Tag Archives: The Plan-as-you-go Business Plan

Lean Business Plan: Form Follows Function

Business Planning, Lean Business Plan, , ,

Your lean business plan is no more than what you need to run your business. In the beginning, it might be as simple as an elevator speech. Be able to talk through those key points: the customer story, what makes you unique, how you’re focusing and on what you’re focusing, and, if it comes to that, your close — what you want from whoever is listening. Form Follows Function

 

Or it might be a simple sales forecast, and perhaps, a burn rate in the very beginning because you know what you’re doing — maybe you’ve been doing it for years already and you don’t need to verbalize it right at this moment — and you’ll set those figures down and start tracking them.

Lean planning comes in many forms. Think of it as analogous to motion in athletics. In so many different sports, the winners practice economy of motion, repeated muscle memory. Another way to look at it: in design and mechanics, the fewer moving parts, the better. If you have to squint conceptually to see the key points, squint down on the elements you’ll be able to track and then revisit.

It’s not about the text, or the form of the thing, until that becomes related to the function. When you’re doing a business plan as part of a graduate business school class, then yes, it has to be complete and look good and read well; editing and format matter. When you’re doing a plan for an investment group that is going to pass it around among the partners, then it matters. But you don’t want to get bogged down in format when it’s just you and your spouse and you simply want to think through what’s required.

So the plan is a collection of concepts in the middle, surrounded by specifics that have to be done. The core of the plan is strategy and tactics, as simply as you can put them, just bullet points as reminders. Around the core you put a collection of milestones; numbers to be measured and tracked (lots of them are sales, expenses, and the like, but not all); task assignments and responsibilities for different people, dates and deadlines, budgets, and so on. That’s your plan.

From that core lean business plan, you spin off various outputs. You take the highest highlights of the plan and 60 seconds or so to explain it in an elevator speech. That’s one output. Or you write it all out carefully, and add supporting information about the market and the industry and the backgrounds of the management team, and it’s a plan document. Or you create a 20-minute 10-slide summary with PowerPoint or Keynote slides, and that’s a pitch presentation for potential investors. Or you create a cover letter or cover e-mail, about a page or so, along with a 5- to 10-page written summary, and that’s a summary memo. Or you do none of these, you simply keep that plan as a collection of bullet points, of picture financial projections, and a list of things to be done by whom and when and for how much money, and share it with your team. In that last case you don’t ever edit or polish it, or sweat the page headers and page footers or font size. You just use it to manage your company,

Notice that none of these outputs stands as something you do instead of the plan. And none of these outputs is really the plan. The plan exists at the core, and you create the outputs as needed.

With all of these various iterations and outputs, always keep assumptions on top, where you can see them for every review meeting. Minding the changing assumptions is one of the significant advantages of the plan-as-you-go approach over the more traditional methods.

I ran a business for years during which the plan was shared only between me and my wife, mostly, enhanced by sales forecasts and burn rate. During those formative years there was no need for anything else. When it was time for an elevator speech, either one of us could do it. When there was need for a written business plan — it came up first when we first set up the merchant account to be able to accept credit cards, in 1988 — then we settled down for a while and wrote it out as it was, conceptually, at that time. We always knew what we wanted to do, but we also knew our key assumptions, and we tracked them as they changed, and revised the plan. A lot of that was verbal, between two people.

As the business grew, the verbal plan with the forecast stopped working. Things became more complicated. Employees needed to know about the plan and join in its formation and then its implementation. So we moved it into bullet points on the computer, and tied those to forecasts, and began tracking in a group, in more detail.

We then began to do annual plans more formally, writing out chapters, and conducting review meetings every month. With each annual plan we’d go out and take a new fresh look at the market. We had people doing nothing but marketing, and they developed segmentations and forecasts and supporting information. It was part of their job.

Are you recognizing yourself somewhere along this line?

Eventually we wanted to bring in outside investment. That was during the dotcom boom when valuations were very high, so we thought it would be a good time to lock in the value with some cash out. We produced very formal plans every three months during that period.

