In the previous section I stated that business planning is the same as project planning.
Business plans have more fluid long term goals. But, the targets for each year are fixed and more similar to a project plan's target than not.
This means the business planning process is similar to the project planning process.
That is, the business planning process is monitored on a regular basis.
To achieve effective monitoring, objective metrics are used (KPI's - I'll explain these later).
The iterative business planning process consists of four major cyclic processes:
"If we knew what it was we were doing, it would not be called research, would it?"
Albert Einstein
A key component of planning is developing a set of researched assumptions that help identify the plan's baseline. The baseline is a position the plan can deviate from or be rolled back to. For example, if the plan is a battle plan for the military then research would be things like what is the terrain like, what is the weather forecast, the enemy size and type of units that may be encountered, the logistics required to support the operation, etc. The same research for a business plan must be completed as well. That doesn't mean the process is linear, it is iterative, but the starting point is the research. |
There are four main areas of research
The Vision, Mission, Goals & Objectives, and Values help set the direction and end state of the plan as well as specify how the business will interact with internal and external stakeholders.
The Market, Customer, Competitor, Products & Services, and Legislation shows how external forces will impact the enterprise. These forces can be either positive, negative or both.
The Products & Services, Logistics, Organization (including growth projections), and Policies shows how internal forces will impact the business. Like external forces they can be positive, negative or both
The Business Structure (Corporation, Partnership, Franchising etc), One to Three or Five Year Projection, Start up Costs & Scheduled Use of Funds, Valuation, ROI, Exit Strategy are the framework of how the success of the enterprise is measured, the cost of getting to the operational start point for the business and when potential investors (internal or external) can reasonably expect to recover their investment in the enterprise, make a profit on it and leave the investment if they so desire.
We knew a business owner in the franchise quick printing business, a highly competitive quickly changing business environment. He was consistently the top performer in the franchise because he was constantly looking at where the market was trending. The quick printing business requires new technology on a regular recurring basis. This fellow always made sure he was as close to the leading edge as possible but never was an early adopter. Being an early adopter of new technology is a key factor in growing market share, both within new and existing areas. But it also carries a high risk of running into technology glitches that can severely hamper the business. Sounds like a risky strategy, doesn't it. Since being an early adopter usually means high lease rates and/or over inflated pricing for equipment, he always ended up the winner by targeting his research toward used equipment that would deliver what was required. |
The extra cash allowed him to investigate additional sales channels. Something most of his peers couldn't afford.
Ergo... success from some solid research!
As I have said; business planning is a perpetual iterative cycle.
For this to be true, business plans must be easily and quickly modifiable.
Large in-depth, wordy business plans are the major reason that business stakeholders only view them once a year or they are glossed over by potential investors.
They say too much!
They don't get to the point!
An active business plan is comprised of two components:
As we will discuss in "Writing the Plan", the business plan document must be concise and in a level of language that a neophyte can understand.
The business plan must be focused on what the audience wants to hear, not what the writer wants to tell. Even then the report must be slimmed down so that the reader has most of the answers but not all of them.
This will force the reader to engage the writer with pertinent questions and have the affect of developing a bond between them (people buy from people!). It also develops ownership and evolvement by the reader.
The key point above is that the plan is focused on what the audience of the plan wants to hear, not what the writer wants to tell. This means there may be more that one written plan. For example, investors what to hear a compelling story of the products and services coupled with how much and when they can reasonably make money on their investment. Key staff on the other hand are more interested in how they are expected to contribute to the plan, what sort of career path they have and how they will be compensated for their effort.
The content of the business plan report is described on the page "Business Plan Format"
When the term "business drivers" is researched, the resulting answer is about external forces that affect the direction of a business. Things like market forces or legal requirements, etc., in other words; External Environment
There are internal forces that can affect the direction of a business as well. These internal forces fall into two categories. Those items we can control and help us focus the business effort and the forces that can be planned for but not necessarily controlled (Internal Environment).
So based on the above, our definition of business drivers are:
A more detailed explanation on the above drivers can be found on the page "Business Plan Drivers"
A great business plan not only tells a compelling story, it is structured in a logical fashion that lays out how, and by who, the story will be executed.
Two techniques are used to explain the execution.
The first technique is free form text in the "Operational Plan" chapter of the business report.
The second technique is with business drivers, using a divide and conquer technique on the mission statement until a series of discrete action plans have been developed as shown in the figure to the right.
When the action plans are put together they become input to the free form operational plan.
Because goals involve establishing specific, measurable and time-targeted objectives, they can be monitored.
The monitoring mechanism used is "Key Performance Indicators" or KPI's.
All this is explained in "Business Plan Monitoring"
Business continues as usual as long as the monitored KPI's of the plan are within predefined tolerances (as identified within each KPI). But when a tolerance for a specific KPI is high or low, then exception processing occurs.
The processing done usually consists of informing the responsible parties and/or following the steps defined by the KPI.
Occasionally the procedures may not be enough to bring the measurement back within the defined KPI tolerances. In that case internal and/or external help may be required to assess the problem and suggest the appropriate action plan.
This may require a change to the business plan so that proper monitoring of the new state can be implemented. This implies that the busines plan will deviate from the established baseline from the beginning of the year. When the plan is reviewed the following year during the Research phase, the original plan can be compared to the subsequent changes. The changes can be reviewed with two puposed in mind; did exteranl or internal forces cause the change and did we respond appropriately, or were the changes to the plan caused by poor planning and can we improve the process so it does not happen again.
Instilling feedback in the business plan can only result in better planning and more successful business goals!
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