Attitude Adjustment

The plan-as-you-go business plan is not your formal, traditional business plan. You don't fill in a checklist or cover all the bases as defined by some recipe somewhere. It's about planning and running a business in the real world, this millennium, whether you are going to show some big plan document to somebody else or not. This chapter covers the attitude adjustment involved in this new approach to planning. The following table outlines the main sections of this chapter.

Start Anywhere. Get going.
Start with concepts, start with numbers, start with whatever suits you. It doesn't matter. Do something today that you can use tomorrow.

Form Follows Function
Your plan is not necessarily a document. It's what's going to happen. Think it, speak it, write it out simply in bullets, or use pictures. No extra struggle. Use what you need.

Let It Evolve Organically, as You Need It To
Do what you can use now, then use it, and then you can grow it over time as you need to. When a business plan event happens and you need to show it to somebody outside your company, then you add to it and make it more formal.

Fundamental Management
It's not just a plan, it's your business. You should use the planning process to manage better, achieve your goals, work proactively instead of reactively.

Mixing Numbers and Words:
Use only what you need. Keep it simple.

Inside Out from the Heart
A good plan is like an artichoke, with the core strategy in the middle and the rest of the plan -- what's going to happen, when, how, and so on -- surrounding it.

Separate Supporting Information from the Plan
One of the big wins with the plan-as-you-go business plan is that if you aren't going to use the complete market analysis, industry analysis, and the rest of the supporting information, you don't formally develop them.

Planning Not Accounting
Although your business plan projections look a lot like accounting statements, they aren’t. Where accounting goes into minute detail, planning needs summary andaggregation. They are educated guesses, not tax reports. You should approach them with flexibility and an understanding of how much uncertainty is involved.

It Has to Be Your Plan
You don't need just a business plan, written by anybody. You need to know your own plan, inside and out, with all the details. The core should be your own thinking. Use consultants wisely or not at all.

Control Your Destiny
One of the most important wins you get from good planning is controlling your own destiny in business. You set your future goals and steps to achieve them. While people think you have to have a plan to show somebody else, you want a plan as a tool to manage your own business future.

Filter Ideas from Opportunities

Tips and trapsBusiness ideas are interesting, exciting stuff to build a business by, but they are worth nothing (in general) until somebody builds a company around them.

Opportunities are the best of the ideas. An idea is just that. An opportunity is an idea you can implement. You have the resources, and know-how to do it. There is a market. You can make money on it, and the investment will be worth it.

Good business planning filters the opportunities from the ideas. Apply the planning process to the idea to make it an opportunity. Determine the market strength, what exactly is needed, how long it will take, how much money it will take, what people are required. Lay it out into steps.

Not all ideas can survive the rigor of planning. Some fall by the wayside, ending up as interesting ideas that aren't really opportunities.

Some of the factors that count:

  • Risk vs. return. Is what it takes to pursue this idea worth the likely return? This is not scientific. It depends a lot on your business' attitude about risk, and what other opportunities are available.
  • Realism. How realistic are the forecasts? Give them a good look. Are you pushing the forecast to make things work.
  • Resources. What will really be required? Think of people, know-how, skills, compensation, implied risk (paying people to build this company up). What are the start-up costs, including expenses required and assets required?
  • Market potential. The heart of your sales forecast is the market potential. How much do people want or need the business offering?
  • Business potential. How much money can the business make? How will this impact the business? How big is this opportunity, overall?

My Worst-Ever Business Plan Engagement

It's not for nothing that I always say a business plan has to be your plan and nobody else's. It can't be your consultant's plan. You must know it backward and forward and inside out, or it won't work.

I learned this the hard way, sitting in venture capital offices at 300 Sand Hill Drive, Menlo Park, California, the business plan consultant on the tail end of the new venture team. I had done the plan, built the financial model, written the text, shepherded the document through the painful coil binding and the whole thing, but I wasn't part of the team. I didn't want to be. I was still at grad school, getting my MBA, and my part of this venture was writing the plan, period. I needed the money to pay tuition.

