Practical Business Planning for Small Business

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+ Graeme Wood 2 months ago
gets my vote
+ Portable 2 months ago
A fantastic presentation. Very open and informative. Especially good for those at the start of the business process who can take some business lessons when they most need them. Great work, Russell.
+ jvanreyk 2 months ago
An excellent presentation. Clear. Practical. Insightful. Shows a depth of experience. Thank you. I learned a great deal.
+ declanmcewan 2 months ago
This is an extremely practical presentation that gives great examples of how to engage people in executing the plan. As a student I found this very insightful. Well done. Thank you.
+ Walter Adamson 2 months ago
25 years of experience compressed into 15 slides - a gem of information and all makes sense - many times over - to me. Good luck with the votes.

Welcome to this presentation on Practical Business Planning for Small Business.In this presentation I argue that business planning must focus on building better businesses not impressing investors. If a business is well prepared to take advantage of the opportunities before it, if the business planning process is focussed on promoting learning across the company rather than try to predict the future then the business will improve, and the business is much more likely to achieve its goals. Then the business plan will impress investors!I have used in the title “business” rather than “strategic” because I fee the word ‘strategic’ has become pretty meaningless through overuse. Business planning is strategic and strategy iswhere preparation meets opportunity. What is strategic and what is tactical? Is strategy just about direction and tactics just about the doing or operations? Company boards are said to be responsible for strategy and the management team responsible for operations. But boards seem to spend most of their time reviewing management decisions, operations and shadowing the management team. Therefore it must be easier to review actions than set direction and allocate resources. How can we best develop ourstrategy and also excel at execution?A start-up has a small bundle of cash and some highly energetic people who are passionate about an idea. How should they go about planning their business? Each and every day they make decisions about spending their limited cash and what they do with the 86,400 seconds each of them has each day to get things done. Every dollar and every second can be spent on many things but once a decision is made to spend, it can only be spent once. Strategic planning is about deciding how to achieve the best possible results with your available resources. Each choice sets up future possibilities and closes off others. So strategic planning is about making the best choices. For a company to make the best choices it must continually learn from experience. But it is in the doing that strategy and operations intersect. Good choices must be well executed to achieve outstanding results. Ultimately good business planning is about changing behaviour within the company so that the right things are done but they must be done right to achieve the best possible outcome.Why is Planning Important?I’ve often heard it said that planning is a waste of time because whatever you plan for your business it never turns out the way you plan it. My response to this is that planning is like training to run a race; it is fitness preparation for future business activities. Much like a thought experiment it exercises our brain and provides a review of your resources to run a variety of races without actually expending the energy and resources to run each race.In being prepared to run one type of race we will be better placed to run another when the opportunity is presented to us. Our dilemma is that there are so many races that we can run. So we might prepare for a marathon to only find out we have a short sprint to run but planning is important because a well prepared marathon runner can still beat a couch potato over 100 meters. Having prepared our company for plan A, B or maybe C, even if we are forced to make up plan Z on the run, our preparations for plan A, B and C are more likely to prepare us for any eventuality, than doing no preparation at all.So business planning is more about learning to be ready, fit and able to meet any opportunity than it is about preparing for a specific anticipated future opportunity. It is about honing the organisation’s skills, culture and resources to be agile and capable of performing in the emerging economic environment.

My capacity for business planning really began with Percy Cerrutty who inspired me as a 12 YO to create goals, and turn those goals into reality by setting hard edged objectives with training activities that had to be done every day and I soon learned that winning races was the result of hard work not just in recent weeks but all the hard slog from last winter with a good pre-season and the right track work over summer. As Malcolm Gladwell set out so well in his recent book Outliers, our success in life comes from the opportunities we are given, matched with focus and 10,000 hours of practice. What started with Percy Cerrutty guiding my running career was later built on by John Miller, my business coach and mentor. John is pictured above on the Worldloppet website (42 km of cross country skiing) where he is listed as the 30th skier in the world having accomplished all WorldLoppet races. Now in his 70’s John is a wonderful inspiration to us all in setting goals, identifying the right objectives and building a plan to achieve your desired outcomes.I had met John back in 1974 when I was supporting Ian Macphee in winning Liberal pre-selection for Balaclava a seat in the federal parliament. John came third. John and I often laughed about what might have been if I had not supported Macphee. Because later John so characteristically concluded Macphee was the best candidate and that John’s later career in business and academia was definitely the best application of his abilities. I had not seen John for almost 10 years when I met him at NAB going down the lifts after my first rejection meeting with my bank. Having spent more than 7 years with IBM I was embarking on my own journey to start my on business, something that I had wanted to do since I was a teenager. John was managing partner with PKF and he told me about the DIRD business planning grant scheme. It didn’t take John long to organise the approval from DIRD and my first formal business planning process was underway. That was nearly 25 years ago and what I would like to do in this presentation is to share with you my journey to help you develop the best possible business planning process for your business.This is not a presentation about writing a business plan as part of the sales process for investors. This is a presentation about establishing and benefiting from effective business planning to run and operate a successful business.

