No matter how big or small your business is without a clear vision of where you are going owners and directors often fall into the classic trap of just managing from day-to-day. A business needs great leadership, and for that they need to create a clear business vision, which will make and deliver longterm leadership success.
Envisioning the Future
Leadership is about investing time, envisioning the future and effort to see into the future and imagine how things could be, is as important for success as having real passion for the business and the determination to create something new. These three personal qualities of leaders are vital for successful companies and a vision statement, sometimes called “a picture of your company in the future”, but it’s so much more than that.
Your vision statement is your inspiration, the framework for all your strategic planning. A vision statement may apply to an entire company or to a single division within that company.
The vision statement answers the question, “Where do we want to go?” What you are doing when creating a vision statement is articulating your dreams and hopes for your business. It reminds you of what you are trying to build. A vision statement is for you and the other members of your company, not just for your customers or clients.
Visionary goals should be longer term and more challenging than strategic goals. Collins and Porras describe these lofty objectives as “Big, Hairy, Audacious Goals.” These goals should be challenging enough so that people nearly gasp when they learn of them and realize the effort that will be required to reach them.
Most visionary goals fall into one of the following five categories:
Targeted – quantitative or qualitative goals such as Nike: “To bring inspiration and innovation to every athlete in the world” “If you have a body, you are an athlete.”
Common enemy – focused on overtaking a specific firm, becoming the number one in that sector, such as Amazon: “Our vision is to be earth’s most customer centric company; to build a place where people can come to find and discover anything they might want to buy online.”
Role model – to become like another in a different industry or market, the mirror role, Victoria Beckham (Posh Spice) “Right from the beginning, I said I wanted to be more famous than Persil Automatic”.
Internal transformation – creating internal vision, GE set the goal of “Becoming number one or number two in every market it serves”
While visionary goals may require significant stretching to achieve, many visionary companies have succeeded in reaching them. Once such a goal is achieved, it needs to be replaced; otherwise, it is unlikely that the organization will continue to be successful. The second most dangerous place for a company is to have achieved its only goal, the most dangerous place is never to have had one.
Creating Your Business Vision
Simple steps to creating your vision, ask some simple questions:
What will our business look like in 3 to 5 years from now?
What new things do we intend to pursue and how?
What future customer needs do we want to satisfy?
Write the answers down and focus on developing them into a coherent, motivational and purposeful message which can connect with everyone.
Does our vision statement provide a powerful picture of what our business will look like in 3 to 5 years from now?
Is your vision statement a picture of your company’s future, which everyone can interpret into their role?
Does it clarify the business activities to pursue, the desired market position and capabilities you will need
If your statement answers these questions then you have a vision worth owning and sharing. A vision must be motivational to everyone inside an organisation.
The classic apocryphal story to demonstrate the effectiveness of great visions is about the time President Kennedy visited NASA. During one trip he came across a cleaner sweeping the warehouse floor, and asked him what his job at NASA was. The cleaner replied “My Job is to put a man on the moon, Sir.”
Now I don’t know if the story is true, but it’s inspiring. In a facility full of high-powered individuals and great minds, even the cleaner was completely on board with the strategy. While you may not be planning to put a person on the moon, we can learn a lot from the story. It may sound ridiculous, but every business needs to be a little like NASA.
Every organisation needs to have a clear vision, owned by everyone inside and outside it. An owned and shared vision creates and sustains great morale and internal strength for companies, which can become a powerful and unstoppable force in any market no matter how competitive.
At Cowden Consulting we focus on ensuring companies can successfully compete in their chosen or desired market.
One of the most important pieces of any good business plan is to define what you do and where you are going as a business. If you do not define what you do and where you are going then why should people work with you or for you? Defining your purpose as a business is the clearest statement of intent any director or owner of a business can make, and yet one of the most misunderstood and avoided pieces of any business plan. This is the mission statement which everyone in a company should be able to relate to and believe in.
