For every startup the development of a business plan is a  required first step. It is so obvious – business schools have course on writing the business plan and it is impossible to get funding without one. Teams coalesce around the labor. So, every startup has a business plan.

For the going concern, the ones that are now three or so more years old, the business plan (also called strategic plan -really the same thing) is forgotten, only stumbled on when a move forces someone to pick it up and wonder, “Should I just relegate this to the dumpster?”

This is not a good situation. A business without a plan is like a boat sitting in a pond just waiting to sink to the bottom for nature to compost it. Or, if it has the fate to be afloat in a stream, it will be carried along willy-nilly until it bumps into a stone or dead branch or reaches the ocean where nature will also send it to the big composter.

Every business exists in a world that is changing and filled with opportunities and threats. Your business plan is your set of oars to provide the means to pull in the direction you want to go in, to avoid the rocks. You might even row to shore and portage around the falls, to move to an entirely new river.

But, many people, even accepting the wisdom of having a plan, find it a painful exercise, all too easily avoided. This may be driven by the idea that a business plan involves dozens of pages of writing, lots of spreadsheets with numbers they really don’t believe (sometimes don’t understand). Business plans, strategic plans, these are just the exercises one does in business schools. Or it may be the folk wisdom that business plans are not a useful part of managing and they always end up on the shelf or hidden in a file cabinet only dusted off for display when in search of a bank loan.

However, shift your thinking to view the process of building a plan as a value in and of itself, and adopt a simpler more flexible business plan model you will find that building that set of oars for your little boat is fun and productive.

The Business Plan Model

Lets talk about the business plan model first. Since we are developing a business plan for our internal use it does not need to look like or contain everything that bankers, MBAs, venture capital funders expect. This is a working document to help us move the business in a definite direction.

First, I have found that setting an arbitrary limit of 12 pages focuses the mind and edits out all the useless boilerplate that populates many plans. Second, if you and your team prefer not to write a paragraphed narrative, use an outline, PowerPoint approach. Third, get out your most recent Income and Balance Sheet statements – these will be the starting point for the financials. Fourth, establish an outline of the topics that you feel must be covered and keep to it.

Basically, the plan will include these twelve topics.

1. Describe why you are in business – what value are you delivering to which customers. An important corollary to this topic is to identify why customers buy from you and not someone else?
2. How do you find customers? Who are your current customers? List the big ones and their share of your business
3. How do you produce the service or product?
4. How do you make money by making your customers happy?
5. What are your objectives for growing a larger customer base, adding a new market segment, new products or services, or other growth strategy?
6. What are the external obstacles to accomplishing these objectives and how do you intend to get around them? This is where you might look at competition, SWOT and PEST analysis and apply other analysis tools.
7. What resources do we need to put in place to achieve the growth? Money, people, technology….?
8. What strategies are we going to apply to achieve our objectives over the next year to three years? This should be limited to three to five strategies. State clearly what the objectives are for each strategy – how many new customers, new products, dollars of sales, profits, etc? When will these happen?
9. What key tactics are needed for each strategy? Who is responsible, what resources do they get, when will the accomplish the tasks and what results are you looking for?
10. Build a financial model. The spreadsheet should be not more than 25 rows with columns containing quarterly projections for three years. Starting numbers must link to existing financial statements.
11. What is the schedule for follow up business review sessions where you will examine progress on the plan and take required actions to revise and push the plan forward. The first meeting should be one month after you kick off the new initiatives. The, not less than quarterly.
12. How does all of this fulfill the management team’s personal objectives? The answer to this is not money?

The Planning Process

Now, how do you actually develop the plan?

Four to six two to three hour working sessions with all members of the management team present usually suffices. Some homework will be required between the sessions, typically a  couple of hours. You might imagine a month to six weeks as a useful window of time.

Who should be in the room? Every significant stakeholder – owners, chiefs of marketing, sales, operations, technology or product development, finance, and HR. In small companies this sometimes means that one person has to cover several functional areas. Do not let the group get larger than six to eight people. More than that and you can not have good, deep interactions – the work sessions will be more like a conference or convention. Two or three is fine as long as every key stakeholder in the business is present.

These work sessions are more important, in many ways, than the plan itself. During these sessions, the team will talk out loud and write things down. Arguments, discussions, innovations, deletions, new agreements about the business emerge. These flow out of the group and the whole team understands and owns these discussions and the conclusions.

In my experience, if the management team represents all of the key elements, all of the facts and concepts about the business are sitting in the room. Some people think that business planning is a research project. But, with a team, the process is more a sharing around the table of the facts, consensus building about the situation, goals, and strategies to get to the goals. The most powerful outcome of the planning process is that it arms the management team to convert the strategies into actions to reach the goals.

You Need a Consultant

All of this seems quite straight forward. You may be thinking, “Well, I am the Owner, the CEO. I am a seasoned veteran.  I can lead my team through this planning process.” Resist this line of thinking and here is why, and I say this despite the obvious self-serving nature of what follows.

