More on Why Business Plans Fail – financial planning -part three

In the two earlier postings on key causes for business plans to fail, we took note of the lack of a vigorous implementation process and poor understanding of the customer value proposition and market environments. 

A third significant cause is poor financial planning. Entrepreneurs fail to plan six basic financial elements: Continue reading

More on Why Business Plans Fail – part two – the connection to customers

In the preceding post about key causes for business plans to fail, we discussed the lack of a robust process to convert strategy into tactics, to convert the plans into the day-to-day work of the organization. This posting will take up another major failure mode. That is the failure to have a compelling customer perceived value proposition and the corollary failures to understand markets and customers more generally. Continue reading

The Most Significant Reason Business Plans Fail

The failure rate in bringing business plans to fruition is very high. Many observers, including me, have found a number of common failure modes. First among all are the shortcomings in the planning and execution processes themselves. The failure to actually put the plan into action

A good planning process engages all of the significant stakeholders in the creation of the plan. This practice is productive because 90% or more of the facts required to create the plan are sitting in the room when all of the stakeholders are there. Creating the plan through a team effort leverages this knowledge, provides opportunities for problems and opportunities to surface and be resolved, and the resulting plan is inherently owned by everyone because they were present and involved in its creation.

A good planning process insists on ruthlessly testing every assumption. It is a common practice to conduct sessions with no holds bared brainstorming and critiques. This is most essential when planning for a transformation strategy for a mature business. Business leaders find it extremely difficult to prune away the past even when it has no future. Past successes seductively appear to forecast future success.

By far the most significant cause of failure for business plans is the inability of the management to translate the plan effectively into day to day work. Most business plans fall far short of the detailed work required to decompose strategies into tactics. No where do the list of tasks, properly sequenced, appear with clear delineation of responsibility, authority, deliverables, budgets and resources and deadlines. And, finally, there is no clear communications and feedback plan so that those in frontline positions know what to do, why, when, and what are the expected results.

More about why business plans fail over the next four postings

Your Business Plan, Business Goals, & Tactics – Where Are Yours?

For most business plans the document is the end itself. It is such a commonplace of my practice to ask a business owner, or manager, “Do you have a business plan?”, only to have them look around in a bookcase, or in a pile of papers in the corner, in response.

A good business plan is the result of a process in which the management team comes to a common understanding of:

  • the business situation
  • the value the business provides to customers
  • strategies to achieve new business goals
  • obstacles to be overcome or avoided along the way,
  • tactics to bring the business goals to life – this includes who is responsible, resources assigned, timeline of tasks, and results expected
  • schedule of review meetings to measure results and take corrective actions

The plan also provides a common language about the business and a platform to communicate  business goals and values to everyone involved, employees, vendors, and customers.

So here we are at the key question:

If your business plan authentically identifies the business goals of your company, how can you put your management team into action to achieve that future as opposed to the future that will come willy-nilly and that almost inevitably is not the one you desire?

As Peter Drucker said about planning, “a plan is only deployed to the extent that it has devolved to day-to-day work”((1))

Making a  Business Plan Become Day-to-Day Work

This is where you the Owner, the CEO must take the lead. Otherwise the plan is just a plan and is not converted into action. If you have done a good job of establishing the tactics, the step by step actions required, you will know:

  1. who is responsible
  2. resources assigned
  3. desired results
  4. success metrics
  5. timetable for action
These five items characterize every tactical action. Good project management practices demand them. Without these five elements, the tactics are just a plan, a bit of wishful thinking, they are not in fact in action. You cannot achieve your business goals without taking these practical steps.

By tying your business plan to your existing financial reporting system and project management tools, you will be able to measure results directly. The review sessions are not designed to be dull reports, but opportunities to understand where the difficulties lie and where new opportunities pop up. A review session brings together the management team to work on the most important strategic activities of the firm.

Let’s wrap up.  

Your business plan is converted into action through the tactics identified in the plan. These are supported by active supervision and follow up by the Owner, the CEO. Only you can provide the impetus to sustain the management team over the long haul. Without your involvement the management team will fall back to day-to-day busyness and not spend the time required to drive the tactics to reach your business goals.

Footnotes:
  1. paraphrase from Drucker’s The Effective Executive: a definitive guide to getting the right things done (Harper Collins: New York, 2006) []

Why Should You Develop a Business Plan for Going Concern, How to Do It, and How Do You Convert the Plan Into Action?

Why Should You Develop a Business Plan?

For every startup the development of a business plan is a  required first step. It is so obvious – business schools have course on writing the business plan and it is impossible to get funding without one. Teams coalesce around the labor. So, every startup has a business plan.

For the going concern, the ones that are now three or so more years old, the business plan (also called strategic plan -really the same thing) is forgotten, only stumbled on when a move forces someone to pick it up and wonder, “Should I just relegate this to the dumpster?”

This is not a good situation. A business without a plan is like a boat sitting in a pond just waiting to sink to the bottom for nature to compost it. Or, if it has the fate to be afloat in a stream, it will be carried along willy-nilly until it bumps into a stone or dead branch or reaches the ocean where nature will also send it to the big composter.

Every business exists in a world that is changing and filled with opportunities and threats. Your business plan is your set of oars to provide the means to pull in the direction you want to go in, to avoid the rocks. You might even row to shore and portage around the falls, to move to an entirely new river.

But, many people, even accepting the wisdom of having a plan, find it a painful exercise, all too easily avoided. This may be driven by the idea that a business plan involves dozens of pages of writing, lots of spreadsheets with numbers they really don’t believe (sometimes don’t understand). Business plans, strategic plans, these are just the exercises one does in business schools. Or it may be the folk wisdom that business plans are not a useful part of managing and they always end up on the shelf or hidden in a file cabinet only dusted off for display when in search of a bank loan.

However, shift your thinking to view the process of building a plan as a value in and of itself, and adopt a simpler more flexible business plan model you will find that building that set of oars for your little boat is fun and productive. Continue reading

Podcast – Why and How to Develop a Business Plan for an Ongoing Firm

Why you need a business plan and how to develop one that leads to action not the dust bin.

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This podcast is 13 minutes 10 seconds long.

A transcript of the podcast is available in PDF download format here.