In meeting after meeting, at key moments, the venture capitalists would ask critical questions and all heads would turn to me. I would answer. I knew the plan, backward, forward, and inside out, but I was the only one who did. It was my plan. iStock_000000316874Small

It was a good founders team. It included three Silicon Valley veterans -- a marketing guy, a technical guy, and a deal maker. They had about 40 years of computer company experience between them. They had a good idea and, much more important, a market window, differentiation, and experience to make it happen.

The three of them never really got into the plan. It was a hurdle they paid me to jump for them. Every meeting generated new changes, so I would go back to the basement computer at the business school, and rerun the financial model. The team of three didn't include a financial person to learn and manage the model, so it was always me doing the tweaking, which meant I was the only one who knew the plan. I'd rerun my financial model, edit the text, and publish a new version of the plan. They read paragraphs here and there, glanced at the numbers, but they stayed with the strategy, and left the details to me.

Details that, in fact, they didn't look at. They trusted my faithful recording of their ideas and my financial modeling. They assumed, I guessed at the time, that these were functions that could always be delegated to somebody with special skills while they generated high-level strategy.

They did not get financed. I was disappointed. When you develop the plan and revise it dozens of times and support it and defend it through the long series of meetings with supposedly interested investors, you want it to take flight.

All these years later, memory of that disappointment is still fresh. I did learn my lesson, though, and I changed my strategy as a business plan consultant. From then on I made sure that any plan I worked on belonged -- and I'm talking about intellectual ownership here, conceptual ownership -- to the business owners, not the consultant.

If you have the luxury of a budget to pay an outside expert, consultant, or business plan writer, then maybe you should use one. This might be a good use of division of labor, and perhaps you can lever off somebody else's experience and expertise. However, that will not work for you unless you always remember that it has to be your plan, not the consultant's plan. Know everything in it, backward and forward, and inside out.

Adapted with permission from Planning Startups Stories. All rights reserved

Form Follows Function

Your plan-as-you-go business plan is no more than what you need to run your business. In the beginning, it might be as simple as an elevator speech, as explained in Chapter 5. Be able to talk through those key points: the customer story, what makes you unique, how you're focusing and on what you're focusing, and, if it comes to that, your close -- what you want from whoever is listening.

Or it might be a simple sales forecast, and perhaps, a burn rate in the very beginning because you know what you're doing -- maybe you've been doing it for years already and you don't need to verbalize it right at this moment -- and you'll set those figures down and start tracking them.

Planning comes in many forms. Think of it as analogous to motion in athletics. In so many different sports, the winners practice economy of motion, repeated muscle memory. Another way to look at it: in design and mechanics, the fewer moving parts, the better. If you have to squint conceptually to see the key points, squint down on the elements you'll be able to track and then revisit.

It's not about the text, or the form of the thing, until that becomes related to the function. When you're doing a business plan as part of a graduate business school class, then yes, it has to be complete and look good and read well; editing and format matter. When you're doing a plan for an investment group that is going to pass it around among the partners, then it matters. But you don't want to get bogged down in format when it's just you and your spouse and you simply want to think through what's required.

So the plan is a collection of concepts in the middle, surrounded by specifics that have to be done. Around the core you put a collection of metrics to be measured and tracked (lots of them are sales, expenses, and the like, but not all), task assignments and responsibilities for different people, dates and deadlines, budgets, and so on. That's your plan.

From that core plan, you spin off various outputs. You take the highest highlights of the plan and 60 seconds or so to explain it in an elevator speech. That's one output. Or you write it all out carefully, and add supporting information about the market and the industry and the backgrounds of the management team, and it's a plan document. Or you create a 20-minute 10-slide summary with PowerPoint or Keynote slides, and that's a pitch presentation for potential investors. Or you create a cover letter or cover e-mail, about a page or so, along with a 5- to 10-page written summary, and that's a summary memo. Or you do none of these, you simply keep that plan as a collection of bullet points, of picture financial projections, and a list of things to be done by whom and when and for how much money, and share it with your team. In that last case you don't ever edit or polish it, or sweat the page headers and page footers or font size. You just use it to manage your company,

Notice that none of these outputs stands as something you do instead of the plan. And none of these outputs is really the plan. The plan exists at the core, and you create the outputs as needed.