Business Planning is often just called strategic planning. I think this is misleading. Because it’s a Lot More Than Strategy. It is about setting the right strategy but it is also about determining the required activities, it’s about engaging the staff, it’s about leadership and management, it’s about deciding what are the best things to do to achieve particular goals and executing the actions well to achieve the best possible results.In companies we tend to make Boards responsible for strategy and management for operations. Business planning develops the strategy and guides the execution. Each choice sets up future possibilities and closes off others. Business planning is about making the best choices and executing them well. This is about changing behaviour. Why is Planning Important? Why do we need to plan?After spending the past 25 years trying to get it right I have concluded that planning is a series of thought experiments that save us the energy and resources of actually doing it. Planning is learning to be ready and able to meet any opportunity. It is not about trying to predict the future to identify specific anticipated future opportunities. So I’ve concluded that business planning is a Learning Process. It is a process where the entire company learns how to deliver its products and services most effectively and also most efficiently.At Acumentum we had three strategies for our business planning process:To get everyone on board and engaged with our purpose so we ran a 90 day induction process for all employees To keep everyone on board we operated a formal coaching and mentoring system and this was achieved by ensuring that everyone had a mentor and a ‘management’, ‘design’ and ‘technical’ coach To get the business planning process off on the right path we ran an annual 3 day business planning and learning workshop (usually off site) to kick the year off and provide learning activities to ensure the company had the skills to implement the business plan.This process identified our core values. Values cannot be found in a book - the people in the company provide them. Understanding those values helps shape the culture as the company grows. I’ve personally made the mistake of failing to exclude people, who whilst being impressive, did not share the same values and were not culturally in tune with the team. Looking back the damage done was heart-breaking.Real Leadership and Management are essential to establish an effective business planning process that identifies the right quality that the customers are prepared to pay a competitive price for, to work with the staff to meet the customer’s requirements, efficiently and at minimum cost.Leadership and Management are both are required and there are few silver bullets. Leaders need to be authentic, consistent and connected with their team. It is only a matter of time before a team will be undermined by a lack of authenticity, inconsistency or spin. Effective business planning begins with the leadership group clearly setting down what it is that they are really, truly, madly, deeply passionate about. They need to know and be able to communicate what will be achieved by this passion and why others should join them. Your plans need to empower and engage your followers. People become engaged when they see that they can make a difference. People need to believe in what they are doing. It is not surprising that credibility comes from ‘credo’ or ‘I believe’. Setting Learning objectives in business planning ensures the work the business does builds the right skills and assets that enhance the future earnings of the company. By accepting mundane projects a company is reducing its future earnings. To move up the value chain each project must be more challenging than the last. The Planning Process should be well structured and easily understood. The strategy should be set by the board, communicated and executed by the leadership group with the support of the whole company. The business planning process that my companies have slowly learned to follow is a simple 6 step continuous process. Understand your environment, assess its risks and opportunities, plan your response, do it, verify what was planned to be done was actually done and then review the process to provide feedback to begin the process all over again.

When I developed my first business plan back in 1985-86 with John Miller and Robert Longair I only had three employees; Wilma Bailey, Sean Curtain and Robyn Bishop. It didn’t occur to me to involve them in building the business plan. But very quickly as the company grew and probably because we had opened an office in Sydney I realised we needed to get everyone together so the first business planning retreat was held at the Ravenswood historic homestead just out of Bendigo.This was the perfect venue; low cost, relaxed, good walks, fresh air and comfortable facilities for long conversations and getting to know each other. Geoff Morgan a manager from one of our very first customers National Mutual had joined us and he led an excellent session where we shared our personal timelines that had brought us all together at Ravenswood in 1987 or was it 1988? I am still in contact with Geoff and he has developed a great business planning website called WorkIT.Over these 3 days at Ravenswood John Miller helped the company pulled apart our business plan that he & I had put together and we all worked out what it was we wanted to do. Not surprisingly the company more than doubled in size the following year.