The speech isn’t instead of the plan, and the pitch isn’t instead of the plan, but that doesn’t mean you plan or don’t plan if nobody outside your company is going to read about it. Your plan should always be there as the source of these outputs, so you’re ready to produce them when you need to.

Planning Is Telling Stories and Making Them Come True

Business Stories, Business Strategy, , ,

You could call this synchronicity. A few years ago I was reading Seth Godin’s All Marketers Are Liars at about the same time that I caught Harvey Cox talking about the power of stories as truth telling in all major religions. I paused to think about the importance of stories in so many different modes of thinking and communicating; and of course, me being obsessed with business planning, I started thinking of stories as building blocks of planning.

Around that same time, people liked my post Let Your ‘Story’ Frame Your Business Plan, one of my columns at entrepreneur.com. This is moving forward with my sense of planning and stories as closely related:

Suspend your image of a business plan as a document, for a while, and think of it as a collection of stories combined with concrete specifics or goals that aim to make those stories come true.

That led to more recent posts including Stories as Business Strategy earlier this year.

As time goes by I see increasing attention to the wisdom of framing ideas in stories. Just to give you the idea, think of your marketing strategy as a story about how a specific kind of buyer solves a problem or gets something he or she wants by encountering your business. What did she want? How did he find you? What made you different? These are all stories.

A sales forecast tells a story. An expense budget tells a story. So does a set of starting costs, and a balance sheet, and a cash flow projection. I don’t know about you, but I can’t think through these numbers without imagining the purchase decision, the channel, the process, and the scale of units, prices, and costs, assets we need, debts we accumulate, and so on. I can’t be the only one who sees stories in numbers. I hope. Maybe this is what happens when former lit majors fall in love with business analysis, but I’m hoping you agree.

The best way to talk about goals is a story:

Think about your long-term objectives story. Are you looking for wealth and fame, or to do what you like? What does success look like to you? Is it getting financed and making millions, or taking off at 4 p.m. to coach your kids’ soccer team?

And the planning specifics take those stories and break them into specifics required to make them come true:

As you imagine what those stories are, break them down into meaningful, trackable parts. Set tasks associated with those stories, assign tasks to people and give them dates.

The Seth Godin book carries the subtitle: the power of telling authentic stories. I say we go it one step further: we tell authentic stories and make them come true. And that’s a really good path to better business planning.

Pop Quiz: Do You Know How to Start a Business Plan?

Business Planning, Management, , ,

People often ask me how to start a business plan. Sometimes I’ll say it depends on you, your preference, and your style, so some people do a sales forecast first, some do a vision statement. But the right answer is that you start by scheduling your monthly review and revise meeting. That’s by far the most important first step. For everybody.

Each year, as you get ready to publish the next year’s plan, schedule the plan review meetings. Use some regular meeting schedule such as the third or fourth Thursday of every month.  All the managers committed to the plan will know way ahead of time so there are few reasons to miss a meeting.

Some excuses will come up. There will be events like trade shows or client events that some managers have to attend. However, with a preplanned schedule for review meetings, these problems won’t happen that often.

If your planning process includes a good plan — with specific responsibilities assigned, managers committed, budgets, dates, and measurability — then the review meetings become easier to manage and easier to attend.  The agenda of each meeting should be predetermined by the milestones coming due soon, and milestones recently due.  Managers review and discuss plan vs. actual results, explain and analyze the differences.

At Palo Alto Software, we review coordinated milestones once a week, Tuesday mornings, in about 20 minutes.  The monthly plan vs. actual review includes financial results and other measurables — product milestones, support calls, sales events, etc. — and takes just two hours a month.

It doesn’t take that much time, but there is very little in management more valuable.  It makes your plan a planning process.

This is one of the core concepts of my Plan as you go business plan method. 

(Image: bigstockphoto.com page of the calendar) 

Planning: Form Follows Function

Business Planning, Plan-as-you-go Planning, , ,

(Rounding up my business planning theme this week, this is another excerpt from my book The Plan-As-You-Go Business Plan, which is posted complete online.)