Why is it avoided? In my experience directors are most often frightened of making a commitment of what they stand for so as not to alienate any existing or potential customers who may not fit the proposed mission statement. This contradiction, not wanting to say what the primary goal of a business or organization is, means that many companies try to be everything to everyone, ending up being meaningless to everyone.
This failure to define a mission is also one of the biggest limitations companies and organizations have in creating clear blue water between them and other players in their market. It is why so many companies struggle to stand out and then expect someone in marketing to try to answer that question sometime later. It is not up to marketing to define the purpose of any business or organization, they must influence it but it takes leadership from the top for a mission statement to be successful. It may also be why so many companies have to spend so much on marketing to define them.
A good mission statement is clear, unambiguous, engaging and relevant to all its key audiences: namely its leadership, senior management, employees, shareholders and customers. A mission and a vision (but more of that later) provides a central definition of what a business or organization delivers.
Creating a Successful Mission Statement
Here’s a quick-step guide to creating a mission statement.
First identify your organization’s “strategic advantage” what makes you successful. This is the idea or approach that makes your organization stand out from its competitors; the reason that customers prefer you and not your competitors, what makes you unique, what are your core competencies?
Secondly, identify the key measures of your success. Key success measures by which you can measure, Key Performance Indicators (KPI’s), typically pick 3 to 5 headline measures of performance.
Thirdly combine your strategic advantage and success measures (KPI’s) into tangible and measurable goal.
Define the wording, using clear language, until you have a concise and precise statement of your mission, which expresses your ideas, measures, and desired result.
Now communicate it effectively so everyone owns the mission statement within the company, make it public and ensure it is owned from the top with passion.
Communicating mission statements effectively to everyone is a defining piece of making the mission live. After all the hard work in having one so often they are filed away, or framed and stuck on the wall and forgotten. Instead successful Mission statements are launched to everyone and owned.
I’ve run embedding program within companies to ensure that everyone inside businesses and organizations “own” the Mission and build it into their everyday activity.
If you don’t follow through then all the effort is wasted and the opportunity is lost, so remember to focus on making your mission statement memorable and relevant. The leadership also needs to own the mission statement and make it live throughout the company.
A Mission Creates Loyalty
If you do this businesses and companies can achieve significant improvements which can include: building higher loyalty from staff, higher levels of customer service; improved stakeholder and channel support and lower costs for winning new higher value customers. These are just some examples of the benefits from having and using a mission statement successfully at the front end, one other major advantage is that you have a foundation upon which to build your business plan.
Here’s a simple question to any business owner, why are you in business? The flippant answer I often hear is to make money. An honest, if not inspiring answer, but there is a fundamental flaw in that statement which many business owners fails to comprehend. They start a business, typically through experience in, or a passion for the field or because they have seen an opportunity to make money, but fail to achieve that ultimate goal because they fail to plan their end game, their exit strategy.
If you can’t get out making the money you intended to when you sell up then why did you set up the business in the first place? You have a great idea, you work on it, and spend your energy (and life) building it until it becomes you. It succeeds and you enjoy the lifestyle it brings then the challenge of maximising that income to free yourself up and retire or dd something else with your success. That final stage often becomes impossible because you are the business and it is you, its lifeblood, main cheerleader and driving engine.
This typical scenario of being a business owner, is driven by the passion to run the business day-to-day overshadowing the failure to plan your exit strategy from the start. That is building a business with a clear objective to enable the owner to get out and maximising your income from what you have achieved. Nearly all business owners focus on building a successful business, not on making sure they maximise their returns from the successful ownership of the business.
The real payback from all that hard work in creating and setting up a business for an entrepreneur is the final payback, it is in the shareholder value being realised by a sale of that business. Few owners think about realising their shareholder value, being more interested in the Profit and Loss than the Balance Sheet when making key decisions about the business. That approach is effectively summarised in the phrase; the turnover is vanity, profit is sanity and cash is king, a great motto in the running of any business, but it does not hold true in achieving exit strategy success as a business owner.