The business planning cycle never really has a start or an end it is a cycle that begins like a small eddy of wind and slowly builds momentum. At each turn it becomes more meaningful, more useful in driving the business forward. The early cycles are appropriately establishing the company’s purpose, identifying its values and moving from exciting ideas and good intentions to real actions.A good business plan shows where the business is today the environment within which it operates. Evidence here is much more important here than opinions. What market(s) do you operate in? How many ideal customers exist in your target market(s)? Who are your competitors? How easy is it to attract staff? The planning part itself is rather straightforward; goals, objectives (Specific, Measureable, Achievable, Results oriented, Time framed) and a plan of actions that will achieve the goals. The goals must be realistic but not conservative. Goals must be set within the purpose of the organisation. Effective business planning creates fit agile companies that can respond and exploit the best opportunities that come their way. As we learn the company will be able to meet the challenges it faces. Always stretching but never straining!

You can see here that there are 6 phases in our business planning process. The planning process links what the company is today with the actions that make up the doing phase that will achieve the aspirations of the business. To ensure that the whole team is engaged and motivated to do whatever it takes to achieve the desired outcomes everyone needs to understand why things need to be done and what their role is in achieving success. I will now step through the 6 steps in detail.

Phase One: The Audit of the EnvironmentIn setting out on any journey it is essential to know from where you are starting. A good plan shows where the business is today (not where you wanted it to be). Start with understanding your environment. Evidence based decisions require hard facts. Look for data more than opinions. What market(s) do you operate in? What type of organisations are typical customers? How many ideal customer organisations exist in your target market(s)? What value is created by your core business activities? On average how long have current customers been customers? What is the average spend, of all current customers, top 3 customers and bottom 3 customers? How many new customers has the company won over each of the past two years? What has been the average monthly invoicing of these new customers? How many customers has the company lost in each of the last years? What was the average monthly invoicing of these lost customers? Who are your competitors? How many competitors actively target the market(s)? What are the major competitive issues? How easy is it to attract staff? What organisations or institutions will provide you with ideal recruits? How mature is this industry sector? How fast has your company grown over the past 3 years (Revenue, Gross Margin, EBIT)? Who should do this? All the stakeholders should do this. This phase should begin well before the assessment is planned. The board, leadership group, the staff should all be asked to answer specific and open questions about the environment in which they operate. It should cover finance, operations and sales. They should be asked to identify any environmental issue that they feel will impact the business. A SWOT analysis is a good way to stimulate their thinking. Emphasise the importance of source evidence rather than processed information that may be shaped by opinions and assumptions.

Session Two: Assessing the environmentOnce you have gathered the facts they must be carefully assessed. Leave predicting the future to soothsayers and mystics. Examine the evidence you have gathered and create likely scenarios for your business. What evidence is there that this sector will continue to grow? What technological or economic forces that might impact this industry? What would we do if our customers no longer required our main product or service?Acumentum received millions of dollars designing and building websites in the 90’s. Because there were so few examples to copy and university graduates had not been studying how to do this we employed designers who could create things from scratch, people who could write the rule book and we were able to charge a premium for their work. Our 2002 business plan failed to ask the question what we would do when our customers no longer needed this level of service or wanted to hire more specialised design services.

The environmental scan and assessment does need to come together with team building, communications and a focus on getting things done. If the plan is created as part of a 2 or 3 day off-site business planning workshop there will be a much high probability that the team will be engaged with the plan and the doing, verifying and reviewing will be effective.The challenge then is to establish activities where the board and the leadership group set the context and frame the parameters within which the company is to operate.

Phase Four: Doing it!For a plan to be well executed in any small business it must become an integral part of everyday business. Very few, if any, small businesses have the spare resources to allocate to implement a new plan. To change behaviours in the business and to ensure that those people allocated the responsibility for each task in the action plan, make sure they understand the value of their tasks in the everyday operation of the business, the action plan must become a real project not something everyone does in their spare time.Everyday meetings must make thing happen. If everyone is engaged with the plan and dedicated to achieving it they will make sure that everyone they deal with everyday is also working towards achieving the plan. If everyone is reminding everyone else of what needs to be done then things will get done. Such a culture inculcates the plan into everything that is being done. As new people join the team they will identify the importance of the plan as they are inducted into the company. Starter packs will show how things are started. How to kits make doing each job easy. Company meetings share the rewards and work to overcome failures. Whilst there is great value in developing a “blame” free environment it is essential that everyone is responsible for the consequences of their actions and that whilst making a mistake is part of innovating and taking risks to improve, but evryone needs to understand that repeating the same mistake cannot be allowed to continue as accepting repeated mistakes destroys a high performance culture.