Your plan-as-you-go business plan is no more than what you need to run your business. In the beginning, it might be as simple as an elevator speech. Be able to talk through those key points: the customer story, what makes you unique, how you’re focusing and on what you’re focusing, and, if it comes to that, your close — what you want from whoever is listening.

Or it might be a simple sales forecast, and perhaps, a burn rate in the very beginning because you know what you’re doing — maybe you’ve been doing it for years already and you don’t need to verbalize it right at this moment — and you’ll set those figures down and start tracking them

Planning comes in many forms. Think of it as analogous to motion in athletics. In so many different sports, the winners practice economy of motion, repeated muscle memory. Another way to look at it: in design and mechanics, the fewer moving parts, the better. If you have to squint conceptually to see the key points, squint down on the elements you’ll be able to track and then revisit.

It’s not about the text, or the form of the thing, until that becomes related to the function. When you’re doing a business plan as part of a graduate business school class, then yes, it has to be complete and look good and read well; editing and format matter. When you’re doing a plan for an investment group that is going to pass it around among the partners, then it matters. But you don’t want to get bogged down in format when it’s just you and your spouse and you simply want to think through what’s required.

So the plan is a collection of concepts in the middle, surrounded by specifics that have to be done. Around the core you put a collection of metrics to be measured and tracked (lots of them are sales, expenses, and the like, but not all), task assignments and responsibilities for different people, dates and deadlines, budgets, and so on. That’s your plan.

From that core plan, you spin off various outputs. You take the highest highlights of the plan and 60 seconds or so to explain it in an elevator speech. That’s one output. Or you write it all out carefully, and add supporting information about the market and the industry and the backgrounds of the management team, and it’s a plan document. Or you create a 20-minute 10-slide summary with PowerPoint or Keynote slides, and that’s a pitch presentation for potential investors. Or you create a cover letter or cover e-mail, about a page or so, along with a 5- to 10-page written summary, and that’s a summary memo. Or you do none of these, you simply keep that plan as a collection of bullet points, of picture financial projections, and a list of things to be done by whom and when and for how much money, and share it with your team. In that last case you don’t ever edit or polish it, or sweat the page headers and page footers or font size. You just use it to manage your company,

Notice that none of these outputs stands as something you do instead of the plan. And none of these outputs is really the plan. The plan exists at the core, and you create the outputs as needed.

With all of these various iterations and outputs, always keep assumptions on top, where you can see them for every review meeting. Minding the changing assumptions is one of the significant advantages of the plan-as-you-go approach over the more traditional methods.

I ran a business for years during which the plan was shared only between me and my wife, mostly, enhanced by sales forecasts and burn rate. During those formative years there was no need for anything else. When it was time for an elevator speech, either one of us could do it. When there was need for a written business plan — it came up first when we first set up the merchant account to be able to accept credit cards, in 1988 — then we settled down for a while and wrote it out as it was, conceptually, at that time. We always knew what we wanted to do, but we also knew our key assumptions, and we tracked them as they changed, and revised the plan. A lot of that was verbal, between two people.

As the business grew, the verbal plan with the forecast stopped working. Things became more complicated. Employees needed to know about the plan and join in its formation and then its implementation. So we moved it into bullet points on the computer, and tied those to forecasts, and began tracking in a group, in more detail.

We then began to do annual plans more formally, writing out chapters, and conducting review meetings every month. With each annual plan we’d go out and take a new fresh look at the market. We had people doing nothing but marketing, and they developed segmentations and forecasts and supporting information. It was part of their job.

Are you recognizing yourself somewhere along this line?

Eventually we wanted to bring in outside investment. That was during the dotcom boom when valuations were very high, so we thought it would be a good time to lock in the value with some cash out. We produced very formal plans every three months during that period.

The speech isn’t instead of the plan, and the pitch isn’t instead of the plan, but that doesn’t mean you plan or don’t plan if nobody outside your company is going to read about it. Your plan should always be there as the source of these outputs, so you’re ready to produce them when you need to.

How Do You Define Small Business Strategy?