Achieving shareholder success is the only motto to follow if you want to have a saleable asset, then owners need to focus of developing an exit strategy which achieve their personal goals. While profit and cash rule the day, building a valuable asset requires building shareholder value, through building sustainable long-term profitability
Success in business requires owners to build a business which you own but are not concreted into the foundations of its success. Building a forward strategy for your business is a vital first step in building your exit strategy, it is the old adage that you need to work on it not in it which underpins all successful entrepreneurs.
Short-term profitability is always an important goal, but long-term share value is a strategic consideration which owners need to consider in building the value of their business. If you would like to discuss this article further or further information about our services in working with business owners in achieving successful exit strategies then contact us at email@example.com or see our contact page for further options.
Here’s a simple question to ask any business owner, why are you in business? The answer to such a simple question can be very enlightening. The flippant answer is to make money: an honest, if not inspiring answer; but there is a fundamental flaw in that statement which many business owners fails to comprehend. They start a business, typically through experience in, or a passion in the field or because they have seen an opportunity to make money, but fail to achieve that ultimate goal because they fail to plan their exit strategy. Planning your exit strategy is the hidden key to business success.
Start with the END in Mind Strategy
Most business owners focus solely on profitability as their key measure of success. Yet making a profit from a business is more than just yearly profitability. It is also about building a business which is an asset that your target buyer is looking to buy. If you can’t get out making the money you intended to when you sell up, then why did you set up the business in the first place?
You have a great idea, you work on it, and spend your energy (and life) building it until it becomes you. It succeeds, and you enjoy the lifestyle it brings then the challenge of maximising that income to free yourself up and retire or do something else with your success. That final stage often becomes impossible because you are the business and it is you, its lifeblood, main cheerleader and driving engine.
This typical scenario of being a business owner, is driven by the passion to run the business day-to-day overshadowing the failure to plan your exit strategy from the start. That is building a business with a clear objective to enable the owner to get out and maximising their income from what they have achieved. Nearly all business owners focus on building a successful business, but not on making sure they maximise their returns from the successful ownership of the business.
The real payback from all that hard work in creating and setting up a business for an entrepreneur is the final payback, the exit payoff. It is the value creation in within the business, the shareholder value being realised by a sale of that business, which makes al the hard work worth it. Few owners think about realising their shareholder value. Most being more interested in the Profit and Loss than the Balance Sheet when making key decisions about the business. That approach is effectively summarised in the phrase;
the turnover is vanity,
profit is sanity and
cash is king,
A great motto in the running of any business, but it does not hold true in achieving a successful exit strategy success, as a business owner. I would add to that classic phrase;
success is true shareholder value
Achieving shareholder success is the key motto to follow if you want to have a saleable asset, that reflects the true value of your business when you decide to sell u and move on. Owners need to focus of developing an exit strategy which achieve their personal goals. While profit and cash rule the day, building a valuable asset requires building shareholder value, through building sustainable long-term profitability. Building the business assets, the real shareholder value, needs to include strategies around Intellectual Property (IP), long term profitable contracts, strategic relationships and operational excellence that maximise the company’s value to targeted purchasers.
Successful Business Planning
Success in business requires owners to build a business which you own, but one you are not concreted into the foundations of its success. Building a forward strategy for your business is a vital first step in building your exit strategy, it is the old adage that you need to work on it not in it which underpins all successful entrepreneurs. Building the forward strategy to exit, is therefore different that just building a successful business. Planning from start to exit, means focusing on the exit strategy requirement of increasing shareholder value which is recognised as valuable assets by target buyer audiences.
Short-term profitability is always an important goal, but long-term share value is a strategic consideration which owners need to consider in building the value of their business. If you would like to discuss this article further or further information about our services in working with business owners in achieving successful exit strategies then contact us at firstname.lastname@example.org or see our contact page for further options.
