How to do strategic business planning that actually matters

communal chucks
Creative Commons License photo credit: Evil Erin

Go ahead, admit it – if it fits.

Your business plan doesn’t really reflect your real business.

You may not even use it.

Ask yourself these questions:

  • “Do you use it to run your business day to day?”
  • “Does it bear any resemblance to what really happens at your business?”
  • “Did you write it just to get a line of credit?”

If your answers are “No”, “No” and “Yes” respectively, your business plan probably doesn’t matter. So how do we fix that? Really, why do we care?

Why do we care?

We care that our business plan matters, meaning that it serves and guides us every month, because:

  • Running a business without consistent cash flow is a drain on both financial and mental resources.
  • It’s nice to know in advance where 63% of our revenue will come from next month.
  • It’d be nice to know in advance that we’ll need three extra people and 34 extra pallets of flour next month, vs. finding out when the orders come in.
  • It’s scary not knowing for sure that we’ll have any revenue next month, much less enough.
  • We had a horrible sales month that killed our cash flow and we’d rather not have that happen again.
  • We’d like to know these things by some means other than gut feel.

But how?

Knowing your numbers

Developing a way to consistently predict your cash flow and revenue numbers isn’t magic. It’s dependent on tracking month to month lead flow and how those leads perform as they flow through your business processes.

Do you know the history of your leads’ performance? What about closing percentage? Your new and returning customers per month? Their average purchase size, respectively? Can you break those numbers down for each lead source?

These numbers are critical to managing the impacts on cash flow of your operations, marketing and advertising efforts.

Manage it

Weather forecasts help us manage our expectations and alter our behavior so we don’t spend our lives cold and wet. Cash flow can work the same way, rather than simply accepting it as unpredictable.

The early years of my photo software business are a perfect illustration: Our customers hunkered down in September, October and November. They were busy with senior portraits, yearbook photos and Thanksgiving portraits that would become Christmas gifts. In December, they were focused on getting all those orders ready and shipped in time for gift giving.

Guess what many of them didn’t do during those months? Buy software.

A consistently lower level of first time sales during these months also meant that there would be low recurring revenue during those months during ensuing years. It forced us to change our revenue model to smooth out the peaks and dips in our cash flow, which made monthly revenue far more predictable.

That’s the kind of thing that many retailers face every January.

Collect them all

The primary key to dealing with events like our October surprise and the typical January retail sales drop is tracking your lead / sales / closing history and using it to predict future activity. Next, use actual performance data to improve your predictions. As they improve, you’ll see issues coming in advance – buying time to solve them.

The finance component of a meaningful business plan will depend on your lead-related performance data if you’re actually going to use the plan to run your business. This component includes financing (credit card, bank, mortgage, payables, receivables), cash flow management, taxes, legal, benefits, and insurance. For retail businesses, open-to-buy planning (OTB) is critical. Ignoring OTB can kill a retailer.

Next, integrate your lead performance data in your daily operations planning. Lead performance will always drive the resources used in day to day operations, since sales volume impacts the need for raw materials, tools and the trained people necessary to crank out what you make. This helps you predict expenses since they’re driven by the performance of your investments to market your products, manage their leads, and sell / service their customers.

Each of these components help your business plan reflect reality and actually use it to run your business.

Why do all the work to write a plan and then not use it? Make it matter.

Disclaimer: I am blogging on behalf of Visa Business and received compensation for my time from Visa for sharing my views in this post, but the views expressed here are solely mine, not Visa’s. Visit http://facebook.com/visasmallbiz to take a look at the reinvented Facebook Page: Well Sourced by Visa Business. The Page serves as a space where small business owners can access educational resources, read success stories from other business owners, engage with peers, and find tips to help businesses run more efficiently. Every month, the Page will introduce a new theme that will focus on a topic important to a small business owner’s success. For additional tips and advice, and information about Visa’s small business solutions, follow @VisaSmallBiz and visit http://visa.com/business.

Put away the white shoes

seoul conductor
Creative Commons License photo credit: kikfoto

Back in my grandmother’s day, the day after Labor Day meant “Put away the white shoes.”

These days, we may not be quite so beholden to old school wardrobe rules, but we still tend to let a Roman emperor’s calendar decide when our business is going to take action.

With the exception of consumer retailers, some businesses are trying to wrap up their revenue goals before hunting season, before the holidays and so on.

Likewise, many will wait until “everyone is back” (from what, exactly?) in mid-January to ramp up next year’s business. Many of those haven’t even planned what they’ll be doing in the new year.

If you do trade shows, you already know you can’t do this. You have to have your booth setups, marketing materials, products and a litany of other things organized months in advance. You actually have to have your act together, at least as the show requires. You have to show up ready to deliver.