Business Strategy, , , ,

Yesterday I got this comment to my post Maybe You and I Aren’t As Good At Strategy as We Think, from last November:

I’ve been wondering: How do you define “strategy?” Is it possible to brainstorm to arrive at one? What are the “parts” of a good strategy?

strategy outlineThat’s a really good question, worth a blog post, or actually, maybe a book, or a series of books (not that I would be the author) or a whole graduate curriculum. But I do have 37 posts in the business strategy category of this blog, including this post from last October, which had this summary:

It’s really about focus. You can’t do everything, so you do the right thing.
You can’t please everybody, so you select who you please based on common sense, your strengths and your weaknesses, and how you’re different.
You can’t sell everything, so you sell what you’re really good at, what makes you appealingly different, and what sets you apart.
You can’t do everything so you do what’s most important, what gives you the most benefit per unit of resources, what aligns you best with your target market and your focused business offering.

In my Plan-as-you-go Business Plan book I divided it into three interrelated parts: identity, market, and focus.

Your Business Identity: This element is about you and your business, what I call your identity. How are you different from others? What are your strengths and weaknesses? What is your core competence? What are your goals?

Your Market: Telling the market story is about knowing and understanding your customers. Understand why they buy from you, what their wants and needs are, what business you are really in.

Strategic Focus You can’t do everything. In restaurants, you can’t credibly offer great food at bargain prices with great atmosphere. If you say you do, nobody believes you anyhow. So you have to focus. Make this focus intertwined and enmeshed with your choice of key target customer and your own business identity. All three concepts have to work together.

I hope that helps to answer that question from a reader. I’m glad she asked.

Time For a New Kind of Business Planning

Business Planning, ,

[Note: this is a special post placed here as part of Pamela Slim’s Escape Community. It was modified from a post that originally appeared here.]

It is time to adapt a new kind of business planning, which I want to call “plan-as-you-go” business planning. It leaves the formal plan document for the special cases that really need it, while focusing for the rest of us on the real power of planning, meaning management and tracking and accountability, and easing up on the form to make sure that form follows function. For convenience, let’s call it PAYG. The plan-as-you-go business plan is PAYG planning.

What’s Different About It?

How is the PAYG plan different from the standard business plan? Good question. Let’s get into some specifics:

1. It’s a process, not just a plan. Every PAYG plan has a review schedule built in, from the beginning. It sets the dates and participants in the future review meetings, taking 60-90 minutes once a month and 2-3 hours once per quarter.  and PAYG planning is about process: not just the plan, but the regular review and management of the plan.

2. Form follows function. The PAYG plan is not necessarily the same kind of formal business plan document you did in business school or read about all over. It doesn’t necessarily follow a recipe. Every PAYG plan is unique. It might generate a formal document at some point, or over and over again actually at different points in company history, but until you need the formal plan document to show somebody it lives on your computer. You pull from the plan to make a pitch presentation or elevator speech or summary memo or full detailed business plan document, as required for business purpose. It’s the source of all of these, the key thinking including strategy and metrics and dates and deadlines, without having a specifically defined form.

3. It assumes and manages change. The PAYG plan is about navigation, not just a static map. It assumes that assumptions will change. That’s why it builds the review schedule into it, and in keeping with that idea, assumptions must always be visible, on top, where they can be reviewed. Unlike the misunderstood formal business plan, the PAYG plan is a way to keep your view of the long term goals and directions while also managing the short-term surprises.

Now I recognize that you could read this list and say “but that’s the same as good planning has been for years, it’s not so new and different.” And I’d say “that’s right, you’re getting it.” What’s most important about PAYG planning is that people in the real world, startups and growing companies alike, can actually use it. It gets people out of the silly talk about how a business plan isn’t useful because they misunderstand how a business plan is supposed to be used.

4. Accountability. Plan-as-you-go planning develops accountability in the process, as a matter of metrics, and tracking. It is important that accountability be a matter of collaboration, and not the crystal ball and chain.

What’s Essential

1. Start with the review schedule. If you don’t have a plan review schedule, you don’t have PAYG planning. You might have a plan, but it’s not PAYG planning. Set the dates from the very beginning. As you develop the plan, you keep the people involved aware of the touch points, when and how and who you’re going to track.

