Every good business has a business plan but as Mike Tyson said, “Everyone has a plan until they get punched in the mouth”. Well I guess, if you are fighting Mike Tyson, you have a plan for when you get punched in the mouth! It’s unlikely that a boxer has a 10-page plan, or a power point plan so do we need this in business?
Unfortunately, Mike Tyson is right, most entrepreneurs have a plan they are working to but they aren’t prepared for the punch in the mouth. Most entrepreneurs will have had a business plan at some stage but it is unlikely they have an ongoing documented plan. In my experience, entrepreneurs will regularly change their plan and they can be challenged with bringing their team along. So should you have a document you keep updating?
The business community often interchanges ‘strategy document’ and ‘business plan’ as if they are the same thing. Most businesses have a plan for next year, which is their budget, and this ends up being their business plan if asked. So what is a business plan and what has the strategy document got to do with it?
The easiest business plan to recognise is the document required when a company is looking for investment or government support. This can be a lengthy document but usually about ten pages suffice. Next week I will focus on the structure of a business plan which I find most useful. Versions of this document can be an information memorandum for an investment round and a banking proposal for raising bank finance. If we are not a start-up or going through some form of finance round, then a business plan is not usually required.
When our business is established and going through the normal cycles of business then it is most likely that the executive will produce a strategy document, probably with a three year focus. In larger organisations this is a document or presentation by the ‘C’ level to the board and is formally accepted by the board. It may have a longer-term vision, but the focus will be over three to five years. The board will govern based on what is set out in the strategy and usually the CEO champions the strategy.
In smaller, owner managed businesses where a formal board may not be in place, it is still likely that the CEO or MD will set the strategy and get agreement from the owners or management team. In the past, I have used several approaches for recording the strategy. Early on, I used a mind map to document the four strategic pillars and to control the objectives and actions to deliver on the four pillars. In later years we have used a deck, presented at a board meeting. For this process to be successful it needs to be well researched, inclusive, and clear in the objectives it is trying to achieve.
Based on the strategy, a set of projections can be prepared and a budget set for the first year. This is when the accountants get excited! The job of the team is to grow the business and run it in-line with the strategy and the accountants measure against the plan. This is the business plan in operation. In larger organisations, effective managers and leaders are expert at managing expectations around the strategy and budgeting process. In smaller businesses, a well-developed strategy and budgeting process allows the business to perform to its potential.
Your strategy document does not need to be exhaustive; the important thing is to have a plan and measure against it with timely, accurate and relevant information.