With all of these various iterations and outputs, always keep assumptions on top, where you can see them for every review meeting. Minding the changing assumptions is one of the significant advantages of the plan-as-you-go approach over the more traditional methods.

I ran a business for years during which the plan was shared only between me and my wife, mostly, enhanced by sales forecasts and burn rate. During those formative years there was no need for anything else. When it was time for an elevator speech, either one of us could do it. When there was need for a written business plan -- it came up first when we first set up the merchant account to be able to accept credit cards, in 1988 -- then we settled down for a while and wrote it out as it was, conceptually, at that time. We always knew what we wanted to do, but we also knew our key assumptions, and we tracked them as they changed, and revised the plan. A lot of that was verbal, between two people.

As the business grew, the verbal plan with the forecast stopped working. Things became more complicated. Employees needed to know about the plan and join in its formation and then its implementation. So we moved it into bullet points on the computer, and tied those to forecasts, and began tracking in a group, in more detail.

We then began to do annual plans more formally, writing out chapters, and conducting review meetings every month. With each annual plan we'd go out and take a new fresh look at the market. We had people doing nothing but marketing, and they developed segmentations and forecasts and supporting information. It was part of their job.

Are you recognizing yourself somewhere along this line?

Eventually we wanted to bring in outside investment. That was during the dotcom boom when valuations were very high, so we thought it would be a good time to lock in the value with some cash out. We produced very formal plans every three months during that period.

The speech isn't instead of the plan, and the pitch isn't instead of the plan, but that doesn't mean you plan or don't plan if nobody outside your company is going to read about it. Your plan should always be there as the source of these outputs, so you're ready to produce them when you need to.

A Military Exercise

In chapter four of his book Blink, Malcolm Gladwell describes how Paul Van Riper, a retired Marine commander, drove the U.S. military to fits in a war exercise called "Millennium Challenge." It's a brilliant argument for the plan-as-you-go idea compared with the traditional plan method.

The Millennium Challenge was an exercise designed to test the military's ability to deal with a simulated war in the Middle East. It pitted a very large team (Blue Team) equipped with a very detailed battle plan, a lot of computer models and simulations, against a very small team (Red Team) led by Van Riper, experienced and self confident and good at making quick decisions.

"Blue Team had their databases and matrixes and methodologies for systematically understanding the intentions of the enemy. Red Team was commanded by a man who looked at a long-haired, unkempt, seat-of-the-pants commodities trader yelling and pushing and making a thousand instant decisions an hour and saw in him a soul mate."

As you've already guessed, Blue Team is the might of the military, and Red Team is essentially one smart guy who starts with a plan and revises it constantly as the battle ensues.

When the game was actually played, Van Riper surprised the Blue Team quickly with a move not in its plans, and as they reacted to that, he surprised them again, and quickly caused considerable unexpected damage to a much larger force. It was all simulated and hypothetical, but the result was that the quick-to-react team with flexible planning beat the pants off the very detailed plan team that couldn't react to changes.

"Had Millennium Challenge been a real war instead of just an exercise, 20,000 American servicemen and women would have been killed before their own army had even fired a shot."

That was pretty hard for the military to explain. They analyzed it a lot.

"There were numerous explanations from the analysts at JFCOM (Joint Forces Command Center) about exactly what happened that day in July. Some would say that it was an artifact of the particular way war games are run. Others would say that in real life, the ships would never have been as vulnerable as they were in the game. But none of the explanations change the fact that Blue Team suffered a catastrophic failure. The rogue commander did what rogue commanders do. He fought back, yet somehow this fact caught Blue Team by surprise."

