Small Business Administration

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.

Are You Doing Business By Design?

January 25, 2018 By kwmccarthy

Most start-up businesses begin with great intentions but are at risk of being haphazardly led with little to no regard for the founder’s spirit or original intent—even when the founder is still running the business! It is a costly loss of strategic advantage, employee and customer engagement, and business profits!

Some companies get it right and thrive. The Walt Disney Company’s 2-word purpose can be stated as Creating Happiness. They do a great job of living into that purpose.

Susceptibility

Most susceptible to this drifting from the founder’s spirit and intent are large organizations and institutions where work is highly fragmented across divisions and/or countries. Specialization must be paired with a sustainable corporate culture that honors and innovates upon the strengths of its past.

For example, did you know that universities and colleges such as Harvard, Yale, Princeton, and other Ivy League colleges were started as seminaries to train and equip ministers in the Christian faith? Today, these academic bastions of intellectualism and secularization are so far from their founders’ intent that their roots are obscured, if not outright ridiculed.

Candidly, most large businesses have lost a measure of their soul, and so they resort to conveying and communicating corporate values as the “fix” to the deeper loss of authenticity and congruency. When values need to be more codified and communicated than caught, then ethical business problems are predictably on the horizon.

Right behavior can be reinforced, but it can’t be legislated.

Hellegation™

Least susceptible to drift are micro-businesses or one-person entrepreneurs, freelancers, and such—provided they have clarified what matters most. Otherwise, they’re susceptible to the “chasing bright shiny objects syndrome.”

Solo owners face a different challenge, however. Founders of these SOHO (small office, home office) businesses are typically wearing far too many hats and are preoccupied with personally providing production, sales, and customer care. They’re easily caught in a vicious swirl of learning, working, and selling or overwhelmingly stuck in procrastination.

Fortunately, their passion to perform typically enables them to muscle through and deliver on a small scale basis. My term for this is Hellegation™—a condition where the solo owner has no one to delegate work to in order to be freed up to focus on more important matters to the health and well-being of the business, its customers, and society.

Years ago, I had a client who was starting an IT business. He got so lost in his software development, he soon forgot why he started a business. His intent was to help clients, employees, and his family, but he lost sight of the larger picture—becoming buried in the details. His strategic confusion produced a bewildering business design supported by a confused business infrastructure.

In my client’s case, lines of code were the means for creating value and making a contribution. He, however, got caught up in the making of money (financial profit) versus creating a profit for everyone (adding value). The true value of his business wasn’t code or cash but grounded in how his software improved the lives and productivity of his client companies and their customers.

By Design, On-Purpose

It sounds so basic, but the fundamentals of business really don’t change. Ultimately business is about people serving people. As today’s On-Purpose Business Minute encourages: do business by design. Clarity of purpose is your market advantage (or disadvantage if absent!). The difference from company to company is its business style, design, model, and infrastructure in alignment with its purpose, i.e. being on-purpose.

Any kind of plan or business plan for small businesses tends to be scarce. Who has the time to plan? or so the thinking goes. Understandably so because the plans are really not all that appropriate or useful in many businesses (see: What is the Purpose of a Business Plan?). Nonetheless, that doesn’t mean strategy and planning are useless and meaningless. They have a specific and powerful place in a company of any size.

(Special plug: A couple of years ago I met Jim Horan, creator of The One Page Business Plan. Here’s a great planning device for businesses of all sizes. It is, however, especially apropos for solo owners.) I also offer The Service Model as a similar but different way to analyze, build, and design your business. You can purchase instructions and a worksheet at The On-Purpose Shop.

Having a strategic context for building your business matters.

The On-Purpose Business Plan is a 9-minute video providing the essential steps to integrate the business design, plan, model, and infrastructure to reach and serve your customer base. This “map” of what’s needed is too often a missing perspective for those leading organizations. Admittedly, the agenda is full so connecting this many dots seems like busy work. In fact, it is vital business work to the development and growth of your team, culture, and business performance.

Regardless of whether you are an entrepreneur of a one-person show or the CEO of a billion-dollar business, as your business advisor and designer, you don’t call me until there’s a problem in the business that your team or you can’t fix yourselves. Your SWOT Analysis only takes you so far.

Stuck?

Let’s assume that you are competent at delivering your product or service, but the business isn’t growing. That means problems lie in the design of the business or the leadership or both! Conversations and conventional wisdom swirl around business infrastructure, business planning, and the business model, but it is like a fish swimming in water trying to see water—you won’t see it because you’re too close to the matter.

Times like this demand depth, not shallow manipulations of the status quo under the guise of change management. In the strategic depths of an organization, a slight adjustment in understanding, a tiny shift in strategy, or an orientation toward greater alignment ripple powerfully into positive results.

The simple articulation of a 2-word purpose statement is the tiniest of acts—but the most potent of all strategic initiatives.

Tweaking the fundamental design of the business is not for the faint of heart. Eventually, failure to do so will be manifest in every facet of the business … and that’s costly at every line item on the budget. Strategic business design can elevate the business to the next level of performance, profits, and expression of its purpose.

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The On-Purpose Business Person provides a solid framework for any person at work to learn how to be strategic and to approach their work as a business owner. Click here or on the image to the right to purchase it for $16. It is also available on Kindle for $9.97.

