Every business needs a business plan. Right? That’s what you read on the “authoritative” business sites. The Small Business Administration says not having a business plan is a cause in over 80% of small business failure. So, perhaps you’ve found a template and created one. If you don’t have one, you feel guilty, don’t you? You probably tell people that you’re “working on it.”
Release the guilt! While planning your business is absolutely important, the act of creating a business plan from a template isn’t going to do anything for you. In the past venture capitalists, angel investors, banks, etc. were thought to demand business plans. As it turns out, VCs and angels typically only read the executive summary to see if the idea is unique and if it can be done. Banks rarely ask for or review business plans.
If the readers of business plans outside your business aren’t asking for them, then the value must come from users in your business. So, how many times have you reviewed and updated your plan? How many times have you consulted your plan before making a signification decision? How often to you measure success against your plan? That is, if you have a business plan in the first place.
If planning is important, but business plans don’t seem to be effective, how do I plan? Glad you asked. In the years that I’ve been working with clients and running small businesses, I’ve developed a framework that helps plan, keeps focus where it belongs, enables communication internally and externally, provides budgeting data, and creates a measuring stick to check your progress. I’ve incorporated these into the E3 Business Transformation System (shameless plug) and I’ll go over the key elements below.
Envision. Goals. What do you want to be when you grow up? How much do you want to work a week? How much money do you desire? How do you like to spend your days at work? What do you want your business to be when it grows up? Why does it exist? Who does it serve? What value does it provide?
Before you start planning, you need to be able to answer these questions and the secondary questions that they’ll bring up as you work through them. BE HONEST. If you answer them in a way that you think others would, you’re cheating yourself and subsequent planning will just help you create something you don’t really want….
Enable. Now we start planning. More accurately, start putting together a business model that will enable you to reach the goals you just set while conforming to the way you’ve defined your working desires and business characteristics.
Create a business model. Not a business plan, a business model. A business model defines how you deliver value to your customers, what that value is, who those customers are and everything that goes into making that happen. It also models costs and revenues. This is a template to how you are going to do business.
If you’ve been in business a while, start this phase with taking inventory of where you are. Get an objective view of your business today from an operational view and a financial view. This will help you more quickly develop your business model and will also serve as a reference point for progress.
When you’ve created your model, you need to validate it. It feels good to have the model done and understand how we’re going to reach our goals, but for now it’s still a hypothesis. It is our best educated guess on how we should run the business. Take the time to prove your assumptions. List your assumptions and create simple tests to prove or disprove them. Get out and talk with your customers, conduct surveys, query prospects, etc. Change when you find that you were wrong and create a validated model.
Enact. With goals and a proven model in hand, now its time to plan and act. It’s time to figure out how we’ll use the business model to reach goals. There are a couple of important areas that we should all cover… a marketing plan, an operational plan, a budget and a team plan. The marketing plan will cover how you will get your message in front of your prospects and convert them into customers. The operational plan is what actions you’ll take to deliver the value and run your business. The team plan deals with how you are going to create a team that fits in with your company values and can do the jobs necessary. The budget makes it all real and provides a reality check along the way.
After you’ve planned, budget. Budget thinking is likely going on during each stage, but when you’re all done, create the actual budget. Be realistic about how much you’re willing to spend, how quickly you can hire, how much you can afford on advertising, etc.
Now that you’re ready to launch, make sure you’re tracking your business. What are the goals and how do the different plans fit in? Is the marketing producing the results that you predicted? Are you able to hire the type of people that you want within your budget? Are you able to produce / deliver your offerings for the amount that you thought?
Answer these questions at least quarterly and measure the outcomes against your plans. Adjust where you need to and start developing a documented business “memory.” Keep your plans and results stored throughout your business life and learn from them. Keep getting better at predicting, marketing, identifying customers, etc. These lessons cost you time and money to learn, don’t forget them by not documenting them – use the lessons you’ve learned.
Now, you don’t feel so guilty about not having a business plan, do you? If you have one, pull it off the shelf, dust it off, and reuse what you can as you work through this process.
Michael Nelson
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