Tag Archives: business planning

You Need People Committed, Not Just Involved

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In breakfast, the chicken is involved, the pig is committed. Baconandeggsistock_000001083916smal

In the business planning process, commitment is essential. Chickenistock_000000427700smallPlans 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.Pigistock_000000873019small
  • 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.

The 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.

(Images: istockphoto.com)

(Note: slightly revised from a 2007 post here)

What You Think You Know About Business Planning Can Hurt Your Business

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(Note: I posted this yesterday as a guest post on Howard Lewinter’s Talk Business With Howard blog, part of getting ready for a radio chat with Howard on Blogtalkradio tomorrow morning. It starts at 8 am Pacific time. Please click here to listen or get more info on that.)

Is this you? When asked if you have a business plan, would you scoff slightly, roll your eyes maybe a bit, and dismiss the idea as something only startups do. Would you say “we’re not a startup,” or maybe, “we’re not seeking investment,” as if this makes it obvious that you don’t have a business plan.

If so, you’re not alone. And I say, emphatically in fact, that it’s a damn shame you’re not using planning, and planning process, to manage better. The myth of the business plan gets in the way of the benefits of real business planning.

What’s the myth? You already guessed it. They think of a business plan as a document, done once, surmounted like a hurdle, that some business need to produce to get a loan or get investment. They say it’s for startups. It’s hard to do. It’s about the text, and the editing, and the formatting. And nobody really uses it. And they think that rapid pace of change negates the value of planning.

And that myth gets in the way of the real benefits of business planning done right. By which I mean:

  • It’s not a document, it’s a plan. The plan lays out what’s going to happen, why, who’s responsible, what dates and deadlines, and how much money comes in, and how much goes out.
  • It lives on your computer, not on paper.
  • Format doesn’t matter. Keep it in a format that works for you. I like the software my company publishes, obviously (look at www.businessplanpro.com or www.liveplan.com) but if you prefer your spreadsheet, word processor, or slide decks, or — better yet — a combination of the above. That works too. Keep it on a network where you can get to it every month.
  • It’s a streamlined reminder of major priorities. Use it to keep you and your team mindful of what matters most.
  • It gets reviewed and revised every month.
  • It helps you manage change by connecting the relationships between tasks and costs and expenses and sales and people and goals.
  • It sets objectives that can be measured, and then, for the monthly meetings, metrics are tracked and reviewed.
  • Think of it as a way to manage change efficiently. As assumptions change, and results reveal reality, the plan adjusts.
  • Think of it as a way to establish accountability. Tasks are assigned with target values, and results are tracked, and results then become management points.
  • You don’t have to forecast correctly. We’re human. We don’t guess the future well. Just make sure the base your forecast on trackable assumptions, so you can deconstruct when actual results are different from plan. And they will be.

Myths are fine as stories that stand for something, windows into reality. Myths are bad when they interfere with optimizing your business.

Creativity Contest: Fun Way to Say Business Planning. With Prizes.

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Here’s a challenge: Donna Maria of INDIEBusiness asked: what’s a fun way to say business planning? That’s the tweet you see here, which I saw a few minutes ago as I sat down looking at the Willamette River drinking my coffee and starting my day. tweet

I think I know exactly what she means. Business planning should be vibrant, creative, flexible, rapidly changing, as fun as writing a story and then figuring the steps to make that story come true. But when you say “business plan” way too many people shudder, thinking of a long boring task leading to a long useless document. Dry and boring, like she says.

But then think of some time in your life when you were dreaming about something you wanted to make happen. “Gee, maybe we could … ” is a fun way to think. “And what about if we …” That’s brainstorming, problem solving, inventing new things. “And then we could …” And it’s strategy as focus, finding your identity, building a new life, controlling your destiny.

There are many different meanings for the phrase “business plan.” That’s too bad, because a lot of people think of that dry boring thing and miss the fun thing.

I answered her tweet with one of my own, keying on the idea of dreaming, but Donna Maria has a deeper point: the phrase is worn out. We need a new one. What’s a better way to say “business planning” that doesn’t sound like the dumb old fashioned business plan?

So let’s call it a contest, and give it a prize: I’ve got a free copy of Business Plan Pro Premier edition, or a year of http://www.liveplan.com, or a year of emailcenterpro use (your choice) for anybody who can come up with a fun way to say “business planning.” I mean a new, interesting, better phrase. I titled my last book The Plan As You Go Business Plan, but honestly, I want something better than that. One, two or three words.

Send me your suggestions on twitter with @timberry, or use this form.

