Category: Business Planning

Over the years, I’ve reviewed books and articles about business planning, and written some myself, but I can’t remember one of them that said much about luck. Sure, risk – which is really bad luck – comes up often. Watch out for things like slow sales growth, unexpected competitors, new regulations, price drops, expensive labor costs, and so on. Prepare suitable contingency plans. And then, if a business goes under, one of the usual suspects that always shows up is, well, we were just plain unlucky.

Yet I can’t recall ever hearing a successful business owner say: Gosh, we were just plain lucky. Somehow the stars were aligned, the market took off on its own, our competitors were asleep at the switch. Sure, we executed well, but without all that luck on our side, we’d have sunk before we left the harbor. Nope — mostly they talk about the things they did well.

In contrast, I think luck is a significant unsung partner for most successful startups. Not the only factor, but a big one, one that does not get the credit it deserves.

So are there things you can do to have better luck? First, position your business plan to take quick advantage of good fortune when it comes your way. Stay closely tuned to the marketplace, with multiple informal and formal sources of information. In business, who you know does matter, not just what you know. But you have to keep in touch with them or it doesn’t matter. Secondly, as with life, a positive attitude enables you to see opportunities — which are really a form of luck — more readily. I believe a positive attitude actually also helps attract better luck. There are no guarantees in business, but in my experience the optimists (with enough pragmatism to keep them honest) succeed more often than the pessimists.

So be hard-nosed but also be optimistic about your business. Good luck!

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For more resources, see our Library topic Business Planning.

For this blog, I’m simply going to quote from an excellent comment recently posted to my social enterprise blog Risky Business by Jeffrey Wallk:

“Clear articulation of value. This is not the value proposition (here’s what we do / offer). This explains in very simple terms exactly how your product / service will help someone get a job done. Services are just harder to sell than a product because they are intangible therefore you need to go the extra step in getting your customer to understand how the service will solve one or more problems they are facing. You have to create an instant “visual” in their mind.”

“Example: Suppose you are providing crisis management services for local communities. Your value prop would be “we offer crisis management services”. But, your clear articulation of value is “We address the processes and reduce the costs (time, money, & effort) for crisis management so community leaders can address the needs of their community.”

Thanks, Jeffrey!

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For more resources, see our Library topic Business Planning.

Every business plan has them, and they belong in the fiction section of the library. Like romance novels, you can usually see what’s coming: we’ll lose some money in the first year, approach break even in the second year, and then (gasp) become profitable in year three. And the business lives happily ever after, achieving greater profitability with each passing year.

Unfortunately, things don’t turn out that way. Most businesses take longer to reach profitability, and many never do. Sometimes things get better, then get worse, and then sometimes (with much effort, further investment and some luck), get better again.

While financial projections should not be confused with reality (after all, they are guesses), it is possible to come up with some reasonably credible numbers. Here’s how:

• Do your homework. Build your case through solid research, not visualizing reality or plugging in the standard “profitable by year three” formula. Gather industry data, talk to experts in the field, study annual reports, read the trade press. Figure out your market segments. Do this research yourself or hire a consultant.
• Make it simple. Start with the key metrics for your business. Number of paying customers and average purchase. Hourly production rates. Cost to acquire a customer. Profit margins. Also, keep your financial projections to two pages; too much information is bad for fiction and nonfiction.
• Support your numbers. Justify your key numbers with notes indicating where they came from or how they were calculated, so someone could independently verify them.
• Adjust your thinking. If the numbers don’t work out, revise your business model, not the numbers. Consider the possibility that your great idea might not be such a great idea.

Remember that while starting a new business always involves imagination, you’ll better set yourself up for success if your financial projections are realistic, rather than romantic fiction.

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For more resources, see our Library topic Business Planning.

In the previous post (Part 3), we covered questions 7-9 of the 15 questions to address in the “plan for a plan.” This post (Part 4) explains questions 10-12.

10. What Materials Will Be Needed?

For example, think about:

• Materials (books about strategic planning, flipcharts, markers, etc.)
• Equipment (overhead projectors, flipchart stands, white boards, etc.)
• Facilities (conference rooms, retreat centers, etc.)

