To Plan or Not to Plan

That’s not really a question

Many entrepreneurs we’ve met are either too busy to plan or think the plan will create too many constraints for their entrepreneurial spirit. Yet, most entrepreneurs and business owners who actually do prepare a plan are surprised at the success achieved because everyone is focused on a common goal and direction. But how do you do this without getting all tangled up in bureaucratic planning process?

Building a house with an architect to draw the plans, and a carpenter to construct the house, is analogous. The architect will provide proactive advice and ask questions that you never even thought of in regard to design, functionality, energy efficiency and new ideas. The carpenter, as skilled trades persons and important parts of the process, will follow the plan and make adjustments along the way. However, the roles of planning and doing are very different.

For the entrepreneur, here are the guidelines:

Key Points for Planning for Success

  1. The marketing plan – the most important plan
  2. Capacity – getting it done
  3. Planning for talent – organizational charts or horoscopes
  4. The financial plan – scorecard or rocket fuel
  5. Life balance plan

Planning for success

“What got you here,” according to Marshall Goldsmith, “won’t get you there.” Our successful clients have taken many steps, some forwards, some backwards, to build their businesses. A plan helps you to hurdle past the incremental steps and take the helicopter to the top of the mountain.

How would you structure your business if you knew you were going to be five or ten times larger? The best advice my mentor, Alan Weiss, gave me is to “be prepared for success.” That expectation creates a much better basis for planning and thinking big. Here are the major plans to manage and grow most any business.

1. The marketing plan

Marketing creates awareness about your products and services for key constituents. At least, that’s what business schools preach. Marketing, really, educates your customers and prospects about the phenomenal value you provide that extends far beyond the goods or service purchased. What you (often unconsciously) do probably generates an ongoing ROI for your customers that would make you giddy and give you the courage to raise your prices!

The key to your marketing plan is to understand your value. Value is how you improve your customers’ performance and position. There are tangible benefits such as speed, quality, cost, repute, and competitive position. And there are intangible benefits such as less stress, more pride, increased brand awareness, more referrals, decreased price sensitivity and increased loyalty among both your employees and your customers.

Let’s use an accountant as an example. Since most or all of you have dealt with accountants, you will have a great frame of reference. First, what does your accountant do for you? Mine prepares annual financial statements and personal and corporate tax returns. What is the value of these? Is it worth $250 per hour?

The value of financial statements is in knowing my total business performance and position on an annual basis, even though I measure it more often that that. It’s like the annual physical with your doctor, a check up to ensure everything is still healthy. My bankers, advisors, shareholders and board are all more confident in my abilities when I give them a set of financial statements that are prepared quickly and show positive results. Does you accountant promote confidence and control as benefits of their services?

The tax returns give me comfort that I won’t have any tax problems in the future. If I do have an audit, I know everything is squeaky clean and the process will be fast and relatively painless. Does your accountant promote sleeping better at night as a value of their service?

If you can create significant emotional and business value from a few pieces of paper at your accountant’s office, what kind of value do you provide for your customers?

Your marketing plan can include these key points (and still fit on one page!):

  • Clearly articulates your value to your customers.
  • Provides multiple strategies and tactics to increasing your credibility and reach.
  • Leverages existing customers and their successes via testimonials and case studies.
  • Is focused on driving tangible results for your clients and customers.
  • Provides pricing options so your customers have a choice and can control their investment.
  • Includes metrics to evaluate the effectiveness of key activities and the long-term ROI for your customers.

2. Capacity – are you controlling operations or are they controlling you?

If you want to grow your business (and your life), then you need excess capacity in time, people, and money so that you can increase your speed and “talent inventory.” The fastest way to increase your capacity is to fine-tune what you already have: your people, operations, equipment and facility.

Since most of us have cars and have them serviced once in a while, let’s look at a car repair shop. If I book my car in for 8:00 a.m. but don’t make it in until “around” 9:00, what did the mechanic do for the first hour? How do you track customer induced slack? The mechanics shop has a certain number of mechanics, who typically work eight hours a day, and, who charge for the work they get done on your car.

