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simple and loveable business plans
If you ask most people in business if they would like to have an up to date and useful business plan that they feel they are going to achieve, most say absolutely! if you ask the same people if they have this plan, most say, no.
So Whats the problem?
Is it that planning is one of those nice to haves that you just dont have 'real' time for unless you absolutely have to because you're getting investment or applying for a loan? We think not. Nat and me have always have various versions of plans for our business as its continued to take various changes in course, and among other things we're about to start a new venture very shortly (more on this soon), so its again on of those required times to get right up to the moment with our planning,
not the main reason to plan, but one that certainly kicks you into gear. Also in my previous working life I was involved in international business development for a New Zealand energy efficieny technology business and my final work there was helping secure $11million in an 18 month capital raising effort that saw myself and the Chief spend 3 out of 12 months roaming the US from Sanfran to New York selling the story to investment bankers and VC's seriously re-hashing our buiness plan some 13 times. In the end the money came from home, New Zealand. You really do get sick to death of a this sort of document, but all the while understand its importance in getting you and the team focused, growing the business, and getting investment.
Business Planning Fails because:
- Provide limited value in daily, weekly activities
- Have to be read top to bottom
- Provide no means of monitoring, evaluation and feedback
- Difficult and boring to digest
- Very time consuming to maintain currency
- Lacks integration with other business activities, information and systems
- Difficult and costly to keep all stakeholders informed (eg. Investors, team members)
The Solution
Business plans need to be simple and loveable, and useful for your whole team, and anyone else who has a vested interest in your business (investors, banks…). Read
The Zen of Business Plans by Guy Kawasaki for some really useful ideas.
Business plans need to be simple and be something that you can immediately link to your daily actions. They need to be easy to update, and easy to monitor progress against. They need to provide people quick insight as to when they've changed and let everyone whos contributing to or benefiting from the plan know whats happening.
Put yourself together a simple and loveable business plan and bring your planning to life.
Hello, my name is Natalie, I have a business called 
August 2nd, 2006 at 6:12 pm
Ahhh … I thought you were going to give me a neat new tool that would help business plans! only joking!
It is also important to remember that business plans are living documents — they should change as your business changes. One VERY flexible addition to a business plan is to develop a “strategic principle” that can be applied to your business. For example, GE (used to) use “be no 1 or no 2 in any market or get out”. Such principles help you make decisions about your business in line with your overall strategy.
August 3rd, 2006 at 5:20 am
Business plan is essential.
The most important features there are: reality and finance, idea and solution.
There also should be a concrete timeline for the actions (agree with the prrevious post). This document is the first to refer while running a business. The goals and aims should be sheduled to be reached at a ceratin period of time.
If time sets its own rules then the changes should be done in the business plan.
August 4th, 2006 at 3:15 am
A business plan should be like drinking cordial straight from the bottle – Very intense and no more than 10%-20% of what you would normally write. Strategy heavy, focusing on channels and product. Skip the intro, index, appendix, historical accounts and all the other fluff, it’s just padding. We continually modify ours post strategic meetings (wikki based). If the IT world taught us anything it’s that Dynamic and Simple is better!
August 6th, 2006 at 2:14 am
Excellent insights
… I couldn’t agree more: Business plans should be simple since *all communication* should be simple, straighforward, and concise!
I’ve always thought the simplest way to think about and structure business plans is in terms of a financial model (in a spreadsheet). In fact most small business managers I’ve known seem to think about their businesses in just this way; they have simple mental models linking together business processes and expected financial outcomes … mental financial models.
The models go something like this:
(1) marketing and selling activities cost MS and are expected to result in the demand for Q product units at average price P.
(2) to make the Q units the firm needs to use units X1,…,Xn; a series of production input volumes with a cost per unit of C1,…,Cn.
(3) expected fixed overhead and administrative costs per period of F.
So the planned profit function is PROFIT = PQ – [C1*X1(Q)+…+ Cn*Xn(Q)] – MS – F … and so on. The spreadsheet just makes the mental model explicit and avoids brain fatigue errors.
So far, so good. But so what; right? And don’t we need 20-30 pages talking about all the wonderful benefits of the firm’s product and the high caliber of management? Firms would be much better off using 20-30 pages explaining (to themselves and others) precisely why the firm can charge P per product unit, why it can sell Q units at P after investing MS, etc. That is, investors want to know the thought process behind the plan (this is in part how they evaluate management caliber). They don’t really care so much about whether revenue growth is 15% or 20%; more important is knowing *why* it is expected.
Of course, a benefit to all this is it allows the firm to develop a feedback control loop so it can see what went right and what went wrong at a fine level of detail.
Enough words. Most succinctly: The best way to develop a simple, useful business plan is to build a financial model of how the firm expects to generate profits and cash flows (incorporating all critical business processes), and then explain why model parameters and variables are unbiased and reliable. I think some of the best—that is, most informative—business plans I’ve seen are about 10 pages long. And such plans are pretty easy to update as well!
August 6th, 2006 at 3:59 pm
Some great ideas. Yes Gavin an application to help this would be great, more on this soon. As you say Julia a good business plan should be your first reference when running the business and should kick you lead you directly into action achieveing your goals. Marc, your analogy of drinking cordial straight from the bottle is fitting, an intense plan is the only one that gets read and used, using a wiki as a means of makiing the business plan current and integrated into daily activities is a great approach, we've done something similar to this too.
Thats a good note on making the plan financially centric malcom, a tight set of numbers that are well thought through and backed up with every strategy leading to their achievement is key.
August 8th, 2006 at 3:24 pm
Oh, I’m loving this thread. I thought I had a great business plan and you all have opened my eyes.
Clue #1 – I haven’t looked at my plan in about 3 months!
Does anyone have any examples of some of these great plans? Be #1 one in the market is probably not a strategy that’s going to work for me yet.
Especially Malcolm, I’d love to see an example of the financial model business plan you are talking about. Do you have this posted somewhere?
Rebecca
August 12th, 2006 at 11:17 am
The only caveat to the using a financial-model-as-business-plan is the most financial statements and, hence, financial models contain quite a bit of jargon (though this is not necessarily so). Use of jargon of course contradicts some of Tim’s insights about making business plans simple and understandable, but …
Having said that, I’d be pleased to send anyone on this blog a copy of a generic financial model for a consulting firm written in MS Excel. The model provides the structure, the entrepreneur provides the parameter values (roughly speaking, the “exogenous variables”) and chooses the values of decision variables constituting The (no doubt cunning!) Plan.
The idea is that the model captures and summarizes the financial/quantitative effects of critical factors in the business plan. The natural language part of the business plan (i.e., the written part), then explains why the model is an unbiased, reliable forecast of what’s likely to happen if the plan were implemented.