Fundamentals, Planning Process, , , ,

“if I have a marketing plan, do I need (or want) a business plan too?” Good question. And so is its opposite question too, “if I have a business plan, do I also need (or want) a marketing plan?”

As for a lot of these planning questions, you’re going to get different answers from different people. There’s no consensus on this.  But here’s my answer:

  1. Marketing is critical to business, and every business plan has a lot of marketing plan in it. There’s no need to keep the marketing separate from the rest of the planning. The marketing plan is an extremely important part of the business plan. No need to do it separately.
  2. That is, however, unless you are one of those people who are responsible for marketing, but not for the whole company. You don’t manage cash or financial strategy or ownership of the business. Then your job is marketing and related functions like sales and customer service and branding and social media and SEO, and so forth. You ask for the resource, and somebody else reviews, prioritizes, and gives you that resource or a reason why not. You probably have to manage expenses and show how they relate to sales and the health of the company. You probably have to show how those expenses make good business sense. You should probably be doing marketing planning, not the whole business planning; just your subset.

So to me, at least, the marketing planning is different from the business planning because it’s a subset. It doesn’t deal with financial health or financial strategy. It should have projections for sales, cost of sales, and sales and marketing expenses. It doesn’t project overall cash flow or the projected balance sheet. It probably deals with personnel, but just the related personnel, not the whole company personnel or larger personnel strategies.

Somebody just asked me that in email.

In Planning, Not All Metrics Are Created Equal

Business Planning, Management, , , ,

This is an important point. More and more I’m focusing on metrics as a vital component of any useful business planning process, but then I read Entrepreneurs: Beware of Vanity Metrics from Harvard Business Review, which warns of …

… the curse of vanity metrics, numbers which look good on paper but aren’t action oriented: website hits, message volume, or “billions and billions served.” They look great in a press release, but what do they accomplish?

Metrics are magic, or at least that’s what I’ve written in a number of places, related to business planning. But maybe I should have written good metrics, or valid metrics. Metrics as measurement become accountability, which becomes management. Build the metrics into your planning process, and you have better management, better steering, and better teamwork. Not just dollars, but metrics you can track, and metrics that are specific to different jobs, functions, and goals.

Good metrics might be sales, costs, expenses, trips, seminars, ads placed, publications, leads, presentations, posts, tweets, retweets, calls, minutes per call, incidents per serial, and so on. You need things you can track.

But vanity metrics happen all the time. Those are the numbers that look good but come after the fact, without a direct link to cause or performance. I’ve used vanity metrics often enough to know. When preparing a presentation, find a number that looks good, and pretend that it shows progress.

Cool … but is that what you were aiming for?

(Image: 3DDock/Shutterstock)

3 Things Every Entrepreneur Needs to Know About Exit Strategies

Advice, Business Strategy, Entrepreneurship, Family Business, , , , , ,

I’ve been hearing that phrase, exit strategy, for about 30 years now. I used it a lot as a standard component of business plans back in the 1980s when I made a living writing them. And I ignored it myself as I built my own business, for really good reasons, for a long time. I figured out what it really meant, fairly late in the game, but in time for me. I think I can make it easier for you.

water cave exit1. The exit is when you sell the business.

Sorry if that’s obvious, but not everybody understands. In the classic high-tech high-end startup context, it’s either going public (meaning you get all registered up and sell your stock on a stock exchange, to anybody who wants to buy it) or being acquired by a larger company for publicly traded stock or money. In the small business, it’s selling the business to a buyer, or, in some cases, passing it on to the next generation of your own family.

If you don’t need outside investment, and you’re in the business for the long term, you might think you don’t need an exit strategy. You’re right, at least for a while. But even the long term becomes short term eventually.

2. Investors need exit strategies.

If you want outside investment then you have to have an exit strategy. Real investors don’t make money on your healthy company unless it sells all or part of itself. It’s cut and dried with outside investors: either you have a believable exit strategy, or investors don’t make money.

By the way, maybe I should say “if you need” outside investors instead of “want outside investors.” If you don’t need outside investors, believe me, then you don’t want them.

And if you don’t need outside investors, exit strategy can wait. But it will come.

3. Every entrepreneur eventually needs an exit.

OK, you’ve noticed I have a theme here. You need the exit strategy for sure, and right now if you need outside investors. But even if you don’t need outside investors, you’ll need the exit eventually.

You get older every day. Eventually you’re going to exit, whether you like it or not. Better to plan it. You get tired, you get health problems, you get older, and life changes. I was lucky, because we had a hard-working, loyal, smart next generation ready to go. That was more from good luck than good planning.

Think ahead. Look for the right opportunities. For example, there are some baby-boomer entrepreneurs feeling the need to sell during the great recession, having to take what they can get during a very bad market. I’m not saying they could have predicted the recession (black swan, in my opinion); but they could have been thinking about exit or succession.

Ultimately, it’s about people. Nobody lasts forever. You can aim for a business that survives a succession, or one you can sell. Aiming and planning doesn’t mean it will happen; but it can help.

