Investment

What Is The Purpose of A Business Plan?

March 22, 2018 By kwmccarthy

Writing a business plan?

It is hard to argue against the idea of writing a business plan, yet experience tells me very few business owners actually write one.

Wrong choice! In this fast-paced dynamic business environment, a business purpose and plan have never been more needed. They’re essential to decisions and growth regardless of the business size.

The problem isn’t with the business plan, per se; it is the speed of the person creating the business plan which makes it irrelevant to the business. Most business owners aren’t skilled as business plan writers so their mythologies and misgivings are often unfounded in reality. Speed comes with experience and practice.

Too many times, I’ve heard business owners lament that they don’t have time to do a business plan. Hint: maybe the reason they don’t have time is because they’re not working from a plan. That’s more a comment about their limited skills, experience, and understanding or unwillingness to get help.

60-Minute or Less Simple Planning Method

Consider the old adage, “If you have only a day to cut down a tree with an ax, then invest time sharpening the ax before you begin.” Let me add: Continue to check and sharpen it throughout the day. A business plan is a sharp ax that you can take to the forest of business challenges you face and make progress faster, more affordable, and with less energy … sounds like profits to me!

Pull out a blank sheet of paper, go to a whiteboard or flip chart, or open an electronic file to capture your thoughts. Do the brain dump! Then sort it out into a more coherent and logical flow of actions steps. Assign people and dates and you’re ready to go!

A simple idea-clarifying informal business plan can often be done in less than 60 minutes. Practice the following method on smaller projects where the risk, scale, and scope aren’t so large. Practice the process on less demanding content and matters and you’ll be preparing for writing the business plan for the entire business.

Who Are You Fooling?

I’ve even been told by business owners, “A business plan isn’t relevant to my business.” There may be a good reason why business planning is often put aside, but dismissing it as irrelevant is risky business. While creating a business plan is something every entrepreneur or CEO is wise to do, they often don’t. It is a unique skill set that they don’t invest time in learning how to do. In their minds, it seems to be an exercise for the academics and not for people of action.

Reconsider what the pros do.

For example, your favorite NFL team has a plan for the franchise, the season, and a game plan and playbook going into every game for every week of the season for as long as they’re winning into the post-season. They’re professionals who have learned to crank out a “business plan” for every week. To get the results they seek they don’t have an option. Even then, games will be lost. Lessons learned and personnel trained to improve.

Action, even well-intended actions, without a purpose and a plan incrementally lower the trajectory of achievement.

Business planning, hey, it’s optional. That’s a dangerous mindset fraught with avoidable pitfalls. Running by the seat of one’s pants can become a way of life and business. Could this be part of the explanation why the failure rate of small businesses is so high?

Candidly, if taxes didn’t have to be paid, I wonder how many small business owners would have a financial and accounting system in place! Because the IRS likes to be paid and has means of enforcement to be paid, bookkeeping and accounting are done because outside consequences exist. Because business planning is “optional,” it is too easy to not get it done.

So what is the purpose of a business plan?

It helps to know that there are three broad types of business plans:

Financing business plans are done to obtain financing from either investors or lenders. These business plans tend to be formal and time consuming because of the scrutiny of due diligence. Most business planning software leans in this direction.
Functional business plans are more operational or oriented towards helping team members get on the same page to move the business forward. These blueprints for the business are informative and best used for internal use, direction, and communication.
Strategic business plans are very useful, for example, for taking your business ideas and transforming them into a business model. These can be very informal—notes on a yellow pad or napkin—to PowerPoint presentations to more formally written documents.

Audience Matters

Who is going to be reading your business plan and why? Your need for a business plan really depends upon the audience for whom it is written.

Financing business plans are targeted toward outsiders to attract investment.
Functional business plans involve engaging the team. There is a certain amount of assumed inside knowledge.
Strategic plans are best written for the leader of the plan to gain insight and clarity. This enables the entrepreneur to capture thoughts and sort the various elements of a business into an orderly approach.

Each of these business plans has common elements that you’ll find layered in The Service Model™ (see graphic) from The On-Purpose Business Person.

Creating a business plan is something every entrepreneur should do, but you need to know why you are writing the business plan and the audience.

I’ve seen far too many start-up organizations buy business planning software and invest months writing it. The process of doing their market research, developing cash flow statements, defining their organizational chart, etc. is useful, but is the marginal return on investment worth it? Sometimes you just need to get started and prove your concept in order to improve your business model.

Practically, it is rarely as valuable as the benefit of having a simple business plan and getting started. There’s nothing quite like opening the doors on a small scale and learning from the market. This said, if you have only one part of a business plan to get right—put together your business marketing plan.

Planning is not about perfection.

Rather it is about anticipating pitfalls and avoiding them, as well as leveraging opportunities to the max. Plans are meant to save us time, money, and energy. Always consider the ROI (return on investment) for your planning process.

Over the years, I’ve told my clients to use this ratio when business planning: 1% planning:99% execution. Rinse and repeat!

On-Purpose Business Tip: The Service Model from The On-Purpose Business Person provides a simple business plan template to provoke thoughtful inquiry and usefulness.

How to Make Money?

January 14, 2016 By kwmccarthy

Regardless of whether you have a job or own a business, today’s On-Purpose Business Minute invites you to explore three aspects of what it takes to make money and make even more money.

Do you have the mindset, the multiplier and the mechanism in place to make money?

For most people, how much money they want to make isn’t the challenge … it is making that amount of money that presents the real issue. So let’s revisit this classic On-Purpose Business Minute and explore some simple elements to making money.

Study the people who made or make big money — Sam Walton, Warren Buffet, Donald Trump, Bill Gates, Stephen Jobs, or whomever comes to mind — and you’ll find the three essential M’s are present and to the creation of their wealth in a socially responsible manner and in a way that is meaningful to each person.