Whether you do trade shows or not, have you started planning what you’re going to get done next year and how you’re going to launch it?

The rest of the year will likely take care of itself. You should already have it planned. Execution should already be in motion. If you don’t even have that planned, maybe it’s time to start your new year right now.

What’s the point of waiting?

Show up for the rest of the year…ready to deliver.

Being Prepared

One of the things Scoutmasters teach their Scouts is the Scout motto – “Be Prepared.”

We don’t stand around saying those words all that much (or ever, really).

When I ask a Scout what it means to them, I get a lot of different answers. I talk about it with the boys because I’m curious what it means to them – which tells me where they are preparedness-wise.

Depending on their age and their seriousness when I ask the question, I hear answers that include things like:

  • knowing how to select the right gear for a campout,
  • having the right fishing lures,
  • making sure that bacon is on the menu (not kidding),
  • being in good enough shape for the upcoming hike,
  • making sure the car is full of gas and has proper levels of other fluids/air and so on,
  • having charged batteries in the camera,
  • having a sharpened pocket knife,
  • knowing how to tie a rescue knot, or
  • having the proper gear to safely canoe or kayak a river/stream.

What it ultimately means to me is being prepared for what life/business serves up, whether it’s a class V rapid, an unexpected flat tire during a snowstorm in a remote area, that five figure invoice that your “customer” still hasn’t paid, the new box store down the street, mention of your business in the Wall Street Journal, by Scoble and on TechCrunch, or stumbling upon an idea that changes your life and/or business.

Embarrassment? No.

To someone who has a job, I ask them what they would do if they lost their job today? Are they honing a new or enhanced skill so that they can react quickly to a downturn in what they’ve done for the past 20 years? Do they have a network of people in their current (or desired) line of work that could help them identify opportunities?

To someone who has a business, I might ask them what would happen if the building housing their business burned down, or if their biggest customer stopped buying from them, or if they suddenly got 100 new customers tomorrow.

I don’t ask these questions to embarrass employees or business owners any more than I ask them to embarrass a Scout when asking them what would happen if their friend cut his hand or lost his water bottle on a week-long hike. I ask them so they’ll think about their level of preparedness.

Being prepared isn’t just about having a poncho in case it rains, having backups offsite, and having a marketing plan that never stops finding new customers for you. It’s also about being mentally prepared to deal with what happens next.

Be prepared, not only to take a punch, but to make big leaps when opportunities present themselves.

Take yourself seriously first

Private moment. In public.
Creative Commons License photo credit: skedonk

Today’s guest post from AJ Leon is about getting serious about your ideas and goals.

Dan Kennedy talks about “massive action” more times than you can imagine. That’s all about getting serious.

Do you take yourself seriously? If not, how can you expect anyone else to?

What’s on your plate?

Imagen de Hola Gourmets 2009
Creative Commons License photo credit: jlastras

As I spent the last month mulling over my strategic plan for this year, I started by looking at what I was doing operationally as if I was my own client.

In the software business, it’s called “eating our own dogfood“. In other words, a vendor using their own software for the task it was designed to perform.

But it isn’t limited to software.

From a day-to-day operations perspective, that process quickly tossed a few things in my face.

I thought I’d mention some of the higher level things in case they happen to spark a ToDo item for you.

Technology

I need to automate WordPress updates across several dozen sites (some mine, some not). It was semi-automated, after today, I have it down to one button, right down to opening the site WordPress admin page to make sure I know whether I need to hit the “Database upgrade” button in the WP admin interface. No, I don’t use the built-in update process because I’d have to manually go all over the place to make that happen. Old school.

The upside of systematically handling this critical task is that I can finally hand this task off to an intern because there’s a system in place to make the work happen. Can you say “E-Myth”? Yes, I thought you could.

Last year, I moved all my web and other development work (including marketing/strategic client documents and even blog posts) to source-controlled environments after a few fits and starts in the past. This year, the software projects will get further screw-tightening by adding automated build and test processes.

Accountability

I’ve had some trouble with getting consistent action out of some folks this past year. Dan says I shouldn’t care because I can’t control the actions of others, but it isn’t about control. It’s about encouragement. Worse yet, client results reflect on me and I don’t like seeing folks failing to take advantage of my best efforts. I think I’ve found a way to solve the problem. We’ll see.

As for me, I need to lean on the calendar even more than I have in the past, especially on projects important to me.

