The Art of Execution

I noticed this very plan-as-you-go post by Guy Kawasaki on his blog. What I like about it, particularly, is where Guy says "set goals" and then lists these four desirable qualities of goals:

Measurable. If a goal isn't measurable, its unlikely you'll achieve it. For a startup, quantifiable goals are things like shipping deadlines, downloads, and sales volume. The old line "What gets measured gets done" is true. This also has ramifications for the number of goals, because you can't (and shouldn't) measure everything. Three to five goals measured on a weekly basis are plenty.

Achievable. Take your conservative forecasts for these goals and multiply them by 10 percent; then use that as your goal. For example, if you think you'll easily sell a million units in the first year, set your goal at 100,000 units. There is nothing more demoralizing than setting a conservative goal and falling short; instead take 10 percent of your forecast, make this your goal, and blow it away. You might think that such a practice will lead to underachieving organizations, because they aren't being challenged. Yeah, well, check back with me after you don't sell a million widgets.

Relevant. A good goal is relevant. If you're a software company, it's the number of downloads of your demo version. It's not your ranking in Alexa, so telling the company to focus on getting into the top 50,000 sites in the world in terms of traffic is not nearly as relevant as 10,000 downloads per month.

Rathole resistant. A goal can be measurable, achievable, and relevant and still send you down a rathole. Let's say you've created a content website. Your measurable, achievable, and relevant goal is to sign up 100,000 registered users in the first ninety days. So far, so good. But what if you focus on this body count without regard to the stickiness of the site? So now you've gotten 100,000 people to register, but they visit once and never return. That's a rathole. Ensure that your goal encompasses all the factors that will make your organization viable.

What I like about this, as you might guess, is that it's a very close match to what I'm saying here, in this site, and in the Plan-As You-Go Business Plan book itself. Goals are about business, getting things done, and they do you no good unless you follow up on results and manage accordingly.

Measure Your Business Plan Results

(Note: reposted here with permission from Entrepreneur.com, where it first appeared, as one of my columns in the Business Plan coaching area. Since it's so closely related to the plan-as-you-go approach, I'm reposting it here. Tim.)

Plans are wrong, but nonetheless vital. There's a paradox for you. It's a simple statement, one that I hope is somewhat surprising coming from a business planning expert; but it's still very important. And it gets right to the heart of what business planning is all about.

More than ever, those who plan look to projections that often miss the mark. Nobody I know, and in fact nobody I've even heard about, accurately predicted the sharp plunge in the economy last fall. So of course those who actually use a business planning process are implementing a lot of course corrections, reviews and revisions.

It's a great example of how this paradoxical statement -- plans are wrong, but nonetheless vital -- makes sense. As we look at the year to come, most of us are dialing down our forecasts. Does that mean we wasted our time making them? Not at all. How do we even make sense of where we are if we don't have a map that shows us how we got there?

If you had a plan earlier this year and results differed greatly from what was expected, I hope you're taking the time to compare those results, in detail, to the earlier plan. Look for where the differences were greatest. Look for where expenses were tied to sales. Look for the bright spots where sales held up. Look for how the numbers were supposed to come together, and not just how they didn't.

And if you didn't have a plan, then think of this as a good time to get a planning process started so you have a better view of your business in the future. Start making simple sales and expense projections. Don't worry that they're wrong; just make sure you go back each month and plot where and how and in which direction they were wrong so you can correct them.

You should only be wrong a month at a time, and as you use that plan-vs.-results analysis to look more closely at how things are going, you adjust again and improve results for the next time around. With each month, your grasp on reality gets better.

And then, as things go back up -- and they will -- you'll be able to use what you learned to see the signs, anticipate and act accordingly.

This kind of planning process is what's meant by the phrase, "The plan may be wrong, but planning is essential." Then there's another old military saying: "No battle plan ever survived the first encounter with the enemy." What does happen, though, with battle plans as well as business plans, is you don't know how to recover or how to adjust the plan if you didn't have a plan in the first place.

New Attitude Adjustment Video Summary

I've just finished a 12-minute online video (presentation, slides, with me talking) summary of Chapter 2, Attitude Adjustment. Click here for that ... it does require Flash Player and Java on your system, and the window has to be about 860 pixels wide to show the whole thing.

Why This Approach?

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Installing the Business Plan Pro Add-on

I've finished a nine-minute video showing you how to download and install the free add-on, available on this site, to implement a default plan-as-you-go business plan outline as an add-on to Business Plan Pro.

That video is available on YouTube.

This video shows you how to download the add-on, install it into Business Plan Pro, and then use it to create a plan-as-you-go plan. Then it shows you a bit about how to use that customized outline within the software.

The Secret Sauce

Where's my discussion of the secret sauce? Somebody asked me that a couple days ago, expecting it to be in this book. I was embarrassed. I talk about the secret sauce a lot, in my seminars and in my class, at the office. It's definitively another view of the same reality I'm calling the heart of the plan. So that's one thing to add for the next edition. Differentiate

The secret sauce is the magic, also called (boring) differentiators, and sometimes competitive edge; Guy Kawasaki calls it "underlying magic" and recommends that it be one of the 10 (or so) slides is a pitch presentation. You can google it and see how people are writing about it, using it to define what's new or different about some businesses. (You'll also see some items on McDonalds' secret sauce for the big mac, and some cooking stuff, but you'll see what I mean).