A good strategy consultant who knows how to lead groups through a planning process will do the following, much of which you as the Owner, the CEO can not do just because of the fact of your position. First, the consultant stands outside of the actual business discussions, runs the sessions, and keeps the team moving forward. Second, the consultant establishes an environment in which the team is a group of equals for the purposes of the planning. This assures that one person will not dominate, that the less forceful personalities, who frequently have significant contributions to make, will be heard and participate. This increases the breadth and depth of the team ownership of the plan. Third, the consultant can bring up the elephants in the closet that no one wants to talk about. Overcoming the baggage of history can be difficult and painful. The consultant can drive the conversations to confronting the facts of the business situation. Fourth, the consultant will bring appropriate analytical tools to the table. The bag of strategy tools is enormous. All of this liberates the Owner, the CEO from the burdens of running the work sessions to focus on the content of the process. This is where their highest value is.

How Do You Convert the Plan Into Action?

For most strategic plans and business plans the end is the document itself. This is the critical moment and here is where Step 11 above, that asks about the schedule of review sessions, converts the plan into action. This is where the Owner, the CEO must take the lead. Otherwise the plan is just a plan and is not converted into action. If you have done a good job of establishing the tactics you will know who is responsible, what the success metrics are and the timetable for action. By tying the planning to the existing financial reporting system, you will be able to measure results directly. The review sessions are not designed to be dull reports, but opportunities to understand where the difficulties lie and where new opportunities pop up. A review session brings together the management team to work on the most important strategic activities of the firm.

Summary

Let’s wrap up this discussion.  A business plan is the result of a process in which the management team comes to a common understanding of:

• • the business situation
  • the value the business provides to customers
  • strategies to achieve new goals
  • obstacles to be overcome or avoided along the way,
  • tactics to bring the strategies to life – this includes who is responsible, resources available, timeline, and results expected
  • schedule of review meetings to take corrective action and make course corrections

The business plan is converted into action through the tactics identified supported by active supervision and follow up by the Owner, the CEO. The plan also provides a common language about the business and a platform to communicate the business’s goals beliefs, and values to everyone involved, employees, vendors, and customers.

More information is available on the strategic planning process in our white paper: Introduction to the Strategic Planning Process here

This article was the subject of an earlier podcast of the same title. It is available here.

For the last two years, now well into a third year, I have been working with the two owners of  this niche opto-electronics engineering services firm. We meet regularly using Skype videoconferencing.

After being in business for four years, they realized that their business was going nowhere. It was lurching ahead with a few regular client firms, but there was no organized, productive marketing and sales system in place. They had no pipeline of work and frequently had very lean periods.

We began meeting to talk about what kind of company they wanted and how it might fulfill their personal goals and objectives. This discussion evolved into an effort to define what their value proposition was to customers and how to express it. As we began to delve into how marketing might work for them, we developed a list of all the people they knew, people they had worked with or for in the past, and another list of technology oriented meetings they attend or might attend.

We used a two prong approach to the marketing program. First, each partner contacted people they already knew to renew the conversation. We used Google Docs to have a shared list of the target people, who was the main contact, and dates and results of contacts. Second, they selected and scheduled time to go to technology meetings on a regular basis.

These activities provoked a series of discussion about what marketing and sales is about in the world of technical firms. We talked through the usual manipulative models and they came to focus on the happy idea that discussions with people and firms should be about shared values and interests. They could abandon the notion that they were pushing some snake oil. The idea is to engage customers and prospects in an exchange of ideas and experiences. Not far in the background is the notion that through this process the parties would find areas where they could do some business together.

Along the way they figured out that some people and some firms are more worth talking to than others. They learned to delve into the decision making processes at the firms they have been working with and with prospects.

The results came in little bits at first but by the end of the first year the sales pipeline was filling up. With regular prodding from me to keep up the drive on the marketing, they experienced good signs of momentum.

Now we began to talk about different topics: proposals, contracts, negotiations, intellectual property, project management, new outsourced engineering resources, to name a few.

Today, they are so busy with work that a primary topic that I bring up at the beginning of every session is how their marketing and sales efforts are progressing. They must continue to work at this because as the principals they are the ones who must find new customers and maintain relations with existing ones.

Our most recent new topic is cash flow management. They have finally hired a part-time bookkeeper and now have to learn the language to manage this person. They have to learn the language of accounting, at least in a rudimentary way, to ask for reports that will help them manage the business more effectively and with less pain.

Each year I schedule a review session or two to talk about the future of the business. Where do you want to be in two to three years? During this year’s review, we found that several objectives that had not been acted on earlier, but had remained on their list, came into a fresh, revised focus. Now, they are taking some small steps towards those objectives. Incremental, experimental steps that perhaps will clarify whether these objectives are still valid and achievable.