11. What Terms/Titles Will You Use?

For example:

• Will the top-level priorities be called “goals” and subordinate priorities (associated with the goals) be called “objectives”?
• Will the objectives, and the responsibilities and deadlines to achieve them be called “action plans”?
• Will you refer to “mission”, “vision” and “values” or are there more culturally compatible terms?
• What other terms are unique to your culture and organization that you want to use in the planning process, e.g., “trust advisor” rather than facilitator or “team members” rather than planners?

12. How Will You Train the Planners?

Far too often, people jump in to the planning process, expecting to learn about the process along the way. That’s like handing someone a map that the person has never seen before, not saying a word to them about the trip or how to get there, and then expecting the person to efficiently navigate you to your destination. Participants in the planning should get an overview of:

• The basic purposes of the strategic planning process.
• The planning model being used.
• The schedule to produce the plan.
• Any special terms being used in the planning and their interpretations in the process.
• How decisions will be made during the planning process.
• Their role in the process, along with the role of the Planning Committee.

An upcoming post (Part 5) will explain questions 13-15.

What do you think about the “plan for a plan” in the planning process?

In the previous post (Part 2), we covered questions 4-6 of the 15 questions to address in the “plan for a plan.” This post explains questions 7-9.

7. What’s Your Schedule for Developing the Plan?

Too many organizations do planning by gathering planners into one retreat where they tweak wording on the mission statement and brainstorm fantastic ideas. Too often, that generates a plan that’s full of fantasies with little grounding in reality. Take time to do it right.

• Usually, the best time to start strategic planning is near the middle of your fiscal year, so you can produce an updated annual budget in time for the start of the next fiscal year.
• If the purpose of your plan primarily is to verify or expand products, then take time to do some basic market research – to hear from consumers. That could add several weeks or months to the schedule to complete the plan, but it’s critical. Otherwise, your plan could build “a beautiful ladder, but on the wrong roof.”
• It’s often better to have several short meetings between periods of research, rather than one long meeting for planning that involves little external research at all.
• For small organizations, aim to have planning done in several weeks or at most 2-3 months.

8. Who Will Be Involved? How? When?

The contents of the plan are determined in large part by who takes part in planning. Also, the people involved often learn a great deal about the organization. (In Part 1, we talked about who should be on your Planning Committee.) In the overall process, involve:

• Those with authority to make decisions – and this should include your Board members.
• Those who will primarily be responsible for implementing the plan. This is critical.
• People who are knowledgeable about products and services. They ground your plan and make it real.
• Someone to champion the process – to keep up the spirits of the planners. Planning can be tedious, especially when strategizing or talking about how to achieve goals.
• As much as possible, involve some stakeholders, including some customers, funders and collaborators. Involve them especially when establishing goals about products and services.

9. Will You Need an Outside Facilitator?

Get an outside facilitator if:

• You’ve not done strategic planning before.
• Your last plan was not implemented.
• People struggle to come to consensus.
• People believe an outside facilitator will help planners be more open and honest during their participation.
• Planners want an objective perspective on their situation.
• (A note about facilitators – don’t require your facilitator to know a lot about your industry, products and services. You’re better to have an expert in planning who knows little about your organization, than the other way around.)

The next post will share questions 10-12 of the 15 questions to address in the plan for a plan.

What do you think?

Is your great idea actually a great idea? Feasibility testing is how you find out.

Start with your goals. Sure, everybody wants to make a million dollars. But how will you define success? Finish this sentence: I will consider this business successful if after three years, at a minimum, it ______. List just two or three things. Be specific on what your current money goals relate to: sales, margins, profitability, growth rate, market share, or something else? Also list whatever non-money goals you have for this business.

Next, describe the proposed business. Write down its products or services (benefits not just features), target customers, marketing strategies and sales channels, labor and supply channels and costs, pricing, key competitors, breakeven point, and, most importantly, management requirements.

