If you’ve conceived a new idea, whether for a new product line, a reorganisation, or even an entirely new business; there comes a time when you need to take the ideas and start forming a tactical plan, says Carl Reader
Planning is often the area that I see business owners let themselves down. Sometimes they use planning as a useful way of avoiding ‘real work’, and continually update their goal lists and business plans without taking action. Otherwise, they neglect the planning stage and dive straight into action, with no structure or logic behind their actions and activities. It’s important to try to find a halfway house between these two approaches to give your business the best chance of success.
When you think of a business plan, you probably think of a weighty document, perhaps with a glossy cover, or presented on PowerPoint slides by some high flying executives. Often the business plan is confused with a “pitch deck”, which is a business plan produced for investors or funders – essentially, a pitch deck, or a glossy-covered business plan report is only one small use of a true business plan. A pitch deck might contain similar headings to a full business plan, but it is often used solely to get cash in the bank, rather than to set out the steps and targets for the business.
So, with that clear, let’s focus on the whole process of planning. It’s important to bear in mind that we all have our own approach to planning and structure. Personally, I tend to plan a little less formally than most, and I find that I tend to work better with a very broad big-picture plan, combined with very short term detailed actions in alignment to the plan. Others prefer to work on a much more structured basis, perhaps tying daily actions into weekly targets, and in turn into monthly and quarterly goals.
It’s always worthwhile considering how you tend to approach planning in your daily life? Do you have daily to do lists, shopping lists and meal plans? Or do you have a more haphazard approach? Do you find that you enjoy working within a structured plan, or do you prefer to break the plan and see what works?
There is no one approach that works. The only thing more important than a plan is a plan that is actually used! If you feel that this approach to planning is too light touch or overkill, then feel free to adapt the process to fit the way that you work. Perhaps the biggest problem with traditional business plans (or funding decks, as referred to above) is that they often end up gathering dust in a drawer somewhere, with no actionable steps, accountability, or proactive review and amendment. An effective plan for your business isn’t constrained to a few PowerPoint slides; it should be a living document that grows with the business.
Presuming that a plan is actually used, there is another weakness that is rooted in the thinking of entrepreneurs and funders, and that is a disconnect between the dream and the results. Many people get excited by the dreams that are put forward in plans, and focus their due diligence on the validation of the concept, reviews of the marketplace and kicking the tyres of things like competitor analysis. The finance people will also have a keen eye on the numbers, making sure that revenue growth is both attractive and achievable, and trying to sense check whether the entrepreneur has truly thought through the operating margins, overheads, and the impacts on cashflow. This typical approach misses perhaps the most important part, which is how the results will be achieved.
Instead of focusing on just the ‘why’ and the ‘what’, we need to make sure that we cover off the ‘how’ – how do we go from A to B, the practical steps that need to be taken, and some of the contingency plans that should be in place. In short, we need to plan our actions, not our results. We also need a crystal clear understanding of what is and isn’t within your control as an entrepreneur.
Most business plans tend to focus on the output of the business – who the business serves, the customer benefit, and ultimately the return for the business owner and any shareholders. It’s really important that this stuff is nailed down, but it is only part of the jigsaw. The performance of the business will be dependent both on the actions that are taken, and external matters that are outside of your control as a business owner.
Some of these are obvious and are covered by a typical ‘PEST’ (political, economic, societal and technological) review that would usually be included within a formal business plan. Things like political uncertainty, shifts in consumer behavior and technological developments can be predicted to an extent, and should be borne in mind when running the business. While these are all largely out of your control as a business owner, we often neglect to consider the risks closer to home. From a more hands-on perspective, we should also be thinking about the practical risks to the business of ill health, unexpected competition, and things simply not going to plan.
My recommendation for all planning processes is to think of Plans B, C and D. While it might be Instagram-friendly to see motivational quotes with phrases such as ‘No Plan B’, the reality is that you owe it to yourself, your family, and any future employees, customers, suppliers and funders to have a rounded plan of attack that covers different eventualities.
The formal phrase for having a range of backup plans is a ‘sensitivity analysis’. In practice, this often looks like a broad adjustment to the financial forecasts of the business – for example, to see what would happen if revenues are 20% lower than expected, or profit margins are 3% lower. While adapting the results helps to sense check the financial stability of the business, they don’t actually help address the change in course required at an early point to limit the damage to the numbers.
Instead, I’d like you to bear the following in mind when creating your action plans:
What If?
How do I keep my medium- to long-term targets flexible, in order to take advantage of new opportunities or threats? What is the process for this?
Adaptation
How do I flex my short term actions to take into account changes to the market, or simply learning new ways to do things? How will I review the changes to ensure that they tie back to my medium- to long-term targets?
Protection
How do I protect the business from the unexpected, and mitigate any damage? Do I need to take preventative steps, find ways to structure the business so that I’m not the only source of income, or invest in insurance?
Another factor that the traditional sensitivity analysis doesn’t really cover is the impact of timing. In my experience, tech businesses are particularly guilty of not hitting development milestones or revenue targets. It’s all well and good having a beautiful set of projections that pass muster even with a large percentage tweak, but the reality is that the hidden killer in these sorts of businesses is the timeline.
When producing your plans, you need to think about the timeliness of your actions, and the impact of actions not being completed by a certain point. Can your business sustain itself if your website is one / three / six months late? What if employing your first member of staff takes longer to recruit than expected? Mapping out the impact of these potential delays can help you be prepared for the very worst case scenarios, and also help you understand the importance of certain actions compared to others.
This extract from new book BOSS IT by Carl Reader © 2020 is reproduced with permission from Kogan Page Ltd.