Business planning often gets a bad press. Yet those who do sit down and plan their business are so much more focused, confident, and successful than those who float along with the economic tide. Successful leaders plan their business, so they can focus on leading their team to deliver that plan.
Over the past ten years as a strategic planner we’ve worked with hundreds of business owners and seen how those that create a plan and implement it. Those that plan their business do so much better than those owners who try aimlessly lead their business on a wing, a prayer or a dream. Successful leader’s plan their business, so that everyone knows where they are going what their role is in achieving that success.
According the latest BERR report, Small and Medium-sized Enterprises (SME’s) together accounted for 99.9 per cent of all enterprises, 59.8 per cent of private sector employment and 49.0 per cent of private sector turnover. SME’s really do matter to the British economy, and yet they receive little effective support from Government agencies despite being the backbone of the economy, employment, and innovation.
Why Business Leader’s Don’t Plan
“If you don’t make things happen, things will happen to you”Lanes Company
Having questioned business owners over the last decade the reasons why owners have not put a plan in place and then executed it, the excuses range from not having the skills, make the time, or have the conviction of their thoughts. Owners know they should have a plan ‘we had one when we first started, but have not looked at it since’ is a common theme. The other is being too busy fire fighting to realise that preventing fires starting, is the best way to not have to fight them.
Do business owners not see the value in developing a plan for their business? On the other hand, is the classic perception for business owners that frenetically staying alive is seen as being successful? For many not knowing how to plan is one major reason why people haven’t and don’t plan their business. Where to start, and how to know what they are trying to achieve immediately puts people of planning.
Faults in Business Planning
Business planning is also often at fault here. The most common reason new start up businesses create a business plan is to secure funding from banks, that’s when banks did fund business start-ups (now they just offer a high interest mortgage backed by the Government). Therefore, once people have received funding they no longer see the main advantages of planning (and the real advantages are not around money).
Business Planning Skills – Have some GOALS
“The discipline of writing something down is the first step toward making it happen.” – Lee Iacocca
Planning takes time, resources, (grey stuff) not the executive trip to some exotic away weekend planning, but some time allocated to review where you are as a business, how your sector and industry are performing and what you want to achieve in the future. Whether it is looking at the next year or planning the next five years, everyone who owns or directs a business is responsible for setting its direction. However, just having a plan in your head, with the classic defence of ‘its flexible at the moment’ is either ducking the responsibility or deluding themselves.
The only way to have a plan rather than a dream is to have it written down, turned (if it is not already) into an action plan which is resourced and owned by someone to deliver. Only then do businesses go forward in a deliberate purposeful way. Only then do the right things happen because you made them happen and only then can everyone, employees, shareholders, customers, channel partners and even other halves, see your dream, share your dream, deliver your dream. That’s when planning works. It is a written document, which lives within your company, and it doesn’t matter if you are a one-man (woman) band or running a multi-national Plc.
What Business Planning Delivers
“In the absence of clearly-defined goals, we become strangely loyal to performing daily trivia until ultimately we become enslaved by it.” – Robert Heinlein
Planning provides focus in strategic direction. It provides clarity of where the business is and where it is going as well as a vehicle for getting from where you are to where you want to be. Planning time out of the business provides time to reflect on personal and corporate goals, time to share and channel new ideas while reviewing existing activities.
Planning in a structured and open format develops clarity of purpose and a clear understanding of the organisational and individual skills people have and can use to leverage advantage. Bringing in outside views widens the planning horizon, a fresh perspective to drive businesses forward. This is why many successful businesses use non-executive directors or outside specialists to help drive their business forward. That is one reason why so many people volunteer to get support from people like the Dragons from Dragon’s Den, they are looking for expertise and advice which gives them confidence to go forward as much as the money.