Don’t have all that information? No problem. It’s time to do your feasibility research. Talk to anyone who could help you and read everything you can find about it. Find ways to talk to actual customers, and study your primary competitors online and, if possible, in person. Buy something from them. Remember the competition is anything your target customers would see as an alternative to your product or service.

Do this yourself or hire a consultant with venture feasibility expertise. Be clear that you’re looking for an objective assessment, not confirmation that your great idea really is a great idea.

Keep coming back to your goals, revising them if needed. Do “just enough” feasibility testing to provide the comfort level you need to be reasonably confident the business will meet your goals (or won’t). Finally, write down what you learned, even if it’s only two pages worth, and crank out some projections built on your research. Run the whole thing past half a dozen people with business experience. Ask them for frank and honest feedback. Revise and do more research as needed. Good luck!

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For more resources, see our Library topic Business Planning.

In Part 1, we reviewed the first 3 of the 15 questions that should be addressed during the “plan for a plan” phase of strategic planning. In this Part 2, we review questions 4-6.

4. What is the Scope of Our Plan?

It’s not uncommon that leaders believe that a long-term plan will somehow guarantee that they won’t be surprised over that long term – that the plan will somehow lock-in a version of the future. Wrong.

• If the organization is fairly new, has many current issues or the external environment is changing a lot, then consider a shorter term plan, for example, a 2- to 3-year plan.
• If the organization is in this situation and still wants a longer term plan, then consider clarifying the misson, vision and values and some goals for the longer term, but do action plans for the next year. (The action plan is about who is going to do what and by what date.)

5. What Planning Model Should We Use?

Here’s where planners often make a big mistake – they do vision-based planning when they should have been doing issues-based planning.

• If your organization has a lot of resources, few current issues and a history of being able to implement plans, then do vision-based planning. Vision-based planning is working from the future to the present.
• If your organization has very limited resources, several major and current issues, and struggles even to implement a plan, then do issues-based planning. Issues-based planning is identifying current issues and what to do about them. A year or so after implementing this plan, then the organization might be healthy enough to do vision-based planning.

See the article Basic Overview of Various Strategic Planning Models.

6. How Might That Model Be Implemented?

• If the organization has frequent turnover of staff, a well-informed Board and upper level of management, and the culture does not value participative decision-making, then a top-down planning approach might be most suitable — although highly participative decision-making almost always results in more buy-in to the Plan.
• Otherwise, if Board members and executives are not well-informed about the organization and its environment or are weak leaders (an extremely unfortunate situation), then a bottom-up planning process might be most suitable.
• A concurrent approach to planning — participation from all levels of the organization — is probably best if the culture of the organization highly values participative decision-making.

The next post (Part 3) will address questions 7-9 in the plan for a plan.

Your thoughts about the plan for a plan?

I know, you’ve got a great business idea. Everybody says it’s a winner, even your business friends. It’s amazing no one else has thought of it before. You’re feeling you should jump on it right away before someone else gets there first. But you realize you need to do some research before taking the plunge, so you’re game for that, as long it’s not too time-consuming or expensive.

So it’s time to gather some data to show it’s a good idea, right?

Not exactly. All too often, this research begins with the presumption that you have the right business idea. I call that the confirmation bias trap, and it’s so common that most businesses fall into it. Truth is, many business startups make big mistakes in their first year, and many of those mistakes could have been avoided by doing some basic feasibility research, rather than just looking for confirming data. Successful business leaders will often tell you that it was not their first idea that worked out, but an offshoot of it.

So use your research into customers, competitors, pricing, business models, and so on to refine your idea, or even radically change it. Doing some feasibility testing can’t guarantee you’ll get it right the first time, but it sure can reduce the number and severity of those painful first year mistakes. Or even demonstrate that your great idea is not so great after all.

Our next blog will offer strategies and steps for doing feasibility testing.

In this post, we’ll discuss one of the most important phases in strategic planning – a phase that far too often is forgotten, resulting in plans that sit untouched on shelves. The plan for a plan should be developed by a Planning Committee and should answer 15 important questions — do this before the planners start identifying goals to go in the strategic plan. This post (Part 1) is part of a 5-Part series and each Part will review 3 questions. Part 1 reviews questions 1-3.