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Do you have a favorite quote about money and wealth? Share it in the comments section. Here are some that I found valuable.

Abundance consists not alone in material possessions, but in an uncovetous spirit.

Charles M. Sheldon

Those who condemn wealth are those who have none and see no chance of getting any.

William Penn Patrick

That some should be rich, shows that others may become rich; and is hence just encouragement to industry and enterprise.

Abraham Lincoln

Click here to receive an email when I post new On-Purpose Business Minutes.

Why Do I Need to Align & Integrate My Business?

December 10, 2015 By kwmccarthy

Within our business advisory firm, the single greatest “request” we get is about sales growth or income generation. There are lots of quick-fix remedies to tweak sales. There are marketing strategies, too, that can position the business for improved selling opportunities. Business strategy examples can only take you so far. Be specific. Worse, you’re selling your business short of specificity when you copy what others do. Your business is unique, so the business strategy and model need to capture that.

What you need is a universal tool to address your unique needs — that’s The Service Model (below). Here you have both a tool to create and build business strategy as well as analyze and improve what exists. Regardless of whether you are the CEO of a major corporation or a commissioned salesperson with a territory, you have a Service Model by either default or by design.

At On-Purpose Partners we help our clients assess the underlying strategies, structures, and systems — the foundations of an organization found at the bottom of the Service Model (Purpose and Plan). Slight misdirection here only gets amplified throughout every line item on the P&L and the corporate culture through the People, Processes, and Performance.

Service Model 1-page worksheet & instructions

Most clients call because they have a “Performance” level problem — such as not enough revenue. So they’ll do the quick fixes to performance or dig a bit deeper into the Process area (Marketing). Or, they’ll gin up the sales team with incentives to meet current objectives at the risk of sustaining the relationship.

In other words, they start where the problem appears and try to fix it there. There’s merit to this, but if there are persistent problems, then this doesn’t address the root cause. In fact, it tends to create a frenzy of latest gimmicks. It becomes almost addicting activity.

Addressing Process matters such as Marketing or Training looks at systems for solutions. This is a smart move because if the system has flaws then the Performance will suffer. I’ll venture a guess that 98% of most consulting work is hired in the Process and Performance level.

The challenge, however, is that the Purpose, Plan, and People levels are too often neglected or assumed to be properly working. Here’s why. The responsibility for these levels falls to the leadership and management of the organization. It is hard to self-assess. Much like a fish doesn’t realize it is swimming in water until it is out of the water, leaders and managers rarely have the perspective to see their own context.

What To Do:

Define your Target Audience (Customer). Then, remodel your business by starting at the bottom of the Service Model and work your way to the top one level at a time.

Call it business alignment or getting everyone pointed in the same direction; the bottom line business objective is sales growth and profits. When the people and business strategy are confused on the inside, the customer or client experience is diminished. Losses mount in profits and people. It can get ugly!

Here’s how to create a better result for your organization. Know that alignment works but it stops short. Start with your goal or a vision, pare to the core, create alignment, and continue working on the business and with your team until all are more fully integrated.

Step 1: Setting the goal or writing the vision is typically the easy part. It may take time and some thinking and noodling with your brain to clarify it in writing, but get it done in writing.

Step 2: Alignment comes in many forms. Here are a few:

The On-Purpose Principle: This is the purpose of the person aligned with the purpose of the organization. If this alignment doesn’t exist, then everything else is manipulation or feels like manipulation. Work must be a meaningful expression of one’s life.
Strategic alignment within the business means, for example, that the business strategy informs the marketing strategy which informs the sales strategy and provides for tactical direction. Social media in particular needs to align or it is just a waste of time. Use the Service Model to guide you.
Customer alignment means the business is highly designed, built, and oriented to serve the customer while uplifting the team.
Project alignment means that the team players seek a common outcome or objective.

Alignment is an important and solid step but it falls short of what is needed. Business process engineering or re-engineering efforts are directed toward business alignment. When a business is missing its core strategy then there is no cornerstone for aligning and building.

As a business advisor, I consistently see money poured into tactical execution (Performance) when the strategy is deeply flawed. The waste of money and effort is monumental. Worse, I see good money chasing bad business designs time and again.

Websites provide a great example. So you’ve finally gotten your website launched and you’re waiting for the visitors to start finding you thanks to your investment in SEO (Search Engine Optimization and Google AdWords). It isn’t happening, so you invest even more money in your SEO and AdWords campaign. But what if the website, itself, isn’t welcoming or fails to present a call to action? Much of the investment in SEO and advertising dollars is wasted or hopelessly inefficient.

“Getting the business aligned” is often heralded as the cure for what ails the business. It is important, but it stops far short of what is really needed.

Step 3: Now that the goal is set and the strategy and structure are in place, turn to the relationships. Does your team understand the purpose of your organization? Have you clarified and communicated the purpose? Do they have a sense of call and contribution that allows them to get beyond the inevitable personality and preferential differences? Do they see their individual and collective contribution as so important that they can work as a team toward the greater good?

The higher level concept is integration. Strategically, purpose is the point of integration. Alignment deals with tangibles and direction. Integration deals with the people plus the intangibles and tangibles to create a wholeness to the organization. It provides a fabric to the culture and brand of the business that translates to the customer experience being extraordinary.

Work on alignment, yet remember to go the next step to create integration of the business beginning with the purpose, plan, people, process, and performance. Integration gets you to the gestalt of business where it works effectively and efficiently.

Do you need some one-on-one work on your business? Do you want me to help you create the path to being on-purpose? Contact the office to arrange an advisory relationship. Small Business Advisory Packages are available for one-on-one help with me (Kevin). Need more information? Call: 407.657.6000 or email us at info@on-purpose.com.