This idea of the secret sauce is a good way to explain how you're different from your competitors. What sets you apart?

Examples? Apple Computer's secret sauce is design, for example. Michelin tires' branding tries (in my opinion) to emulate Volve, the safety angle. My favorite restaurant in Eugene, Poppi's Anatolia, has an extremely spicy version of vindaloo chicken. Whole Foods' secret sauce is its having established the brand for healthy and organic foods. In cars, just look at the mini-cooper or the Honda Element or the Toyota Prius and you see secret sauce immediately.

Take the Brand Genie quiz now!

Plan as you Go and Business Plan Pro

This is a flash video, set for 800x600 dimensions, which will require that you install Flash on your system if you don't already have it. just click this link ... Planning as you go with Business Plan Pro ... it should open up a new window with a media player showing, and an obvious arrow to click.

The source file was set up at 800 x 600 resolution, so you might want to resize the window to show the resolution at its best. If the window you use to watch this is too big, then it looks fuzzy.

And here, below, is a flash player version of the same thing (I hope) ...

If this doesn't work for you, it might be a matter of Internet band width or compatibility with flash. I'd like to know, so leave me a comment and I'll get back to you.

The Book is Out

A tip of the hat to the team at Entrepreneur Press, because the book was barely finished in May and it's already available now -- July 25 as I write this, but it's been a couple of weeks.  You can order it now at amazon.com, it should be on the shelves at Barnes & Noble stores and is available online at the Barnes & Noble website.

Distribution

If your new business is going to distribute products in the U.S. retail market, that means what people call "the channel." Also known as channels of distribution, or retail channels. As in stores. Big stores or little stores. Macy's, Office Depot, Staples, Safeway, whatever. I see too many business plans that underestimate the effort, resources, and problems involved in selling things through channels.

So you know, my experience with channels started in 1993 and has been almost entirely in stores and chains selling packaged computer software. I've talked to a lot of people dealing in other kinds of channels, and it seems to be quite the same. So that's a disclaimer.

  1. Understand tiers. Most of the major retail channels in the U.S. involve two-tiered distribution.
  2. The big retailers, who tend to be chains with hundreds of stores, want to buy from distributors, not from you. No offense intended. It's just that buying from distributors makes their life simple. One bill, one payment, easier administration.
  3. Distributors are tough gatekeepers to get through. They aren't looking for new vendors. New vendors mean more work. And more risk. So they aren't anxious to change the status quo. Of course there are exceptions, but that's the rule.
  4. Retailers are also tough gatekeepers, for the same reason. There too, there are exceptions, but it's hard to be one.
  5. Both tiers are much happier about new products when they come from existing vendors. Those major companies that are already selling into the channel have it easier.
  6. Packaging is really important for everybody in the channel, and more so for new companies. Obviously this is a matter of different products and different industries, but through retail, buyers make choices based on what they see. We vendors would like them to read reviews and make more informed decisions, but most of the time they decide based on what they see.
  7. Channels take a big cut of your money. How much varies by industry, but if you are planning a new business and you don't know, find out. The distributors take a smaller cut but they take forever to pay you. The retailers take a larger cut, and they don't have to pay you, because they bought from the distributors. Both tiers take cuts of the money for co-marketing and things like that. You get a much smaller revenue per unit, and it comes several months after you make the sale.
  8. Most channels will insist on being able to send unsold goods back to you the vendor, and have you purchase them back from them at the same price they paid you, without any allowance for all the co-marketing commissions. This makes financial analysis hard.

One of the things I learned early and hard about channels. They don't care about your problems. If you're hard to deal with, they'll find somebody else to sell into the same segment.

So if you can sell direct, count your blessings. Channels offer volume, and branding, and that's attractive. But direct sales have some very attractive advantages too.

And in the context of developing the formal business plan, for outsiders to read, unless distribution is completely direct and painfully obvious you should include a discussion of distribution in the marketing section of your plan.

Explain how distribution works in your industry. Is this an industry in which retailers are supported by regional distributors, as is the case for computer products, magazines, or auto parts? Does this industry depend on direct sales to large company customers? Do manufacturers generally support their own direct sales forces, or do they work with product representatives?

Then explain how your specific distribution strategy works. There are almost always variations on the industry norm. In many product categories there are several alternatives, and distribution choices are strategic. Encyclopedias and vacuum cleaners were traditionally sold door-to-door but are now also sold in stores and direct from manufacturer to consumer through radio, television, newspaper, and of course Web ads.

Technology can change the patterns of distribution in an industry or product category. The Internet, for example, changed the options for software distribution, books, music, and other products. Look what it's done to video and video rental. Look what cable distribution is doing to video and video rental as well.

This topic may not apply to most service companies, because distribution is normally about physical distribution of specific physical products. If you are a restaurant owner, graphic artist, architect, or some other service that doesn't involve distribution, just leave this topic out of your plan.

For a few services, distribution may still be relevant. A phone service, cable provider, or Internet provider might describe distribution related to physical infrastructure. Some publishers may prefer to treat their business as a service rather than a manufacturing company, and in that case distribution may also be relevant.