Verification As we come to the end of the business planning cycle we have two important things to complete. Verification is a critical part of the business planning process.Measuring the financial, sales, marketing, technical results of the company on a daily, weekly, monthly, quarterly basis verifies that what has been planned to be done is achieving the goals set. Do these results indicate we need to change the way we are doing the plan? Does the plan need small changes based on what is being achieved?Everyday management must verify that what has been agreed to be done is being done and that what was anticipated to be achieved is being achieved. One of the big challenges for every business owner is to be able to stop working in the business and start working on the business..

Monthly, quarterly, half yearly and annual reviews look at what do the results are telling us about the business. What do we need to change in the plan. Do we need to reassess where the company is headed? Has the environment changed. What external impacts are there on the company? A structured review process for the business plan is one of the best ways to assist in this transition. Quarterly reviews of financial, marketing and human resources strategies helps elevate the thinking processes to questioning the direction and the allocation of resources.

And so we come to the end of this business planning presentation.I hope that I have given you some further insight into effective business planning and that you agree that effective business planning is all about creates fit agile companies that can respond and exploit the best opportunities that come their way. The continuous learning approach sets real challenges for us to be better today than yesterday but we know that we are not as good today as we will be tomorrow. After a few years of doing the the big bang business planning workshop I helped Acumentum realise the value of a continuous business planning and learning process and we broke it into a two parts. At the beginning of each year we first addressed what we termed “the health of the people” in January usually at an off-site venue and then just before the begginning of our financial year in May/June we ran a second planning session, usually in-house, addressing what we termed “the Health of the company”.As we learn we grow and become more capable and take on even greater challenges. But the secret is to push the team hard and to really stretch but we must never strain too hard because as we learn as young athletes it can take months to recover if you snap that tendon or pull a muscle so it is also true for any business if you break the culture, the core of the business by striving too hard it will take a very long time to reconstruct it!

I hope these thoughts and ideas developed over the past 25 years help you to build better business planning processes and if you would like to continue this discussion please make contact on my website, or through Twitter or on LinkedIN.

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Practical Business Planning for Small Business - Presentation Transcript

www.RussellYardley.com
5 September 2009
Practical Business Planning for Small Business
Planning for small business is about being prepared and being capable to take advantage of the opportunities that present themselves.
Planning is more about learning and preparation than it is about trying to predict the future
© 2009 Algonquin Investments Pty Ltd
Why do we need to plan?
- The entire company needs to understand the planning process to know how the company delivers its products and services
- Every employee needs to know what are the core skills and values required to exceed the customers’ expectations
- This must be done profitably which demands:
- The right quality
- To meet requirements
- Efficiently
- With minimum cost
Planning Approach
- What is the company’s purpose
- How does the company go about its business?
- Values/ethics/ideas /good intentions
- Goals (not dreams)
- Objectives
- Aligning company goals with customer goals and the day to day actions of our staff
- Making the mode of operation visible to both staff and customers
- Achieving a common understanding of context, relevance and purpose
The Planning Cycle
Opportunity and Risk Assessment
Goals
Objectives Plans
Changes to operations
Everyone understands why things need to be done and what their role is in achieving success
Review the context of the business What is
The planning process links what the company is today with the daily actions that will achieve the aspirations of the business
Outcomes
Results
The Current Environment
Who
The owners, directors, team leaders, customers
Review the context of the business What is
Be brave involve everyone who can make sure this is a realistic accurate statement
Audit the business to get the data to build a picture of the whole business
What
Finance
Operations
Sales
How
Hard data
SWOT
Gather data from original sources –orders, call logs then management reports
Environment
Assess Opportunities and Risks
What
Determine the likelihood and consequence of each
Opportunity and Risk Assessment
How
Describe the impact or outcome of each risk or opportunity
Who
The owners, directors, team leaders, customers
Output
A realistic picture of the current state of the business, the environment and context within which it operates and the opportunities it has to grow profitably
Assess
Plan
The Plan
Goals
Objectives Plans
Goals
A description of the desired outcomes for the company
Planning
Why
What
How
Why
What
How
Objectives
Specific, Measurable, Achievable, Results focused and Time framed
Plan
A description of what has to be done, the required resources, by whom and when
Executing
Plan
Do
Verification
Verify
Review
Review
Summary
21 July 2009
© 2009 Algonquin Investments Pty Ltd
15
Let’s Keep this Conversation Going
Website:www.RussellYardley.com
Twitter:rmyardley
LinkedIN: www.linkedin.com/in/russellyardley
Email:yardley@AlgonquinInvestments.com