What are Business Plans for?

Everyone talks about them - large or small businesses, established or start-up companies. I had a conversation today about how some new products got established without ever having made it to paper-  so are business plans really needed? Aren’t we just adding un-necessary burdens and governance layers when we want is to be lean, fail fast and keep going? Isn’t lean the new black and business plans so 2 seasons ago?

Not quite. Business plans serve different purposes in different organisations but there are commonalities in what they are able to achieve. It is not about the piece of paper or even necessarily the meeting in which they get presented if any, it is not even about the dollar forecast one puts in there.

Time. Business plans create time. No, they don’t have the magic power to make a CEO day any longer, rather the reverse as most people will work on a business plan on top of their ‘day job’. But they create the most rare kind of time - time away from working IN the business to time working ON the business. The distinction is subtle but key. Business owners or product heads are likely to spend their day bringing the next piece of revenue, managing that HR problem, putting down the next fire. That is all key and should remain at the core. But without the ability to plan ahead, the agenda quickly gets taken over by tactical matters. Business plan cycles create the habit and time for people to actually sit and come up with a plan, or in established corporations most likely to update their plan. It is almost like they are allowed not to be ‘producing’ revenue during that time. In smaller companies, business plans may take different shapes and length but they can still offer the same benefit. It is often in small businesses that CEOs have even less time. So take it as permission granted to plan.

Structure. Business planning provides people with a structure. Be it a word, power point or business canvas, it does not matter. No matter what the structure is, that is often lacking especially in small businesses or new initiatives within a large corporation. A business plan may be seen only as the set of 10/15 questions that every business owner should ask themselves on a relatively regular basis. And if you are a structured person you may think that you have already done it anyway - why am I telling you the obvious. But more often than not business owners or ‘launchers’ have no business management experience and are more passionate than structured. They have an idea but may not even know if they have a business opportunity. And that leads me to the next point, which I chose to keep separate.

Thought Process. Business Plans are mostly a thought process. In my time facilitating  business plans in an extremely large corporation, they are often seem as a ticking the box exercise that should be done in the most painless way. That tends to fail. There is no point about doing a plan if you ate not really going to be thinking about it. Isn't that what I just said about time? Well no, time is almost the creation of a mandatory agenda item/ calendar invite to think. Thinking may or may not happen depending on willingness to do so. The thinking comes out of an immense knowledge of the business put together with time and structure. The need to articulate a message will force people to debate internally or with others what that message should be, why and how it should be conveyed. And thinking comes in greater quality when not done in isolation but rather using different people’s opinions. Which brings me to my all time favourite.

Challenge. I am still surprised at how people are sometimes so unwilling to challenge the status quo. I understand when they feel threatened by others challenging the status quo. That’s human nature. But when given the opportunity to challenge themselves in a safe environment one should always take the chance. And for the fearless leaders, allow yourselves to be challenges by your team or even more, by your juniors. Challenge comes at a price - it takes more time, it takes that a leader listens and really is willing to accept that the current way is not always the best way, that the original idea may need a divergence to actually get to market. But the benefit is immense - an actual working business opportunity in a dynamic market place.

Direction. Business plans may be flexible in nature but they all are expected to be a product of a certain vision. It is that vision that will give a company direction, that will allow it to progress forward, grow, establish itself in new markets or with new clients. Launch a new product. It is the company's north. A business plan is an excellent opportunity to establish goals of what the business wants to be. The 3 (or 5 things) it wants to be and achieve in the market place, vs. competitors, with its clients, whatever the right metric may be. Goals are not to be confused with strategy. Goals are a clear demonstration of what the company is striving to do. And they can be 1 year / 3 year long term goals. They will be a point of reference, and not often be reviewed in more established businesses, like "retaining #1 positioning". In an early stage venture, it may be "go to market", "get x number of clients". But they will all be a clear indication of which stage the company is in and where it focus its attention.

Metrics. Every business needs benchmarks. It allows check points on the above goals, but in a more tangible and measurable manner. Whilst a company may be targeting to be cash flow positive, different indicators may be the client growth, the client acquisition costs, the burn rate, amongst others. It is key that business owners define what metrics they will use to measure their progress against their strategy, and business planning time is key for this. It is key to have a set of dynamic metrics that management can look at, be it on a weekly, monthly or quarterly basis. They need to be sourced in a relatively simple (and accurate) manner and provide valid information. No, they are not meant to be a laundry list of data. If they don't tell you anything, they are just data. What you want is information, a set of metrics that tells you about the health of the business. But if you don't know where you want your business to go, what the goals for the new initiative or product are, how can you measure your progress?

Communication. A final point of commonality across business plans for any type of company are the ability to be communicated. All companies have stakeholders. It can be a start-up pitching for investment, a small business trying to get a bank loan, a large company reporting to its board. Business plans provide CEOs with a powerful way to communicate and articulate their strategy. They don't need to be shared in full, but it is their existence that allow owners to communicate clearly their vision, their goals, and how they are doing in the key areas for their business.

Yes, I am a business plan advocate. And after 7 years working with teams to move them forward, I am still in awe how they can be seen as such a pain and angst for many people. However, a good business plan is a delight. Not a delight to read (well maybe, for some people), but they are a delight to observe how they are developed. The business owner knows not only the north, but also what it takes to get there, and what it may distract the company from doing so. The CEO knows the strengths it needs to emphasize, and the weaknesses it needs to resolve to be successful. Different stakeholders understand why the company is pursuing a certain new market, and support functions, such as operations or technology can make the required changes to follow along. Because there is a strategy, and a plan.