The result of pondering this is that…

  • I’ve already chosen my charitable time commitments for the year.
  • I’m actively seeking a new mentor. Yes, pretty much everyone who is getting anything done has a mentor. Even Dan Kennedy has a mentor. Think about that for a minute.
  • I have to be more demanding of my marketing clients in 2011. You may have figured out that I have a certain level of expectation of my clients after creating a strategy, tools and other materials for them. When they don’t get used (regardless of the reason), that hurts them and me (eventually). That level of accountability will rise markedly later this month as I complete a few tasks that will help me “enforce” it. Those who are willing to take their business seriously will be glad I’ve done this. The rest will probably end up working with someone else, if they do anything at all.
  • Because I had to more or less ignore the needs of several prospective clients in 2010, I will be narrowing the clients I personally serve in 2011 while expanding the number of clients that can get my personal help. Yes, I know that sounds like opposite directions. Stay tuned, it’ll make sense as I roll it out. Planet Dan folks – think “ladder”.

Focus

John Haydon mentioned the other day on Twitter that his boss was a jerk. Of course, John works for himself. The hardest person to manage is yourself.

Focus comes up because a few personal projects slid last year. This was mostly due to an abundance of customer work. While I’m grateful for the work, I’ll be more demanding of myself in the selection of projects this year because these other things MUST GET DONE.

That’s already being corrected, partly via the accountability change noted above, partly via the mentor thing, partly via kowtowing even more to the calendar and via a few other steps I’ve taken. Like Jim Rohn said, when you say yes to one thing, you’re saying no to something else.

My existing clients will get even more attention this year. If you aren’t a client now and you’ve been thinking about it, now would be a good time to make a decision.

Writing

My writing (in the blog) has suffered immensely the last two years. I think it’s gotten better, but the frequency has really fallen off due to my workload.

The upside of this is that it’s given me time to think more about what I write and how you guys consume it and take action on it. That has resulted in the BIP book taking a few turns strategically. Now that I’ve finally, really (no kidding) figured out what I want to do with it, well, it’s moving along much better now.

I’ve also waded most of the way through an editorial calendar for the blog for the year, something I’ve never taken the time to do before. I suspect that’s pretty obvious to long time (it’s been 6 years this week) readers.

Bottom Line

One of the things that stood out in my mildly-freaky conversation with myself was that I need to put even more effort into doing for me what I do best for others. Imagine that.

Oh yeah, by now you should be asking me why you should care. “Boy, doesn’t that seem all about you and not at all about your readers?”

Yes, except that most of what I talked about is…for my readers/clients. And I hope it has made you reflect on what your plans are.

Do your clients know where you’re going? Does your staff?

Paying attention to changes

At first glance, you might think this is a video about climate change.

Maybe it is, but there’s a story about a young, focused entrepreneur here. It’s also a story about making choices when change happens.

Do you choose to sit and watch, or do you decide to adapt and flourish?

In this video, a story is told about a boy who noticed a change in the success of the crops he raised.

Rather than sit and watch, he made changes his family’s business to take advantage of what he saw.

The result? He ignited a new, local industry that saved his family’s economy and perhaps his village’s…simply because he was unwilling to give up, even after getting negative feedback from influential people in his life.

How are you watching for, detecting and adapting to change in your market? Your community?

Strategic planning or not?

Is your business activity planned this far ahead?

This commercial screams Covey’s “Begin with the End in mind”.

Where do you begin?

And how far out is the End that you plan from? (not for, *from*)

5 strategies for a better 2010

So today you wake up and find that you have only 15 days until 2010 (fewer than that if you count working days, at least for most people).

You vow that 2010 is going to be the year that you finally get your act together – despite the state of the economy, since can’t do anything about it but create your own…

Maybe you vowed that in 2009 and it did or didn’t go so well. Doesn’t matter. What’s gonna make 2010 DIFFERENT?

No matter how things are going, they could be better. If they’re going great, the challenge is to keep it that way and build upon your success.

So lets go over 5 things that you can do to make sure 2010 is the year your business gets the effort – and the results – it deserves:

Number 5: Become and remain brutally focused about the time you have and how you use it. Need some help with that? Try The Power of Focus and Dan Kennedy’s No BS Time Management for Entrepreneurs

Number 4: “Put on the hat” of your biggest critic or doubter: Ask yourself some tough questions. Justify what you’ve done this year. Reflection is a critically valuable tool. It isn’t about guilt, it’s about recognizing the need (or lack of) for change as well as recognizing what went well.

Even better, take your biggest critic/doubter out for coffee and ask them to let you have it. Ask them to kindly critique the year they’ve seen from you and suggest what they think you should be doing. The feedback isn’t the result you’re looking for. Instead, consider your reactions to the conversation. How do they make you feel about your level of commitment and what you’re really trying to accomplish? Do something about it.

Number 3: Schedule communications (not boring ones) in some form with every customer, at least once every month. If you can’t figure out what to say to your paying customers, you aren’t thinking hard enough – or – they aren’t much of a customer to you. If you can’t afford to communicate with them (and I don’t mean just by email) on a monthly basis, it seems clear that your business model could use some work.