Get The Service Model worksheet here!

Business Building: A “ME” or a “WE” Business?

December 7, 2017 By kwmccarthy

Business building is exciting.

Don’t let the excitement get the better of you. There’s a fork in the road in your business design that is too easily missed or goes unrecognized. The strategic and performance implications are profound.

If you are planning to start up a small business or are already running one, then you have a deep leadership decision about the orientation and attitude of your business as a “ME” business or a “WE” business. This orientation will play a major role in defining your corporate culture as well as the long-term sustainability of your organization—even its viability to be sold.

Here are two basic ways to go about business building:

M.E. = My Ego

W.E. = Winning for Everyone

Many professionals’ offices and mom and pop businesses are “ME” businesses simply by default or lack of knowing any better. “ME” businesses may provide adequate customer service, but they are more likely a source of periodic customer service nightmare stories.

Being a business advisor for over three decades, I’ve observed that most ME businesses do not have happy endings for the business owners who are unaware of the “ME or WE” business model. Either the business success is so dependent on the person that there isn’t a viable exit strategy, or the reputation of the business is so poor there’s no goodwill worth buying.

The employees are workers doing the owner’s bidding, so in the boss’s absence they’re lost or unable to act independently.

Sale of the business is next to impossible, or it will be bought for pennies on the dollar.

Family members capable who would be a logical part of the succession planning have long since departed the scene to carve their own way. Or worse, they’re still around as dependents. This latter situation can get ugly fast.

Generally, these ME enterprises close when the dominant or alpha personality departs by either retirement or death. If by chance, the business is sold, the valuations are almost always discounted or only asset-valuations based because the business is so revenue and operationally dependent upon the owner.

However, if you’re unwilling, unable, or just don’t care about the long-term sustainability or saleability of the business, and if you’ve made an informed decision about having a “ME” business, then press into it all the way.

As long as you’re building a ME business by design and you understand the downside and can accept it, then there’s nothing inherently wrong with just shutting the doors when you’re done.

“WE” businesses are looking for win-win outcomes for everyone involved.

Candidly, the “Everyone Profits” mindset is a challenge to design, create, and execute, but done well is far easier to sustain and manage. (Here’s a huge tip: use The On-Purpose Business Plan as a guide.) When the people thrive, the business is more likely to follow suit.

An owner who cares about people infuses that attitude to the employees, who pass it along to the customers, who in turn send their referrals.

The spirit of customer service begins with a decision about whom the business serves. If you’ve never thought about your business orientation as “ME” or “WE,” then invest a few minutes to take a hard look in the mirror. I promise you that you can improve your lifestyle, position, and business performance if you will make a decision regarding your business orientation and then take it deeply one way or the other.

Don’t stay in the mushy middle. Pick a direction and run to it.

The On-Purpose^® Approach is a service concept with “WE” checks and balances. Yes, it is more difficult to design and develop, but it brings a sustainable and durable dimension to the business. If you need help forming or transforming your “WE” business, let us know. We have business advisors who can guide you regardless of the size of your business.

How Do I Focus My Small Business?

July 14, 2016 By kwmccarthy

As you stare at the walls of your office, your mind swirls with a hundred different items on your mental To Do List. You haven’t got a clue what to do next because everything seems important. By default you open up your email so at least you’re keeping up with something. A couple of hours pass at the keyboard and your list is only longer and you’re further behind than when you began. A sinking feeling leaves you even more overwhelmed and disappointed with yourself. Ugh! How do I go about organizing the business? How do I get more focused and productive? I’ll deal with it … tomorrow.

Admit it, you know this scenario all too well. And it bugs you because it is sabotaging your business, your dreams, and your finances. With so much on the line, you wonder, How can I be so stuck?

Over the decades of working with business owners, this shallow pattern of performance is most often associated with an ill-defined or out of focus business. While brilliant ideas abound in your brain, there’s no blueprint to build the business. Would you hire a home builder to construct your house who didn’t have blueprints? Yet, you’ll build your business without the most basic of plans.

There’s a reason most SOHO (small office, home office) business owners don’t write their plans. It is called flexibility and responsiveness to opportunity. Unfortunately, keeping your options open typically results in a cycle of learning, but not one of earning. The secret to building your business is to create an economically efficient engine of profit. Once the engine is up and running, you can afford to invest in your other ideas. Depth, not breadth, is essential. This takes discipline and commitment … to a well designed, thoughtful, written plan.

Here are three On-Purpose^® tools to help you gain focus and sustain it:

Use The Discovery Guide to clarify which of your many options is the best. This “Want List and Tournament” tool is a free download and can be used for many situations, such as clarifying which opportunity makes the most sense for you and why.
The Service Model is a simple tool to map out why and how to design and build your business on one page starting with purpose.
My On-Purpose Folder is a self or small group guided process to develop your personal leadership capacity. When you’re in mental disarray, your business will reflect it too.

You may think you have a plan, but you may not. Candidly ask yourself, Just how is my plan working? If you’re not obtaining adequate results, speed to market, or profits, then please consider a small business advisory package. Let us help you bring order, focus, clarity, and direction to your business enterprise by guiding and documenting your business plan and model. Organizing the business is a couple of clicks and a few hours away.