I got to the office, sat down at my desk, looked at a picture of my girlfriend and decided there and then that I wanted to spend the rest of my life with her. It was Valentines Day. She worked at an investment bank and I needed to get past security and into her office to surprise her. I had no plan, no ring, no table booked for lunch, nothing. A few phone calls later and I was down on one knee asking her to marry me. An hour after that, we were having lunch at one of the best restaurants in London. It worked out well.
Before I started Kingmakers in 2005, I wrote a business plan. I didn’t think of myself as entrepreneurial, I never thought I’d start a business, but here I was, doing just that. I quit my job and started working my six month notice period. I needed a business bank account and an overdraft. The bank asked for a business plan. A friend at the time suggested a book called The Definitive Business Plan and I got a copy and read it from start to finish. I wrote the plan. It took forever. The bank gave me the overdraft. Two weeks before I was due to launch, I crashed while mountain biking; shattered wrist, dislocated clavicle, broken ribs and a twisted pelvis. It didn’t work out well.
Two very different scenarios; one largely emotional, the other very practical. Two different approaches and two very different outcomes. Of course, success is rarely judged in the short term and while I’m both happily married and still in business, one took an emotional approach, the other a practical one. I don’t have a marriage plan (well, not that she knows about anyway), but I do have a business plan. The first plan I wrote was for permission. It wasn’t a practical plan, it was full of hope and guesswork and really pretty useless when it came to running the business. I’ve no idea what iteration I’m on now, but I’ve had to adapt as the business has developed.
Whatever stage of business development you’re in, the essence of a plan is simple; where do you want to get to, where are you now, how do you get from A to Z. However, this ‘essence’ only relates to outputs. The plan must detail inputs and processes too. The protocol is easy to remember; input – process – output. For business plans, inputs are resources, processes are strategies and outputs are results. In the quest to simplify something complex, many firms have developed a one-page plan. These dashboards full of goals and past performance data focus on outputs only and as such, don’t help you to make good decisions around resources and process. In order to weather the storm on the horizon, we can and must do better.
I set out the basic spine of a business plan in a recent tweet thread (pinned to the top of my Twitter profile). I’ve been told it’s a useful overview, but you need more detail. Before we jump into that, it’s rare that anyone builds a plan for permission these days, so let’s assume our focus is on business management. There are many ways to approach the construction of a business plan, but there are a few key pointers to remember: –
1.Get the right people involved.
Yes, owners but also individuals who will play a key role in the delivery of the plan. But not everyone. There are people who just want to turn up and do their job. They expect you to know what’s going on and provide leadership. Get everyone involved and progress will be very slow indeed. Sure, get feedback through other channels both before, during and after, as you will need engagement if you want to implement the plan successfully, but keep the core team small and focussed.
2. Discover what key people really want.
What drives them, where do they want to go and why? A business vision is actually one or more key people’s personal visions. Make sure you consider the collective and reconcile obvious differences in commitment and timeline.
3. Be objective in your assessment of the current situation and historic performance.
Imagine you are researching an unrelated business to invest in. You can afford to be brutal, as the plan is staying inside the firm.
4. Spend time considering strategy.
Sure, set some goals that help link the current position to the vision, but think about how those goals will be achieved. What resources do you need? How will those resources be used in concert, to achieve your goals in the shortest possible time, while building both leverage and momentum?
5. Take great care with assumptions.
If you picked up ten new clients last year and you don’t have a clue how you did it, why is your goal twelve new clients in the coming year? Again, you don’t need permission, you’re not trying to impress anyone, so be objective.
6. Run the numbers.
Financial modelling is not strategy, it’s validation (or not) of the strategy. A one year cashflow forecast is not sufficient. That rolling quarters and comparison to this time last year that you’ve run forever – it’s not good enough. Spreadsheets are very scalable, so do a ten year forecast across revenue, direct costs and overheads. Bring that into a profit and loss statement. Take that into a cashflow statement and summarise it all in the balance sheet. Question all your assumptions and identify the stages where resource requirements and/or processes will need to change. Of course the forecasts will be wrong, but you are trying to determine where the approach might need to change. Important insights can be gained in this process.
7. Break the plan.
Think about how it all goes wrong. Think about how it doesn’t go quite right. Consider the options, set out how decisions will be made and re-run the numbers across a range of scenarios. You are going to invest resources in this venture. A good plan turns unknown unknowns, into known unknowns. Think risk vs reward. You must take some risk to get a return. You can (and should) explore risk before committing resources.
8. Iterate, iterate, iterate.
Take the time to move between the various steps, revisiting each connected aspect of the plan.
Your final output can be in any format you like, but there are certain tools that do specific jobs better than others. The main plan should ideally be a written document. Don’t skip this. Writing is critical thinking. You don’t really know what you think about something until you write it. Get it down on paper. It’s hard, but it’s worth it. The numbers will be in a spreadsheet but bring a summary into the written plan. With spreadsheets, it’s important that users understand how the model works. People have a tendency to look at lots of numbers and glaze over. Explain what the model is trying to do and focus attention on what it’s telling you, not how it’s telling you. And finally, use presentation software to communicate the plan to the team. Stick with key statements, critical numbers and graphics that illustrate the points you’re trying to make, all the while remembering that your audience are rarely thinking anything other than ‘what’s in this for me’. With all the documents that make up a solid plan, getting the right depth of information to the right people is the goal.
Then it’s down to your team to execute. Or is it? In the next blog we will look into the critical stage that is often missed – implementation.
PS – showed this to my wife before posting it and she made a very astute observation – when it’s about love you act on instinct, when it’s about fear you proceed after careful planning.
By Rob Stevenson – May 2020