“Someone is sitting in the shade today because someone planted a tree a long time ago.”
So said Warren Buffett, a man worth over $70 billion (that’s US dollars!) and CEO of Berkshire Hathaway. At 85 years old, he is a great example of keeping your eyes open, planning your options out and playing a long game.
Planning is one of those things that many of us know we probably should do, but because it deals with things a long way over the horizon, it’s easier to push it back and focus on the here and now.
And after you’ve been in business a while, it’s easy to convince yourself you know where things are headed, so you can justify not spending time on it – you work in the business everyday, you know what’s going on. By that logic, you’re helping your business and your interests are in the right place.
And the best way to do that is with a business plan.
Relax…we’re not talking about a 100 page document that will take as many days to produce and then be ignored.
Traditional business plans were long, textually and technically dense documents.
In recent years, there has been a shift to more concise and practical business plans that are built for execution without confusion. And if you’ve already done a Business Model Canvas and workshopped some KPIs for your business, you’re halfway there.
It’s important to note from the outset that no plan is ever truly perfect or completely accurate – most are educated guesses that allow for some adjustment – but exploring what could happen and plotting a course to get there certainly helps!
You’ll be amazed how much you benefit from preparing an actionable and measurable business plan for the current financial year and a high-level directional business plan the next 3 years.
To do this you’ll need:
- A business model canvas for how your business currently works
- 2 blank business model canvases
- Your current Key Performance Indicators
- A few spare hours with your key business partners to think and work without interruption
Creating a simple business plan
First, use one of the Business Model Canvas to map out how you see your business working in 3 years’ time. On the other canvas, refer to the 3 year canvas and sketch out how your business will work in 12 months’ time. Include a KPI or two for each of the canvas boxes so you’ll know if you’re progressing well.
These canvases will act as your true north as your business evolves.
At this point, you know what your ideal future looks like. Now, we need to plan how to get there.
The 3 Year Plan
The 3 Year Plan lets you set and maintain perspective and “zoom out” from your day to day operations. It’s the place where your vision for the future can really be mapped out. Big ticket projects with long time frames live here. Starting with the 3 Year Plan instead of the 1 Year Plan forces you to consider where you really want to take your business.
A lot of what will go into your 1 Year Plan flows down from your bigger business goals in the 3 Year Plan. It’s worth revisiting it at least every quarter to see how you’re tracking against the vision.
Examples of what you might find in a 3 Year Plan are:
- $9 million in sales
- build software to simplify client delivery
- Commercialise in-house technology
- Sell company to competitor
- List company
- Increase profitability by 30%
- diversify farming operation into distribution
The 1 Year Plan
The 1 Year Plan is your detailed, operations-focused plan. To create it, look at your 1 year canvas and consider:
- What do you need to do to achieve those outcomes?
- What changes need to be made to your business operations to get there?
- How about Sales and Marketing approaches?
- How will you fund the changes?
- If your new model has you doing something different or growing quickly, how will you let the market know what’s changed and why it matters to them?
- If you need to change how you do things – for example you want to charge more for services that are delivered faster than the standard delivery – what internal systems and processes will need to be refined or improved to cost-effectively deliver the service?
- What will your KPIs be doing through these activities?
All of these questions will lead to answers that will form your action plan for the next year. You may find it convenient to use the same business unit headings and attributions you use in your budgeting process, but the main objective is to split the “what and why” into actionable and relevant projects that are then broken down into tasks and combined with a way of measuring success – a due date or a volume etc – that can be used to report on the health of the project.
For example: Office Expansion
- Find new premises by 18 October
- Arrange Finance for new premises by 2 November
- Sign contract by 10 November
- Inform customers and suppliers by 12 December
- Move offices by 23 December
- Office opening party with local media invited 18 January
- Hire 4 more engineers and 2 assistants by 7 February
Using a simple spreadsheet and calendar to track key initiatives and dates will let you keep on top of your progress without getting lost in detail.
At the end of each year, redo both plans and update to see what’s changed. You’ll be surprised at (and proud of) the progress.
A clear business plan makes getting business loans simpler
When we work with a client going for a business loan, we make sure the plan can explain the market the business operates in, what it’s doing with the money it has and the money it’s asking for, why the time is now to do that, and the expected outcomes. That’s a funding-centric plan, but it forces you to remember that you’re running your business to make money, and ideally, a healthy and sustainable profit.
Plans are proof of vision
An up to date business plan is a great asset whenever you’re working with business partners, financiers, accountants, lawyers and potential investors, as it lets you tell a consistent, articulate story in a way that paints your company in the best light and shows you’re thinking ahead. As a tool for managing a team, it lets managers be confident but also encourages discussion around direction, and can actually lead to insightful feedback from all levels of the company. This “at the the coalface” feedback is instrumental in getting a real view of what’s possible given current people and resources.
A plan is only as useful as the person or people responsible for executing it and is in no way a guarantee of success. However, it does position your business for a healthy dose of reality and prepares you and your team for keeping an eye on the future, as well as the work in front of you today.
Are you a planner? What’s the biggest advantage you’ve gained from preparing a plan?