The Single Most-Often-Overlooked Key to Successful Business Planning

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Sadly, it’s so simple that it should be obvious: Make sure the way you organize the rows of sales, costs, and expenses in your financial projections match the way your accounting tracks them.

So if your accounting divides sales into widgets, gadgets, and dealios, don’t project your sales as direct, channels, and distributors. And if your accounting divides marketing expenses into personnel, advertising, and PR, don’t project marketing expenses in your business plan as print, online, and social media. And in the picture here, a simple plan vs. actual review for a café, if the accounting divides sales into meals, drinks, and other, then the business plan should divide sales into meals, drinks, and other.

Get your last Income Statement (also called Profit & Loss) and keep it in view while you develop your future projections.

  • If you don’t have more than 20 or so each rows of sales, costs, and expenses, then make the rows in the projected statement match the rows in the accounting.
  • If your accounting summarizes categories for you – most systems do – consider using the summary categories in your business plan. Accounting needs detail, while planning needs summary.

If your categories in the projections don’t match the accounting output, you’re not going to be able to track plan vs. actual well. It will take retyping and recalculating. And you’ll lose the most valuable business benefit of business planning: management, steering your company.

When Is a Business Plan Not a Business Plan?

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This has been bugging me for a long time now: It turns out that the phrase “business plan” is a homonym, exactly as in these examples from yourdictionary.com:

homonyms

Just like the different meanings for crane and date, there are at least two completely different meanings for the two-word phrase “business plan:”

  1. Business plan: what’s supposed to happen in a business. This normally includes priorities, strategy, assumptions, milestones, responsibilities, sales forecast, expense budget, and cash flow.
  2. Business plan: a document used to summarize a business to serve as part of the process of seeking investors or applying for a commercial loan.

Why does this matter? Because I see both of these two distinct meanings coming up in business conversation all the time, constantly confusing people. For example, when successful entrepreneurs tell pollsters they didn’t have a business plan when they started, they’re using definition #2 here. When smart business advisors play down the use of the business plan, they are also talking about that second definition, not the first.

I’ve been starting to distinguish the two meanings in my own work by writing about “business planning” for business plan definition #1, and “business plan document” for business plan definition #2.

That first-definition business plan is about optimizing management. It includes regular plan vs. actual review, course corrections, and managing rapid change. It doesn’t assume that there’s virtue in sticking to a plan for no other reason. It lives on your computer. The slide deck, the pitch, and the document are output of that plan. It’s Plan-As-You-Go business planning.

The second-definition business plan is something like sales collateral; it’s business goal is communicating a deal to investors, or supporting a loan application. It’s important to a subset of businesses that are seeking investment or commercial loans. I see a lot of those in my work as a member of an angel investment group and a frequent judge at business plan contests.

These are very different things, these two definitions of business plan. They are homonyms. And that confuses business discussions about business plans and business planning. Do you agree?

Planning vs. Accounting: 2 Different Dimensions. And Why You Care.

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Just as the stargate in the picture was a gate between two different dimensions (from the 1994 movie), today is also the stargate between planning and accounting. Accounting starts today and goes backwards in time in ever-increasing detail. Planning, on the other hand, starts today and goes forward in time in ever increasing summary and aggregation.Stargate Movie Poster

The catch that causes many misunderstandings is that the tables look very similar.  Your accounting system produces an Income statement (alias Profit or Loss), a Balance Sheet, and a Cash Flow statement.  A good business plan has at least the same three statements as “pro-forma” (meaning projected) statements. The form, presentation, and order of appearance of these financial statements are almost identical, but their information content is quite different.

Why do you care? Because the two concepts don’t mix well. And people who approach planning from an accounting point of view suffer. Accounting is reporting off of a database of transactions. Each transaction is recorded and kept, and the accounting sorts and selects and reports. Instead of guessing future monthly totals, they want to figure out an imaginary database of imaginary transactions, and then report results from them. They sweat, the suffer, they get digestion problems, and it doesn’t work.

Planning is to help steer the business. It helps with decisions, tracking progress, and managing change. Accounting is also for information and management, of course, but there are legal obligations related to taxes. Accounting must necessarily go very deep into detail. Planning requires a balance between detail and concept, because there are times when too much detail is not productive.

Accounting can never be wrong. It’s about taxes and governments and actual money transactions. Business plans, however, are always wrong, which is fine, because they’re about setting down assumptions so you can manage and track results, and steer the company. Steering is a matter of constant corrections. So is planning.

Closing the Loop: How Planning Is Management

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A couple of weeks ago the editor of my entrepreneur.com column poked me sideways a bit with the suggestion that I explain how planning is management. He said (I’m paraphrasing):

What do you really mean when you say planning is management? It’s not immediately obvious. Can you explain how a business plan becomes better business management?