2. Develop useful metrics. PAYG planning is about actually managing, not just planning into thin air. The main metrics are money, and the most important is cash flow, but look for metrics that involve the team. Calls, presentations, visitors, inquiries, average time of calls, downloads, whatever. Ideally, everybody on the team deserves metrics.

3. Identify the assumptions. Effective PAYG planning keeps the assumptions on top, where you can revisit them with every review meeting. We assume things change and the planning is about navigation, not just a static map. This is how you keep your plan alive and active.

4. Every plan has a heart and flesh and bones. The heart is strategy, market need, differentiation, and focus. This is as true with PAYG planning as with traditional plans. The flesh and bones are just as important, and in PAYG planning that’s metrics, milestones, tasks, dates, deadlines, and responsibility assignments, and, most important, cash flow planning.

Important Principles of PAYG Planning

1. Start anywhere. Get going. The plan is a matter of interlocking blocks, so some people start with a numbers task, like a sales forecast, and others start conceptually, with a vision or a strategy or focus. Just get started. Don’t wait until your plan is finished, get going. Start today and start using it tomorrow.

2. All business plans are wrong – but still vital. It’s a matter of humanity, you are predicting the future, you’ll be wrong, but you set down tracks so you can follow up and revise without losing sight of the long-term goals and directions.

3. Good business plans are never done. My company’s business plan started in the late 1980s and it’s still a work in progress. If your plan is finished, your company is finished. Instead, you revise as needed, as in steering, navigation, and walking. The core of the plan is the collection of heart and flesh and bones, it’s content, thinking, and specifics; from that you spin out a document or presentation or elevator speech as needed, and when needed.

4. Form follows function. Do only as much as you need to run your company, to manage, to build strategy and follow-up and long-term goals and directions. If you don’t need to create a formal plan, don’t; keep it on your computer.

5. Keep it alive, always, and spin the output as needed. Don’t ever let your plan go static. Keep it on top of things, active, and alive, not forgotten in a drawer.

6. Planning is worth the implementation it causes. You measure a plan by results. It’s as good as the decisions it guides.

(Image: Velychko/Shutterstock)

Planning Is Telling Stories and Making Them Come True

Business Planning, , ,

You could call this synchronicity. A few years ago I was reading Seth Godin’s All Marketers Are Liars at about the same time that I caught Harvey Cox talking about the power of stories as truth telling in all major religions. I paused to think about the importance of stories in so many different modes of thinking and communicating; and of course, me being obsessed with business planning, I started thinking of stories as building blocks of planning.

Fast forward to this month and I’ve been getting a lot of warm fuzzies for Let Your ‘Story’ Frame Your Business Plan, my most recent column at entrepreneur.com. This is moving forward with my sense of planning and stories as closely related:

Suspend your image of a business plan as a document, for a while, and think of it as a collection of stories combined with concrete specifics or goals that aim to make those stories come true.

Just to give you the idea, think of your marketing strategy as a story about how a specific kind of buyer solves a problem or gets something he or she wants by encountering your business. What did she want? How did he find you? What made you different? These are all stories.

A sales forecast tells a story. An expense budget tells a story. So does a set of starting costs, and a balance sheet, and a cash flow projection. I don’t know about you, but I can’t think through these numbers without imagining the purchase decision, the channel, the process, and the scale of units, prices, and costs, assets we need, debts we accumulate, and so on. I can’t be the only one who sees stories in numbers. I hope. Maybe this is what happens when former lit majors fall in love with business analysis, but I’m hoping you agree.

The best way to talk about goals is a story:

Think about your long-term objectives story. Are you looking for wealth and fame, or to do what you like? What does success look like to you? Is it getting financed and making millions, or taking off at 4 p.m. to coach your kids’ soccer team?

And the planning specifics take those stories and break them into specifics required to make them come true:

As you imagine what those stories are, break them down into meaningful, trackable parts. Set tasks associated with those stories, assign tasks to people and give them dates.

The Seth Godin book carries the subtitle: the power of telling authentic stories. I say we go it one step further: we tell authentic stories and make them come true. And that’s a really good path to better business planning.