Plan More For Success
British business owners need to plan more often to keep being successful. Good planning creates and sees opportunities as owners and directors lift their heads up from the daily grindstone. How often should you plan? Well it all depends on the speed of your market’s evolution, but even stable and stagnant businesses should review their business every year, and not just a light dusting (add ten percent and change the year) but strategically review what and how well they are doing.
It is only by looking for fresh opportunities and how to take best advantage of them, by planning your business around those opportunities, that companies successfully compete in today’s business environment.
Business Planning is not a four letter word
“An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage”Jack Welch
The old adage, compete or get beat, is more relevant today than it has ever been. The rise of the Internet means there are no secrets, competitive advantage lies with those who can see an opportunity and adapt fastest to take advantage of it. Those owners and directors who see and go for opportunities become the stronger ones. That is where good strategic business planning provides it real advantage. That’s why successful leaders plan their business to achieve that success.
By orientating a company to where it can retain better, win new and develop existing customers companies that plan their success out compete in their sector, and equally importantly have everyone focused on where they are going. From the smallest to the biggest every business needs to have a plan that is written down, owned and guiding your business in the direction you want it to go.
Leadership is most often identified as someone with a clear vision to grow their organisation, of where it is to where you want it to be within its market. By definition, that means looking for and finding growth. All leaders must focus on looking for growth and development of their organisation if leadership is going to be seen as successful. But many leaders do not have a plan for growth within their organisation.
Do you have a clear vision of where you are going to take your business? From understanding the market and its direction to where your business needs to be within those sectors, to profit from the growth within the market. Leaders need to be strategically aware of their market if they are to find and focus on growth within their organisation.
Leaders must also redesign their organisation so that it can take advantage of growth opportunities, redesigning how a business operates to increase turnover and / or profits is at the heart of ensuring a leadership team has plan for growth. Revitalising the sales and marketing operations is at the heart of acquiring more clients and developing improved relationship structures with customers and channel partners.
With a plan for growth leadership teams can reduce the amount of down time and focus their efforts on driving your business forward, with a clear vision of where you are going and why. Successful businesses develop strategic plans to move their business forward, to grow and succeed, while being in control.
The first role af any owner or director is to have a plan, from star-up onwards (not for the banks) but for you to own and deliver. That plan needs to be kept alive, fresh and driven to focus on success and succeeding.
A strategy is a researched approach by the leadership team, supported by a detailed plan of continual action steps to get the organisation to where you want it to be. The reason strategies are so vital is they keep things moving, and in business, if you are not going forward, you’re going backwards, and that can happen very fast. So, if you want your business to be successful and/or pay you more, having a strategy that focuses on growth is a must!
If you have no formal strategy to take your business to the next level you need to refocus your priorities right now to create growth, here’s the first stage of a growth strategy framework:
Create a clear vision of what you want to achieve:
There’s an old saying that you can’t hit a target you can’t see. Well your vision is your target. Your vision needs to be very clear in terms of what you want from your business, by turnover, profit, customer type or all three? What’s your ideal position in that market, do you want to be known as the premier supplier of your product or service, or a low cost or niche player?
What about your personal goals to support your lifestyle? You need to be very clear about what you want and what you don’t want. Have a clear focus that will keep you aligned with your long term goal for you and your business. Make your vision aspirational, where do you want your business to be within the net 3 to 5 years? What will it look like and what will the business feel like to be part of?
Looking for Business Growth
Starting with a clear vision for growth within a business is the simplest and most powerful way a leader can motivate everyone. Growth is about understanding the drivers of growth within your business sector. Knowing where a market is going requires leaders to step out of the day-to-day operational detail and focusing on the drivers of your market.
Growth is fundamental to a successful company. Finding growth does not mean just looking for growth in turnover, growth in profitability is by far the most valuable growth any leader can find. Growth can also be found in winning new market entrants; cross selling penetration to existing customers; launching innovative products and services or premium pricing of scarce products. Other profitable ways to grow your business include driving demand of premium and unique products, where your business has or can create a competitive advantage.