(Image: Eugene Sim/Shutterstock)

Bonus material: 6 tips for involving your kids in your business

No, You Can’t Just Pull Numbers Out of The Air

Angel investment, Business Plan Contest, Business Plan Marathon, Business Planning, Venture Capital, , , ,

Question: I’m in the process of writing an Internet startup business plan to present to prospective investors. The site isn’t live so I don’t even have a basis for speculation with respect to the financials. I would essentially be pulling numbers out of the air. Being that the Internet business as it pertains to advertising revenues is so mercurial, is it feasible to present the plan without having the financials included? If not, how can I make more realistic financial assumptions?

My answer: No, you won’t get anywhere presenting a business plan to investors without financials. I’m glad you asked me instead of just moving ahead with that idea.

Every new business, including a website business, has to be able to present a reasonable forecast if it’s going to hope to get an approval from outside investors. And it can never be “pulling numbers out of the air.” The assumption is that before you start a new business you have some idea how it’s going to work, based on some experience. If you have no idea, no investor wants to even share the same elevator with you.

In this case, the website business, you need somebody on your team who can project website traffic and sales based on real experience with search terms, search engine optimization, Google ad words and its competitors, conversion rates, and so on. Your traffic doesn’t get pulled out of the air, it’s a function of what you plan to do and what you plan to spend. Know your key search words and the traffic those words and phrases get for others, right now. Know reasonable conversion rates. Make estimates based on real assumptions about real variables.

For more information on this, you could try:

Business Plans are Never Done

Business Planning, Weblogs, ,

If your business plan is finished, your business is finished.

I’d like to think that this is obvious, but a lot of people don’t get it. A business plan isn’t supposed to be finished, ever. If it’s useful to your business, then you keep it alive. You review it regularly. You check assumptions and how they’ve changed. You compare plan versus actual results and make course corrections.

It’s supposed to be like the farmer’s axe: the handle’s been replaced 10 times and the blade three times, but it’s still the same axe.

Like that axe changing its parts, expect your business plan to change. Parts of it will be replaced as reality rears up its ugly head and messes with assumptions. But the plan goes on and on.

For example, Palo Alto Software is 22 years old. The business plan has never been finished. We take a fresh look at it once a year, and review plan versus actual results every month. When we discover that assumptions have changed, we review the changes and the impact of the changes, and adjust the plan.

Maybe 10 or 15 times in 22 years, we’ve had to dress up the plan and send it to somebody outside the company. 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. Each time we needed to present a plan, we took the real plan — the live plan — and we reviewed, edited, formatted, and produced a document. And that document, once produced, is no longer the plan. It’s just the dressed-up view of the plan as it existed that particular day.

So the plan lives on. Unfinished. 22 years later.

Planning Fundamentals 5: Planning Is To Manage Change

Back to Fundamentals, Business Planning, Planning Fundamentals,

(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.

A Great Time for Planning

Business Planning, ,

It’s a very cold and very foggy morning in Western Oregon on Monday Dec. 28. This is that strange week we get every year, right in the middle of holidays. A lot of companies close. Retail does a lot of business. And it’s a great time for planning.

I emphasize planning, not just the plan. Don’t sweat the formality of “the plan,” but give yourself and your business the benefit of planning.

Unless you’re in a busy retail business, things are quieter. You had a long holiday weekend and you have another long holiday weekend coming. A lot of people are thinking and writing about next year, writing about resolutions, trends, and predictions.  It’s relatively easy this week to step back away from the day-to-day operations and look at the broad view. Take a fresh look at your market. Take a fresh look at your business.

Objectives: review your long-term goals. What’s success to you? Have you been moving toward it? Has your view of success changed? I can tell you that my vision of success changed through the years. Cash flow independence, growth, sales, freedom, fun, independence?

Market: take a fresh look at your market. Markets change right under our eyes, and if we don’t take a step away, sometimes, we miss the change. It’s like watching children grow up; you see the changes from year to year, but not day to day. How’s your relationship with the people who buy what you sell? How has it changed? Are your customers still the same kind of people or businesses they’ve always been? Do they find you the same way? Do they get the same benefits from you that they always have? Are you serving the same needs you always have?

Strategy: I think of strategy as focusing in on specifics of your business identity, market, and business offering. Review your identity with a good SWOT analysis: That’s strengths, weaknesses, opportunities, and threats. It’s better if you get a team together for a SWOT analysis, but even if it’s just you, it’s still a good idea.  Take a good look at your market focus. Are there new markets emerging? Do changes in your business offering lead you to new markets? Are there possibly some new market segments that your day-to-day focus has missed? Look especially for contiguous markets, meaning those that are close to your current markets, getting their benefits from things close to your current business offerings?

Specifics: planning is about specific concrete steps you can track and manage. Start thinking about dates and deadlines and specific task responsibilities.

(Image credit: Susumis/Shutterstock)