Makes a Good Plan
Illustration 1-1 shows a business plan as part of a process. You can think about the good or bad of a plan as the plan itself, measuring its value by its contents. There are some qualities in a plan that
make it more likely to create results, and these are important. However, it is even better to see the plan as part of the whole process of results, because even a great plan is wasted if nobody follows it.
The plan depends on the human elements around it, particularly the process of commitment and involvement, and the tracking and follow up that comes afterward. I’m going to deal with those elements in coming chapters of this book. They are vital. But for now, let’s look at the qualities that make the plan itself better or worse.
A business plan will be hard to implement unless it is simple, specific, realistic and complete. Even if it is all these things, a good plan will need someone to follow up and check on it.
Successful implementation starts with a good plan. There are elements that will make a plan more likely to be successfully implemented. Some of the clues to implementation include:
1. Is the plan simple? Is it easy to understand and to act on? Does it communicate its contents easily and practically?
2. Is the plan specific? Are its objectives concrete and measurable? Does it include specific actions and activities, each with specific dates of completion, specific persons responsible and specific budgets?
3. Is the plan realistic? Are the sales goals, expense budgets, and milestone dates realistic? Nothing stifles implementation like unrealistic goals.
4. Is the plan complete? Does it include all the necessary elements? Requirements of a business plan vary, depending on the context. There is no guarantee, however, that the plan will work if it doesn’t cover the main bases.
Use of Business Plans
Preparing a business plan is an organized, logical way to look at all of the important aspects of a business. First, decide what you will use the plan for, such as to: • Define and fix objectives, and programs to achieve those objectives.
• Create regular business review and course correction.
• Define a new business.
• Support a loan application.
• Define agreements between partners.
• Set a value on a business for sale or legal purposes.
• Evaluate a new product line, promotion, or expansion.
No Time to Plan? A Common Misconception
“Not enough time for a plan,” business people say. “I can’t plan. I’m too busy getting things done.”
Too many businesses make business plans only when they have to. Unless a bank or investors want to look at a business plan, there isn’t likely to be a plan written. The busier you are, the more you need to plan. If you are always putting out fires, you should build fire breaks or a sprinkler system. You can lose the whole forest for too much attention to the individual trees.
Keys to Better Business Plans
• Use a business plan to set concrete goals, responsibilities, and deadlines to guide your business.
• A good business plan assigns tasks to people or departments and sets milestones and deadlines for tracking implementation.
• A practical business plan includes 10 parts implementation for every one part strategy.
• As part of the implementation of a business plan, it should provide a forum for regular review and course corrections.
• Good business plans are practical.
Business Plan “Don’ts”
• Don’t use a business plan to show how much you know about your business.
• Nobody reads a long-winded business plan: not bankers, bosses, nor venture capitalists. Years ago, people were favorably impressed by long plans. Today, nobody is interested in a business plan more than 50 pages long.
A Business Plan Fable
Once upon a time there were three entrepreneurs who set out to seek their fortunes. Each of them developed a business plan.
The first business plan was built of straw. It was easy to complete, but it was mostly just puffery. For example, it had objectives like “being the best” and “excellence in customer satisfaction” without any way to measure results. It had a lot of talk, but few specifics. I’d almost say it was written like a sales or public relations piece, except that not even those can really afford to skip the hard facts.
The second business plan was built of sticks. It was built on what a venture capitalist I know calls “hockey stick” forecasts. You can probably guess what that means. I’ve seen a lot of them. Sales grow slowly in the past but the forecast shoots up boldly with huge growth rates, just as soon as something happens. Usually the something that is supposed to happen is investment, usually with other people’s money, and as soon as
this plan gets the money, then wonderful things will happen. As one of my favorite teenagers would say, rolling her eyes with eloquent sarcasm, “yeah, right,” and “oh, brother.”
The third business plan was built of bricks. You can see them in Illustration 1-1. Bricks are specifics, especially “ownership”, such as in specific job responsibilities, or specific people in charge of well-defined activities. Bricks are milestone dates, deadlines, budgets, and concrete, measurable objectives.
Then came the real world, as awesome as the big bad wolf in a similar fable. The real world was phone calls and daily routine. It was business problems and changes in economic environment, customers paying slower than expected, costs going up on one product, down on another. In business school they called it the RW, pronounced “are-dub.” I won’t say anything about huffing and puffing.
The real world blew the plan of straw apart in an instant. It was worthless, forgotten, lost somewhere in a drawer, never to be referred to again. Nobody remembered what it said. It was useless.
The real world blew the plan of sticks apart too, in an instant. Nobody had paid much attention anyhow, because the forecasts were so wildly optimistic. Nobody had been given responsibility, and nobody would have taken it. The plan was simply ignored. It was useless.
The plan of bricks, however, stood up to the real world. As each month closed, the plan of bricks absorbed planvs.-actual results. Managers looked at the variance. They made adjustments. Each manager kept track of milestones and budgets, and at the end of each month the actual results were compared to the plan results. Managers saw the performance of their peers. Changes were made in the plan—organized, rational changes—to accommodate changes in actual conditions. Managers were proud of their performance, and good performances were shared with all. And the company lived happily ever after.
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