Number 2: Spend some time considering where the leading edge thinkers in your industry are going – and why. If one of those leading edge thinkers is you (be honest with yourself), think harder. Look outside your industry for ideas you can use and “convert” for your business.

  • How do these things fit into your current plans?
  • Do those plans need adjustment?
  • Does your entire big picture need adjustment?
  • Do any legislative changes affect you in the coming year?

Number 1: Spend an hour (I’d prefer you spend a day or two – or a week if you can do so) and really, seriously nail down a picture in your mind of a few things:

  • What things in your business should look like on Dec 15, 2010.
  • What that year of progress is really, truly working towards – yes, what exactly *is* your big picture?
  • Did 2009 work toward it, or go somewhere else? If you don’t like the answer…do something about it.
  • If you have staff, do they fit the result of this discussion? Can they be trained to do so? What other resource challenges does this bring to mind?

Tick tock.

Are you throwing stuff overboard?

It’s a classic, if not overdone scene.

A plane, low on fuel and starved for altitude, flies over the ocean. As far as the eye can see, nothing but water. Her crew hustles to throw unnecessary items off the plane to lighten the load in hopes of gaining altitude and getting a few more miles out of what little fuel remains.

For a struggling business owner, the situation might not seem all that different.

Like a plane empty of unnecessary gear still flies because it has the essentials (thrust from the engines and lift from the wings), the business owner sometimes has to focus on survival strategies that keep them from crashing.

The trouble with working from a survival strategy is that’s all you often accomplish: Survival.

Your goal isn’t to just to keep from crashing, it’s to thrive, to accomplish that big thing that got you into this business in the first place – whatever it might be. It’s tough to see that when you’re barely afloat, but that focus is exactly what you it’ll take to get your business out of that survival mode.

Sure, spending time on the things that will get you over that current bump in the road is important – but if you do nothing else, all you’ll do is barely get over it and then be faced with the next. And another. And they’ll keep coming.

So what do you do? Take some time to think about where you really want to be. If everything worked out perfectly, what would you accomplish? It’s essential to spend time focusing on the long-term. “Where am I going?” is easy to look at as fluff, but that mission/ vision / goals stuff isn’t fluff because it drives everything else when nothing else will.

It tells you who you serve and who you don’t. It tells you what you focus on and what you ignore. It gets you out of bed in the morning when nothing else will. It’s what you talk about when anyone will listen. You know what you’re heart’s in. Admitting it to yourself is the hard part for many, especially you tough guys.

Without that and the focus it brings, your business focuses only on surviving (don’t let the plane crash), rather than cruising at 33,000 ft.

Find your mission and refocus on it

Spend some time over the next few weeks focusing on the real mission you want to accomplish. What got you interested in what you do? What gets you out of bed in the morning, excited to do this work? Cash flow – while critical – isn’t it. Sure, it’s important, but few people get into a line of work solely because of it.

You’ll spend a lot of fuel climbing to cruising altitude, just like a plane does, but you’ll still be interested in the destination once you get there.

Taken a pulse lately?

Ten months of 2009 are gone. Take the pulse of your business and ask yourself: “Is the business where I wanted to be by now?

Before you think this is all about the finances, it isn’t. It’s all about where you wanted to be. Maybe it’s about finances, but there might be more important indicators. It’s easy to be profitable and still heading in the wrong direction, for example.

If you’re behind, what can do add, change, delete, correct or adjust to get your progress back on track to meet/exceed your business’ goals? Have you actually done what you said you would do? If not, why not?

Not just about Retail

Big retail (and far too much of small retail) looks at these next two months as what gets them into the black. They’ve even named the day after Thanksgiving “Black Friday” because that’s the shopping day that traditionally moves their business into the black.

While many outside of retail often look at these next two months as throwaways due to the number of holidays, vacations, parties, travel, hunting season and so on – that’d be a mistake.

Likewise, lots of companies put off hiring during these two months (hmm, so NOW till January is the time to pick off the best talent?).

As for the delay, I can find a holiday and related excuses to do that in any month. Why would you do that?

Thank them

In a few weeks, Thanksgiving is coming up in the U.S.

What a great time to take a little time to thank your clientele for their business – just don’t be boring about it and don’t make it a sales call. Whatever you do, do it as a sincere thanks rather than making it ordinary and using it as just another opportunity to pitch everyone.

For Canadian readers who are thinking “Darn, our Thanksgiving was last month”, it’s not too late. Simply acknowledge that you’re a bit tardy so you thought you’d thank them in time for the Americans’ Thanksgiving.

2010

One last thing on this topic – now’s the time to get moving on an assessment of 2009’s successes and failures, and start laying out your 2010 plans and goals. Have your plans and strategies ready for Jan 1 (and start them earlier if it makes sense). Don’t wait until Jan 1 to start this process.