Planning Fundamentals 2: All Business Plans are Wrong, But Vital

Business Planning, Planning Fundamentals,

(I posted most of this in 2007, but it’s even more important now)

Business plans are always wrong. That’s because we’re human. Business plans predict the future. We humans are dismally inaccurate when predicting the future. Istock_000000549056small_2

Paradox: nonetheless, planning is vital. Planning means starting with the plan and then tracking, reviewing progress, watching plan vs. actual results, correcting the course without losing sight of the long-term destination. Planning is a process, like walking or steering, that involves constant corrections.

  • The plan sets a marker. Without it we can’t track how we were wrong, in what direction, and when, and with what assumptions.
  • Use this marker to manage the constant conflict between short-term problems and long-term goals. You don’t just implement a plan, no matter what. You work that plan. Use it to maintain your vision of progress towards the horizon, while dealing with the everyday problems, putting out fires.
  • So the plan may be wrong, but the planning process is vital.

The truth is that forecasting is hard. Nobody likes forecasting. But Istock_000000408066smallone thing harder than forecasting is trying to run a business without a forecast. A business plan is normally full of holes, but you fill them, after the fact, with the management that follows. That’s what turns planning into management.

Good planning is nine parts implementation for every one part strategy.

(Photo credits: istockphoto.com)

Planning Fundamentals 1: Form Follows Function

Back to Fundamentals, Business Planning, Planning Fundamentals,

(Author note: I’ve been asked to go over some business planning fundamentals, and maybe collect those into a series. Consider this a first installment.)

Your business plan isn’t necessarily a document; it’s what you want to do in your business or organization, what’s supposed to happen, and why. It’s a combination of goals, directions, long-term strategy, and, more important, dates, deadlines, steps, tasks, responsibilities, and basic numbers.

Don’t confuse output with plan. That business plan document is just output. So too are the elevator speech, the summary presentation, the pitch, and the summary memo. They’re just the latest output.

So how long is a business plan? Long enough to serve your business needs. How well edited, formatted, and presented? Enough to serve your business’ needs.

Think about the difference between the business plan document requested by a potential investor and the business plan document requested by a banker, and the business plan you create because you want to manage your company better. Who’s the audience? What’s the business purpose?

I like this (and you can quote me on this, because if I heard it from somebody else, or read it somewhere, I’m sorry; I’ve forgotten. I think it’s original) because it is important:

You don’t measure a business plan in pages. You measure it in business results.

I don’t believe in the business plan in your head, or the one-page business plan, because neither of these serves the management purpose of setting things down as specifics which you can then track and follow up with course corrections.

Keeping it in your head won’t work as soon as you have someone else you need to share it with. And it won’t work for management purposes because you won’t be able to track results and manage the difference between what you planned and what actually happened. You lose the value.

So forget your preconceived notions about a business plan. Think of it as a first step in a process. Ask yourself what you need, in your unique situation, to be able to organize and prioritize and look at the steps and the metrics, and follow up on a regular basis. Is your strategy clear? Can you set it down so others can join it? Are dates and deadlines and steps along the way set down clearly? Have you done basic numbers, like sales, costs of sales, and expense budgets? Can you track those regularly and manage for course corrections? That then, is the right business plan for you.

Baby, Bathwater, and Business Planning

Business Planning,

Which is better: aiming at something from a great distance and committing to that without flexibility; or setting a general direction and moving towards it in smaller flexible increments?

The second is better. Of course.

The first is like the myth of the business plan, the way it’s frequently misunderstood. The second is business planning, the way it is supposed to work.

Real business planning doesn’t lock you in over the long term. Quite the contrary, it sets directions and priorities, and concrete steps, and gives you something you can track and manage. It gives you more flexibility, not less. Keep the long term in mind while you deal with the short term. Watch how things unfold, what turns out to be as you expected, and what doesn’t. Manage your business, with planning.

And not, emphatically not, set a plan once a year and then follow it blindly until you do a new plan a year later.

So don’t throw out the baby with the bathwater. Don’t think that because some people misuse a business plan, turning it into a straight jacket, that you don’t want to plan your business. Just do it right.

(Photo credit: istockphoto.com)