Work the Plan, Not the Idea

I've often commented that my clients like to ask me what I think of their ideas. My standard response is, “you have a great idea, now let me see your plan.” Here is where my clients reactions to this will vary, as some clients will show me their drafts and others will ask how to go about writing a plan. Unfortunately, a good number of others will tell me that they don't have the time to be bothered with this process. My feeling is that if you don't have time to plan, then you don't have the time to achieve success.

I don't care how great the idea may be, the actual process of developing a business should involve a planning process. And planning is not just an exercise of putting your idea on paper. It is a process where you think about how you are going to make your business work.

It is actually a fairly simple process and I like to refer to what I call “the four cornerstones of success” that are the foundation of any successful business. This includes:

* Marketing
* Operations
* Financials
* Leadership

The planning stage should encompass a process that will bring your vision into reality. From the marketing perspective, this involves thinking about who will be your customers, what is your competition for those customers and what message will you send to effectively entice enough of them to purchase your product or service.

On the operations side, this is envisioning the process of everything it takes to produce your product or service and effectively deliver it to your customers. It should also involve contingency planning for things that can interrupt this process.

The financial side of planning involves thinking about how much it will cost to start or expand your business and the holy trinity of financial documents: cash flow statements, profit and loss statements (or income statements) and the balance sheet. Since you are in the planning process, you should plan what they will look like in the future. Usually a three year period is a good starting point (projections are sometimes referred to as pro formas)

Leadership is identifying the direction and goals for your business. It also identifies who will be responsible for the different roles in managing the business and should include some accountability for what dictates success. I've written in a previous post that everyone should own a number. The business plan is a great starting point to identify who owns which numbers.

Probably the most frequent question I get about the business plan is, “How long should it be?” My answer is always, “As long as it needs to be.” Ask a good question, get a good answer!

First of all, as long as the business is going, the planning process never ends. It is something that should be revisited and refined over and over again. I refer to a great book by James D. Murphy, entitled Flawless Execution. Mr. Murphy is a retired Top Gun pilot from the U.S. Air Force who runs a business consulting firm, named Afterburner. In his book, he refers to a cyclical process that involves the Plan, the Briefing, the Execution of the Plan, the Debriefing and then the process begins over again. I highly recommend this book to those who are serious about improving their businesses.

While the business planning process never ends, there are obviously times when your business plan will need to be presented. Usually, it is because financing is needed for the business and any reputable investor, whether it is a banker or a private investor, will want to see a business plan before making an investment decision.

Of course, if you want to get a positive response from a potential investor, you have to think about what they want to see in a your business plan. The key in the business plan is to sell your plan for success, not the idea. The biggest mistake I see in most business plans is it focuses too much on what is wonderful about the proposed product or service, rather than focusing on how the business will be successful and, more importantly, why this is a wise investment decision for the potential investors.

While I am not going to speak for bankers and say that they could care less about your business proposal, certainly they are more concerned with how they are going to be paid back rather than consider how wonderful your business idea may be. So think about risk and reward analysis in your business planning process.

Speaking of risks and rewards, I can't stress enough the importance of the business planning process to assess feasibility of your proposed business start-up or expansion. Think about the risks and rewards as they relate to your particular situation. While the your business plan may have a good chance of providing you the opportunity to do something you love, it may not provide enough financial rewards to justify the financial (as well as time) investment you may have to make.

There are a number of great resources for providing assistance in writing business plans. Consider visiting your local SBDC as a good starting point (go to the "Find Your Nearest Small Business Development Center" and search by zip code or State).

I also provide a caution about paying someone to write your business plan for you. While you may use a consultant to provide advice for you in assessing market potential, develop operating systems or to help you format financial documents, the business plan has to come from you.

“Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan.” Tom Landry