Implicitly, the problem was the big team full of computers and data trusted a static plan, while the other team didn't.

Red Team's powers of rapid cognition were intact—and Blue Team's were not.

So relate that to the planning we want: planning that responds to rapidly changing reality. Not just "Duh, I can't plan, I don't know the future," and not just "Why plan? Why bother" and not "We have to follow the plan," but planning as you go.

Let It Evolve Organically, As You Need It To

You see in lots of places (including later in this book, in Chapter 5) recommended outlines for business plans. With the plan-as-you-go plan, in contrast to the more weighty and ominous outlines, you're probably going to start simple. For example, see the outline here:

You could jump right now to Chapter 3 to see what I mean by the core strategy, or to Chapter 4 for details about the action plan and financial plan. If you don't jump, then just take my word for it: these can be very simple pieces. I do recommend that you write them down or record them somehow, but keep it simple. Bullet points are probably enough, maybe some pictures for slides, and even just an elevator speech.

As your business planning evolves, you'll add pieces to fit the needs. Eventually, when you have a business plan event, you may find it useful to fill in a lot of information intended mainly for outsiders, such as the market analysis, industry analysis, detailed financial analysis, and descriptions of the company, the management team, and so on. But don't think you don't have a plan just because you start simply, with what you really need.

It’s Not One Size Fits All

MythbustersIt's amazing how long business experts, teachers, coaches, and advisors have swallowed and even spread the idea that a business plan is some sort of standard document, a predictable standard task with a generally accepted set of parameters to define it.

It just isn't so. Like so many other things in business, the business planning should be appropriate to the needs of the business.

Just about every business needs to build and understand its heart, that core element of strategy that's about what you're doing for whom, and who you are and what you want to do.

Beyond that, every business ought to be able to set down some tracks it can then follow and manage, watching progress towards goals. The sales forecast is the most obvious set of tracks. Milestones, like who does what, when, and for how much, are almost always useful. And don't forget the burn rate.

This isn't necessarily written down carefully into a formal text. It might be just bullet points, or even pictures; it might even be something you say in a 60-second elevator speech.

And as your company grows, you can grow your plan and your planning. Grow it like an artichoke grows, with leaves -- more details, more specifics, more description -- surrounding the heart.

Or, if you're starting your company with a plan for investment or business loans, or if your company is already there and already plans and you want to grow it, then you might go all the way to the more complete formal plan.

What's important is that you do the planning you need, to run your business better. Not the one-size-fits-all plan, but the just-big-enough plan to give you better planning and management without wasting any time or effort on documentation you won't use.

Fundamental Management

Planning should become management and better business, long-term progress towards goals, prioritizing, and focus; but you have to do it. It's up to you to make your planning work. It's not really about the plan, per se; it's about the discipline to use the plan to run the business.

If you think I am pushing too hard on this, fee free to jump into the planning at any time by skipping ahead to another chapter.

The plan-as-you-go business plan normally grows organically; it evolves as your business evolves. With monthly review schedules and performance tracking, your planning, unlike the classic plan document, stays alive and present -- on top of your mind where you consider it regularly.

For that to work, you have to keep assumptions at the forefront. You have to develop accountability by setting goals, usually with metrics, and then following up on performance with people.

Keep the plan visible, to all team members, using the review meetings if nothing else. Ideally, key points, numbers, metrics, and assumptions are somewhere that team members can see them.

People become involved with the plan and committed to the plan. You can't really have people believing in the planning goals if they don't participate. Goals have to be credible and realistic. People who are charged with implementing the plan need to be involved in developing and managing the plan.

What we have here is a problem somewhat like healthy diet and regular exercise. Pretty much everybody agrees that those are good things, but not everybody actually eats well and exercises regularly. So too with good planning process. Knowing what to do doesn't mean you'll do it.

Hint: Set the review schedule ahead of time and invite the team members. Show the metrics. Suggest some key agenda points that you garner from the milestones. People need to believe in accountability for accountability to work.

I talk about this more in Chapter 6, Planning Process.