In your letters so far, you have covered several aspects regarding the creation of business plans, so I am interested (and a bit puzzled) to hear about ‘business planning’: is that something different from ‘creating a business plan’?
Yes, it is a bit puzzling at first glance.
In purely linguistic terms, it is clear that a process (business planning) should lead to an end result or product (a business plan).
However the creation of a business plan is not the end of business planning, rather it is only the beginning.
Let me explain. Some people, after they have produced a business plan, put it somewhere and ignore it. Others attempt to follow the business plan woodenly. Both these courses of action are almost guaranteed to fail.
Rather, a plan is meant to be a ‘living document’ that is constantly reflected on, revisited, and updated. That is because everyone in business actually learns only by doing – and by observing and reflecting on the responses to one’s own actions as well as those of competitors.
So a plan is best regarded as a ‘framework’ for your business: organising your thoughts, strategies and tactics regarding your business. Each section of a business plan should be thought about on its own, as well as in terms of its inter-relationships as a whole. Basically, any business has three connected sets of activities:
* product development
* customer development
* company development (which includes the structure of your company – divisions and so on – as well as your human resources, policies and practices).
For example, you might work through all the aspects of company development. That forces you to examine your (or your whole team’s) strengths and weaknesses, which in turn lets you start scouting for talent in advance (as against hiring someone who is not so suitable because you needed someone so urgently). Or you might work through the ‘Competition’ section of a plan (which affects all the three activities mentioned above), by considering and analyzing who the competitors and other players are, who’s doing what, and where they are strong and weak.
In other words, each business plan needs to be modified according to the conditions of the marketplace, which change all the time. People sometimes forget that all businesses are built upon a foundation of realities (competition, market size, economic factors, and so on) as well as assumptions (such as customer behaviour, distribution channels, pricing structure, and so on) which all shift and change.
In light of this, it is worth taking to heart the following saying, not in terms of life values, but certainly in relation to business activities: “I reserve the right to change my mind at any given point in time.” Of course, if and when one does so, one has to have due regard for existing contracts and commitments, which should not be violated.
However your business may change over time, one thing should be clear. Business is about only two things: getting your product or service ready for your customers, and selling your product or service.
For people like us, who don’t have many resources, we need to concentrate very hard on sales to bring cash into the business. You have to find the most efficient way to your first product and your first customer. But, after that, the most important thing is to assess constantly: Who is my customer? Why does or would a customer buy my product or service? How can I improve the offering? What other needs does he or she have that I could meet profitably? What are the current channels of distribution? What new channels of distribution are emerging or should be considered – or even created? A business has to chase customers and find a repeatable and scalable business model in view of the changing marketplace.
In order to keep in touch with those changes, you have to talk with as many people as you can. Not only customers, and people you think might be potential customers, but also academics, other suppliers, businesspeople in other industries, politicians, social workers, bankers, and so on. Advice from friends and family is always most valuable – and if possible from people in other businesses (never ask a competitor directly because they may to try to mislead you – rather observe what they do and try to analyse what succeeds and what fails).
All that provides you with a mass of information that you have to digest in order to steer your business in the best possible way through the new opportunities and threats created by constant changes in the market environment.
Successful business results from effectively interpreting the answers that the entrepreneur has derived from the changes in the marketplace (market-driven) as well as assessment of the risk factors that relate to particular threats and opportunities.
The best way of doing this that I have come across is to set aside a regular time to set key dates; identify new opportunities for quick or thorough investigation; and continually reshape key estimates regarding costs, prices, orders, sales, and their impacts on all aspects of your business.
Anticipate change, prepare for change, welcome change and understand that change is the entrepreneur’s greatest ally. When you have understood that, you will understand the saying that is credited to Winston Churchill: “The plan is nothing; planning is everything.”
Published in the March 2014 issue of the Forward Press magazine
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