Beware of the Cookie Cutter Business Plan Part 3 By Dean Craven
February 20, 2019 - February 20, 2019
There is a saying that “plans without execution are just dreams”.
For many decades the three phases of business planning have been stated as:
- Where are we now? [Discovery]
- Where do we want to be? [Strategy]
- How do we get there? [Execution]
The first two articles, in this series of four, discussed the Discovery phase and the Strategy phase.
In this article I will look at the Execution planning phase and how to map out the pathway to being able to achieve your dreams.
I have spoken to many small business owners who have wanted to “refresh my business plan”.
Too often they will hand me a dusty copy of a two-year old document that has been lying on a shelf since they had their business consultant draw it up. The conversation will usually follow the path:
Dean: “Do you want to upgrade the plan to reflect a new set of targets for growth and revenue? Because this plan is now out of date?”
Owner: “No. The plan is still accurate – we just haven’t put everything into place yet.” Meaning – we have noted some general themes from the old plan, but didn’t follow a disciplined plan of action, and we’re not as far ahead as we should be.
Point 1: If you do not have the discipline to make time to execute against an action plan then don’t invest in a consultant to build you a plan.
Point 2: If you do not have the discipline to make time to execute against an action plan but are desperate to build a business, look for a time-management coach to help you focus on what is important for you and your business, as preparation.
Point 3: You can complete the Discovery phase and the Strategy phase over a period of time. The actions in your Execution plan should be completed within a specified period of time – much like a project.
Turning the Blueprint into an Execution plan
The outcome from your Discovery and Strategy phases will be a fairly detailed blueprint for your business, as a guide to where it should be in the next phase of its growth.
By compiling this blueprint you will have completed the thinking around the context of your business: Who is my customer, what do they need/want, why will they buy my product before someone else’s? How much should I charge them?
You will also have identified the way in which your business will operate (for the period that the blueprint is valid): How you will market to your customers, how you will sell to them, how you will create your product and how you will fulfil and service their orders.
This blueprint will have gaps to be filled (which the Execution plan will document).
The best way to approach this phase is to start with targets, or Key Performance Indicators, for your revenue.
As discussed at the end of the previous article you can identify revenue targets for the three-, two- and one-year horizons.
The steps I would suggest are:
- Decide on your growth path for the three-year period.
Break down the overall objectives by Monthly, Quarterly and Half-yearly respectively:
With the high level (revenue) targets in place the flow of decisions shows what needs to be done and when, using the If this then … approach:
- For the first year only – calculate the volume of units needed to achieve those targets – remember that Revenue is Units x Price
If this then …
- Estimate how many sales contacts will be required to convert each unit sale
If this then …
- Now calculate how many sales calls you will need to make to achieve those month one sales of $5000, and when should you start?
- If you are buying-in your product for resale, how long will it take from order-to-receipt and then your processing ready to ship to the customer.
If this then …
- When should you place your first supply orders?
- If you are manufacturing when should you acquire and commission your factory and equipment?
If this then …
- When should you hire and train your staff ?
If this then …
- When should you order materials
And so on … You can see that pulling together the Execution plan involves breaking down the blueprint into component parts of your business operation and scheduling when these things need to be done.
By breaking them down to the detail you can also assess what is achievable and what needs to be adjusted.
I recently had a client who had to reschedule their product launch because this planning exercise showed that assumptions around obtaining tooling for their product were too short.
Another client had an unusually huge order and used this method to schedule their manufacturing and ordering of materials to hit the order deadline. It also showed that the squeeze on cash of ordering a large quantity of materials a long time in advance of receiving the revenue needed a short-term funding gap to be filled.
These actions should be captured on a structured to-do list, as per the example below.
Big targets should be classed as Milestones and the individual actions needed to achieve the Milestone will be given their own completion date and responsible person.
[Pro Tip: Turn your to-do list into a ‘done’ list. Don’t say “Order materials”, rather say “Materials Ordered”.
Often an action is either ‘done’ or ‘not done’.
PLEASE do not fall into the trap of ….. “well, that action is 80% complete”!
It feels so much better to tick off an action that says…”Materials Ordered” ]
Two big questions will remain at this point.
- Who will perform the actions on the Execution plan?
- What resources will be required (often cash) to complete the actions?
For StartUps the answer to the first question is usually the founder(s) – which is where you need to look at your capacity and be realistic as to what you alone can achieve. For more established businesses, with employees or a management team, you should determine who should have responsibility to complete the items on the action plan.
Follow the money …..
Try to ensure that every line on your Blueprint, and every line on your action list has a corresponding line on your financial model for the business. All items within a business can be expressed in financial terms.
For instance: You might state that you need use sales channel x, or market channel y as part of your business model. You should estimate what the costs of developing and servicing those channels will be as part of your modelling.
[Tip: At the beginning there will be many assumptions, but with experience those assumptions will be replaced by hard facts. At least put your assumptions into the model to begin with].
The question regarding resources and cash will require some financial modelling, unless you have really deep pockets. More established businesses should have a handle on the flows of cash into and out of the business, and may have an accountant or financial manager in place to manage all that. For smaller, less established businesses you should focus on CASH not profit.
Many businesses fail from lack of cash even if they are selling a successful product. It is also true that many businesses fail by running out of cash because they grow too fast!
From your schedule of revenue targets try to calculate when the cash will flow into and out of your business, on a monthly basis.
- When will you need to set up your marketing platforms and advertising spend?
- When will you need to pay for materials or product?
- When will you need to pay wages for your team?
- When will you receive your revenue (cash with order vs payment terms?)
- When will you need to pay for new machinery?
- When is rent, rates, electricity due?
A screenshot of a typical activity driven financial model for building the business plan.
Please contact me if you’d like more information.
As you can see, business activity drives the financial position of your business and the more detailed thinking you can put into breaking down the activity and timing of bills, the less risk you will have of running out of cash.
This level of modelling will also give you visibility of the amount of funding you will need to run your business and possibly what sort …. long-term (capital), lines-of-credit, loans, overdrafts etc.
The good news: Your accountant should already have this analysis available to you through your historic profit and loss account. You should work with them to create a forward looking financial forecast for your business plans.
The Discovery and Strategy phases of your business planning used your vision, your objectives and a good amount of research to document your business dream in a Business Blueprint.
The Execution planning took all those components and scheduled the detail of:
- What needs to be done
- When does it need to happen and
- Who is responsible.
This exercise also created links to your financial position… Allowing you to identify the size and timing of expected cash outflows and inflows to the business; your cash cycle.
Properly documented these two aspects will give your business plan a huge boost in both confidence and credibility. As with any plan it is still only a dream, unless you execute on it. You have to execute the Execution plan!
By executing and updating the plan with your actual progress, you will be able to:
- Focus on taking regular steps towards achieving your goals and
- Identify where you are heading off-track and make necessary adjustments.
In the final article of this series I will show you how a well-constructed business plan, as laid out in these articles, can help you achieve your business dreams – No matter the stage of your business or the intended audience for the plan.
The components and approach are the same – the difference will lie in the detail.
Having gone through the three phases outlined in these articles you will be perfectly placed to create the documents you need to present to your audience – spouse, business partner, banker, external investor. Most importantly, yourself.
Pulling the plan document together is the easy part. You have already done the heavy lifting!
Until then, Happy Executing!