The shop can measure hours worked, hours billed, dollars collected, write-downs for work that took too long, rework for something that was previously fixed before or warranty repairs. The metrics can compare technicians and identify strengths and strong producers. Studying the best performers and sharing their practices can enhance results faster than disciplining the poor performers. Being taught or mentored by an expert is more fun than being whacked with a stick.

Capacity is usually one of the easiest things to measure in a business—how much work did we get done today—but one of the least tracked. That’s too bad. Nothing improves performance faster than just paying attention to the numbers and what happens.

3. Planning for Talent

Succession planning for owner-managed businesses involves two steps: ownership and management. And, too many owners try to do both at the same time, with disastrous results. Ownership and management are two fundamentally different roles and entrepreneurs who deal with them separately are more successful on both fronts. We call this the “succession two-step” and we’ll discuss how to plan for management talent.

First, create an organizational chart for your business as it is today, and then what it would look like in three or five years. The most successful entrepreneurs we’ve seen have fired themselves and built management teams within the company. This isn’t easy, and even the mighty Apple is struggling to fill Steve Jobs’s shoes for long-term management succession.

Most people want to get promoted and are looking up the ladder. Ironically, if they spend time focusing on the steps below them and developing their replacement, they will be promoted faster. Who are the second-in-commands in your business? How are you using career planning to strengthen your management bench?

Fortunately, small and medium enterprises (SMEs) have an advantage over larger companies because SMEs can provide a broader experience in all parts of the company and create more well-rounded managers. In large companies, the key people from marketing or operations aren’t going to spend much time in finance and probably don’t want to spend any time in human resources.

4. The Financial Plan

The best businesses have billions in the bank: Apple, FedEx, even Toyota, despite its warranty issues. Cash comes from margin (profit per transaction) and volume. It’s that simple. A financial plan is designed to create more cash. Often we’ve seen entrepreneurs get sidetracked by minimizing taxes or pursuing complex structures that defer this or that. The focus needs to be on cash.

A financial plan is much more than your financial statements and budgets. Most entrepreneurs we’ve met run their business from their income statement, to create revenues and, one hopes, have profits left over. Yet most bankers and investors evaluate business using the balance sheet to determine the strength and resources of a business. The fastest growing, most profitable businesses we’ve worked with do both to create cash.

A good accounting department will make you money, every time, guaranteed, because they will be generating fast, accurate information to help your managers make better decisions. That’s the best case scenario – using live metrics and key performance indicators to measure and predict your progress in real-time. The worst use of a plan is to aim strictly for the plan, achieve it, or come up with excuses, or even hold back efforts once you’ve achieved the plan. I think it’s called padding the budget. I don’t know any entrepreneurs who would want their people holding anything back.

It’s like a playoff game in football. You don’t want your players saving themselves for the next game because there might not be a next game. Yet big companies do this all the time, and tie compensation to achieving budgets. Big companies, especially publicly traded companies, want to be able to predict earnings and positively influence their share price. Entrepreneurs, on the other hand, want to make as much money as possible.

Since cash is like rocket fuel, you need enough to get into orbit where you can then pop open the solar panels and create ongoing fuel from your position and momentum. How much fuel do you have and how much do you need to get you into orbit?

5. Life balance plan

Perhaps this plan should be the first plan or the only plan.

Alan Weiss, who I mentioned above, is an expert in life balance and defines wealth as discretionary time. Having the cash to have fun with your time wouldn’t hurt, but most things don’t really take much cash. So, how much time would you like to have in your life?

According to Dr. Weiss, we only have one life…not a professional life and a business life, but one life….

Entrepreneurs, I’ve heard, only work half-time—they work any twelve hours of the day they want. Unfortunately, this is too true. Since small and medium businesses make up almost half of the economy in North America, having entrepreneurs who are healthy, happy and creative is critical to their—and our—standards of living.

Copyright Phil Symchych 2010. All Rights Reserved.