I read close to 100 books every year. I only remember reading one book on business planning, and I enjoyed it. The title is How to Write a Great Business Plan by HBR (I think it’s out of print).
Business Plans Are Not Just for Startups
When I read this book, I thought, “This content is for well-established businesses.”
First, every business should be in continual planning mode as execution is imperfectly played out. Secondly, businesses with a flattening or declining sales or profit curve over the past 5-10 years desperately need to go through this exercise. This is where you can add value.
People, Opportunity, Context, and Risk/Reward
The author downplays projections in business plans. That’s no surprise since he grades business plans a 2 on a 1 to 10 scale to predict the firm’s success. Instead, he believes the business plan should emphasize:
- People – the team
- Opportunity – the size, growth, and attractiveness of the market
- Context – the external environment
- Risk/Reward – risk anticipation and how it will be tackled
Regarding the discussion on people and opportunity, the author gives the reader some great questions to consider–that’s worth the price of admission.
The People Questions
The book includes 14 people questions. There were 3 that piqued my interest.
What have they accomplished?
Remember, this article is a tool to augment your creative juices if your business has become a laggard due to declining profits or sales. I love this question because the biggest drag to growth and getting out of the doldrums is adding new blood. Do you need a new COO? Is the problem marketing or sales management?
Perhaps the other question is, what can the existing team accomplish in the future?
Are they prepared to recruit high-quality people?
This question naturally follows from the one above. I’ve worked as a CFO consultant since 2001. I’m still convinced that good and bad CEOs are weak at hiring great people. I know why. It’s because they get in a hurry and are willing to take shortcuts.
Make an effort to learn the art and science of hiring great people. If not, you risk continually hiring marginal staff members who may lack the ambition and commitment you seek.
How will they respond to adversity?
We need to change the verb tense on this question. Instead, how has the team responded to adversity? Or, how are they dealing with adversity now? What is your success rate in helping your team members deal with adversity?
The Opportunity Questions
The author included 9 excellent questions regarding the opportunity at hand.
In true Druckerian fashion, the author asks, “Who is the new venture’s customer?” That question needs to be addressed at least yearly. The natural follow-up questions are:
- What does the customer value?
- What do they consider a successful outcome from buying from the new or existing venture?
- What other choices does the customer have?
The questions also include topics on pricing, cost, production, logistics, customer support, and customer retention. He unwittingly includes questions that should be incorporated into every single financial model.
What I Dislike About Business Plans
We’re not all the same. Some of us need a template (like startup founders). Some of us need a blank sheet of paper, my preference in creating a business plan.
I dislike fill-in-the-blank business plan templates because they force the brain to go into automatic pilot. It’s like the business owner is going through the motions to get funding of some kind.
The business plan is not a predictor of the uncertain future. Instead, it’s a theory. That’s it. It’s a theory until it’s been tested. Accordingly, William Sahlman redirects our minds by causing us to focus on the questions and concepts that will help our businesses identify and address the risks that will attempt to block the rewards they are seeking.
By the way, the financial model is not a business plan. A financial model merely quantities the direction and primary aim of the person who has written a business plan.