Neil Tuckwell, an Australian consultant, pointed out that there’s still no consistency in business plan terms and approaches. “Business plan” means different things to big firms, to small firms, and to startups. Some industries (high tech, in particular) even argue against business plans and business planning.
So where does that leave us? Are business plans crap? Is business planning bull-oney?
It depends on the question we’re trying to answer
We business owners need to think about our businesses. A lot. How is it doing? Where is it going? How is it going to get there? This thinking is what business planning is all about.
And the planning approach we use depends on which of these 4 key questions we’re trying to answer:
1. Does what we’re doing make business sense?
This is the key question that startups need to answer as they work to discover their business model.
And not only startups. This is a good exercise for any of us to go through. Not only does it answer the question YES or NO, but it can highlight a weakness that needs to be shored up, or a strength that we can capitalize on.
What if we could tune up a little here, and polish a little there, and add 10% to our gross margin?
2. How do we (continue to) differentiate ourselves?
Business success rests on uniqueness in some way. Having a product nobody else has. Delivering a service that the competition can’t match. Having a secret process, a special sauce, a perfect location, an amazing marketing approach. Something that attracts customers, frustrates competitors, and strengthens margins.
And once we have this uniqueness, how do we keep it, strengthen it, protect it?
This question should be in the mind of every business owner. Healthy businesses work out the answer and place it at the center of everything they do.
Imagine having a better, higher-margin mousetrap that customers love buying!
3. How will we achieve our goals?
What projects and tasks do we need to do? Who’s going to do them? By when? How will we track our progress?
Business owners need to create direction and accountability. Structure and process. This is the essence of management, and fundamental to any medium- and long-term success.
These are the steps in our 1,000 mile journey of business ownership.
4. Can we afford to get there?
Ah, yes, better make sure not to run out of cash between here and there…
We know we need to create a cash flow projection for the banker when we’re seeking financing. But what about for ourselves? Isn’t it important to keep a close eye on our cash all the time?
Of course it is. And businesses that do, out-perform their peers by miles.
These four key questions determine what kind of “business planning” needs to be done. In my next post, let’s explore the four types of business planning that match these questions.
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