Not doing a plan for a plan is like going on a trip without a map and then complaining that you didn’t get where you wanted to go. Planners have the illusion that the sooner they imagine some goals and get those goals on paper, the sooner they’ll achieve those goals, as well. So that’s where they start – fantasizing goals. Wrong.

Or, far too often, inexperienced facilitators and planners will start planning by fantasizing words on a mission or vision statement. While that can be creative and exhilarating, it rarely results in a useful plan. (But it does stimulate the creative juices – and it can make Board members, who otherwise are usually detached from the organization, to quickly feel useful in the planning process 🙂

Here are the first three questions the plan for a plan should address:

1. Are We Really Ready for Strategic Planning?

• Does our organization have enough money to pay bills for at least the next 3 months? Don’t use strategic planning to generate quick revenue. It won’t do that. Instead focus on cash flows.
• Does our organization have a history of not implementing plans? If so, you need leadership development more than planning. Learn how to build in performance management to do what you say you’re going to do.
• Are our Board members willing to be involved in planning sessions? If they want only a one-meeting retreat, then don’t consider it strategic planning. It’s a brainstorming session.
• Can our Board members and other leaders make decisions together? If not, planning could be a nightmare. Do Board development, not planning.

2. Who’s in Our Planning Committee?

The job of this Committee is to ensure a high-quality planning process, not to do the planning. Its members might hire a facilitator, do the plan for a plan and review various tangible results from planning, such as the drafted Plan. The Committee should at least include:

• Chair of the Board
• Chief Executive Officer
• Leader of each of the major products or program
• Someone who’s been in a well-done strategic planning process before

3. Why Are We Doing Strategic Planning?

There are different reasons for doing planning and each of those reasons could require a different approach to planning. Typical reasons include:

• It’s just that time of year. (The best time to do planning is the middle of the fiscal year in time to produce a Board-approved budget for next year.)
• Our organization has had recurring major issues among Board members or employees. Often, this is the result of their not being on the same page – planning can get them all on the same page.
• Our organization wants to add a new division or major product line.
• Our investors or funders want a plan. Be careful – don’t just burp out a stack of paper and call it a “plan.” Investors and funders are smarter than that.

The next post (Part 2) will address questions 4-6 in the plan for a plan.

Your thoughts about the plan for a plan?

Here’s many more resources about strategic planning.

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Carter McNamara, MBA, PhD – Authenticity Consulting, LLC – 800-971-2250
Read my weekly blogs: Boards, Consulting and OD, Nonprofits and Strategic Planning.

Successful entrepreneurs tend to be frugal. They have to be. They know that money and time is scarce. Too many things to do, too little time. So they focus, prioritize, cut to the bone, do what only needs to be done to get from point A to point E (skipping point B, C and D if possible). If you ask them how much planning they do, they’ll tell you they don’t have much time for that. But probe a bit deeper, as I have in hundreds of discussions with small business owners and entrepreneurial nonprofit leaders across the country (and some overseas), and you’ll find that generally they’re pretty good planners, even if they roll their eyes when you use that word.

Unlike the Hollywood version, most real life entrepreneurs do not carelessly take risks in hopes of making it big. Instead, before they dive into something, they often gather information from customers, competitors, colleagues, sales people, suppliers, industry sources, wherever they can get it – then add their own knowledge and intuition into the mix. From that effort the idea for their new business or new product or new market emerges. Why don’t they “just do it” the Nike way? Because they know it’s almost always cheaper to get it right the first time. They know to “measure twice, cut once.” That’s what business planning is all about. Sure, some things you can’t measure; but for everything else, there’s business planning.

As we continue with this blog, we’ll discuss specific strategies for measuring, once, twice, but not three times, by doing “just enough” business planning. Then just do it.

How do you do your business planning? Where do you need help?

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For more resources, see our Library topic Business Planning.