Which led to How Business Planning Leads to Better Management, published yesterday.

The key is going from strategy to numbers:

In order to chart your path, you’ll need to define long-term goals. Think broadly about how you see your business in several years. From there, get specific. You’ll want to establish milestones for when you want to accomplish certain goals, and know who you will want to carry them out. Go beyond sales, costs and expenses, and look at what really drives your business. It might be conversions, page views, clicks, meals, trips, presentations, seminars and other engagements.

And then, more important, you track and manage those numbers. You set a regular review schedule and manage performance based on the numbers in the plan plus the difference between plan and actual results.

Can you see the management brewing? Tracking and analyzing numbers can help you manage the work behind the numbers. You’ll be in a better place to recognize and highlight what’s working and what isn’t working for your business and your team. Managing your business successfully requires more than just praise and pats on the back. Sometimes it means focusing attention on problems, helping people solve them if possible, discussing and embracing mistakes, and, in the worst case, weeding out people who don’t care about bad results. This can all be accomplished more efficiently when you have a plan in place.

So that’s why planning, done right, is management. It’s controlling your destiny and steering your company. And that’s not just a plan, a single, use-once plan; no, it’s planning process. It’s regular use, review, and revision, that makes planning management. Like Eisenhower said: “the plan is useless, but planning is essential.”

Business Planning Isn’t About Pages

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Somebody asked me about a one-page business plan. That’s a fashionable idea, and can certainly be a useful exercise. I’ve written in this space how a one-minute elevator speech, for example, can be a useful exercise. And obviously a pitch deck and a pitch presentation can be useful too.

Summary is good. Everybody should be able to summarize their career in a single page, and everybody should be able to summarize their business plan in a single page too.

But that one-page summary isn’t a plan, it’s a summary. You might use it to communicate a plan on high level. It may be useful, but it doesn’t replace planning.

And for the record, that 10-page business plan, or the 20-page or 50-page business plan, those aren’t plans either: they’re output. They are a snapshot of what the plan was at one time. By the time you’ve printed them out, if there’s good planning going on, they are already out of date.

So what’s planning? it’s a process that starts with a plan and continues with regular review and revision. It’s a combination of strategy, review process, assumptions, dates, deadlines, responsibilities, metrics, accountability, and management. It helps you steer your company.

It’s not one page, or 10, 20, or 50. It’s what’s going to happen, when, why, who, and how much.

Top 10 Business Planning Mistakes #1: It’s Planning, not Just a Plan

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(Note: this is the tenth and last of a 10-part series listing my revised top 10 business planning mistakes. The list goes from 10, the least important, to 1, this one, the most important.)

Planning is vital for your business. Start with a business plan and a regular review schedule, then track results and changing assumptions and revise the plan as needed to accommodate a changing world. The value isn’t in the original plan, but rather in the planning that follows, which becomes steering your business.

Planning isn’t just a business plan. It’s business management. The real benefit comes from setting up the assumptions and the links between strategy and specific actions, plus the metrics, and the task assignments. As assumptions change – and of course they will – having the plan already in place increases the power of revisions.

Planning, like steering and management, isn’t just a map and a destination; it’s constant course corrections, the original route map subject to modifications for real time events. So it’s more like a GPS system with real-time traffic and weather information, so you can adjust the route.

That business plan isn’t the end in itself; it’s just the first step. Expect it to be wrong, and plan to revise it. What you’ll gain is controlling your own business destiny prioritizing, setting up metrics, managing change, and steering your business better.

In the illustration: plan vs. actual becomes steering and management.

(image credit: Jiri Hera/shutterstock.com, istockphoto)

Top 10 Business Planning Mistakes #5: Doing It All

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(Note: this is the sixth of a 10-part series listing my revised top 10 business planning mistakes. The list goes from 10, the least important, to 1, the most important.)

Let me start this with one of my favorite quotes:

“I don’t know the secret to success; but the secret to failure is trying to please everybody.” Amen to that. In fact, you can package that up and call it small business strategy 101.

And I’ve written about the displacement principle in small business:

In a business, everything you do rules out something else that you can’t do.

And this fits very well with what I call strategy:

Strategy is focus. It’s as much what you aren’t doing as it is what you’re doing.

One of the most common worries I get as I sit as a judge in business plan contests, or more recently in a group of angel investors as a member, is the problem of too many moving parts. That comes back to you can’t do everything.

Trying to do everything usually leads to doing nothing very well.

(Image: istockphoto.com)