Web-based Information Services Company

For almost three years I have worked with the CEO and co-owner of this firm. An early discovery was that there was no product line sales/profits analysis available. Using spreadsheets and existing data, this analysis was completed and immediately revealed that a product line with low sales and not much sales growth, despite quite a bit of effort, was actually showing negative profitability. More significantly, much of the development effort of the company was focused on this product. This lead to a painful decision to abandon that product line and focus on others in the existing product lines.

Another outcome of the spreadsheet analysis was to focus on Cost of Goods Sold where, after discussion of vendor management, the firm launched a clearer strategy of vendor management. An immediate outcome was a 50% price reduction from the primary information vendor.

Ongoing, the CEO and I have spent time talking about how to focus more efforts on marketing and sales. Since the founders of the company are software engineers, there is a natural tendency for the firm to return to its roots and dream up more development projects and further embellishments on their internal support systems. With some care to the strengths of the primary players, we have been able to shift energies towards marketing and sales.

Overall results over three years have been greater than 40% sales growth each year and an improvement in net profits from 3% to the mid teens.

CPA Firm

Over two years I worked with Principals to analyze this five year old firm’s customer base, product lines, pricing structure and marketing strategies. We pared down the service offerings, raised prices, pruned customer list, refocused marketing efforts. Sales rose 55% with almost 30% improvement in Net Profits.

A critical situation emerged when the partners began to move in different directions in their lives. During a meeting with them I listened to their now diverging life objectives and their solutions to these problems. They had developed complex business arrangements to allow one partner to move to Florida while another wanted to exit. All of this was based on partly believable virtual work processes and the increasing number of clients with whom they never interfaced personally.

When I suggested that they think of selling the business, it was a moment of “Aha!”. This idea was hardly a breakthrough idea except that their inward focus had prevented them from seeing it as an option.

Firm has now been successfully sold. The three partners are off on their own new adventures.

We approach our work with CEOs, COOs and other C-level managers from the perspective of a co-founder of a successful small software company. Although this experience can not inform everything we might want to know, we do have the experience of starting, operating, and successfully selling a small company. In addition we have over a decade of experience in a Fortune 500 electronics firm filling roles in many different functional areas. We understand the environment and stresses and strains in the day-to-day life of top level executives.

Most importantly, we apply our full tool bag of high performance management techniques to the most pressing opportunities and challenges.

Weekly Coaching Sessions

• Scheduled 45 minute telephone sessions.

Bi-Weekly Coaching Sessions

• Scheduled 1 hour telephone sessions

Options

• On-demand coaching support
• Other management consulting services

Budget

• Depending on options chosen budget per month ranges from $350 to $500.

Get started -  Schedule an Introductory Conversation

This is at no cost and no obligation. Read about Introductory Conversations before you call.

Note:

We expect that managers will commit to a minimum of three months effort at the outset. Although most clients find positive results within a few weeks, measurable results in terms of top and bottom line performance take somewhat longer to occur. Coaching sessions scheduled less frequently than weekly do not provide good results.

Many clients work with us for a year or more.

In any event all coaching engagements are subject to cancellation by either party on one week’s notice

Like other General Managers they must be concerned with the overall performance of the organization. However, as owners, they have additional concerns that may include, among others, family members on staff, succession planning if inter-generational management is contemplated, and positioning the company for acquisition, merger or close out.

We approach our work with Owners from the perspective of a co-founder of a successful small software company. Although this experience can not inform everything we might want to know, we do have the experience of starting, operating, and successfully selling a small company.

In addition we bring our full tool bag of high performance management techniques to bear on the most pressing opportunities and challenges.

Weekly Owner Coaching Sessions

• Scheduled 45 minute telephone sessions.

Bi-Weekly Owner Coaching Sessions

• Scheduled 45 minute telephone sessions

Options

• On-demand coaching support
• other management consulting services

Budget

Depending on options chosen typical budget per month ranges from $350 to $500.

Get started -  Schedule an Introductory Conversation

This is at no cost and no obligation. Read about Introductory Conversations before you call.

Note:

We expect that managers to commit to a minimum of three months effort at the outset. Although most clients find positive results within a few weeks, measurable results in terms of top and bottom line performance take somewhat longer to occur. Coaching sessions scheduled less frequently than bi- weekly do not provide good results.

Many clients work with us for years.

In any event, all coaching engagements are subject to cancellation by either party on one week’s notice

We offer business coaching to owners and managers in small and medium size businesses and non-profits.

This coaching is telephone-based with Web support. This means that as required we will review and discuss documents viewed together over the Web.

Coaching comes in a number of sizes and flavors. Choose the type most suitable to your situation.

Business Coaching for Owners

Business Coaching for CEO, COO, and other C-level managers

Learn more about our processes:

What Is An Introductory Discussion?

What Should I Expect During a Coaching Session?

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This podcast is 13 minutes 10 seconds long.

A transcript of the podcast is available in PDF download format here.