Like to learn more about creating growth for your business, then get in touch with us through the links below.
Cowden Consulting provides Strategic Planning Workshops which enable owners to create their vision of what they want to achieve. Our SPW faciliated workshops provide the opportunity for owners to work on their business not in their business. To learn more about Strategic Planning Workshops (SPW’s) or contact us by clicking Cowden Consulting to discuss your needs, or go to our website www.cowdenconsulting.com to learn more about us.
Business growth is not an accident. Why some businesses succeed and others do not is not by chance. Busienss growth requires leadership to plan out where they are going within there market. All markets change through both evolution and revolution (think of those disruptive players in any market and the impact they have.) This slideshow explains why it is important for leadership to use business planning tools to effectively plan their growth.
In every market there is always new opportunities always arising. Markets do not go up (or down) equally. Some segments and individual customers grow faster than others due to their strategic or tactical successes. Knowing where external and or internal market factors are influencing or driving segments within any market is the vital strategic insight which leadership teams need to understand. Even markets declining do not do so at equal rates. Change happens in every market so knowing where to look for positive changes within any market is a key skill for leaders to learn.
Being successful in business is all about seeing the bigger picture and understanding future growth. For a business to grow and develop, the leadership team must invest time building it. That requires the leadership to step back from the day-to-day operations of the business and focus on working on the business. Like to learn more, click the slide presentation below to learn successful leaders work on their business to find growth.
Strategic planning is the process of defining your business’s key priorities as a business. Successful business’s have clear priorities which their business as a whole unit focuses on to achieve. Each of these key priorities are defined within a business as a strategy. A strategy, a course of action which will deliver a pre-determined business goal.
Successful business planning is about developing your strategic plan for your business based upon proven business development tools. The Strategic Planning Workshop pulls these together into a single process. This process takes the guesswork out of your business success.
Reducing Risk: Maximising Opportunity
Taking the guess work out of your business success is a step-by-step process which develops business owners skills to strategically plan their business. Good strategic planning enables businesses to take advantage of emerging markets, emerging trends, develop and launch new products. Strategic planning also enables companies to make structurally improvements to their business to improve its profitability, reduce costs and enhance productivity.
Strategic planning workshop is a proven method of developing and implementing success see www.cowdenconsulting.com
Slideshare of Strategic Planning Workshop
Click the link below to begin the slideshow to learn the fundamental skills and how to undertake a strategic planning workshop.
Successful leadership is about having a clear vision. A vision is a is a mental picture of what you want your business to be at some point in the future. It is a realistic aspiration. That vision gives a business a clear focus and a long-term direction, and it can stop a business heading in the wrong direction.
Great leadership is about planning your business using business planning tools to match their ambitions to the opportunities in their market. Without a vision, businesses often fall into short-term annual plan, rather than long-term sustainable entities.
Creating a Vision
Successful business owners step back to work on their business not in their business. Looking at where they are going and why. A vision is an essential element in a leaders toolkit in communication with all stakeholders and employees. It is about being more than just a product or turnover. A good vision must combine not only an aspiration but elude to the values of the business.
Good visions also aspire to where the business will provide value to customers in the future. What are the opportunities within your market and sector over the next few years. Business Planning is a process of assessing options using tried and tested business planning tools, which provide robust and accurate options for business owners to grow their business successful.
A good business starts with the end in mind: have clear objectives.
Having a vision is vital to be successful in the long term, but having objectives will ensure you get you there. Clear milestones for everyone inside your company, top to bottom are the essential component of a successful company. Every successful company has clear goals, strategic ones the outrageous ones (global domination) through to achievable tactical objectives.
Without clear (SMART, see below) objectives company’s loose focus on its goal. Without objectives companies can fall victim to strategic drift, this month’s whim and next month’s quick idea. Without cascaded objectives at every level, good people’s morale falls as they cannot see where how they are contributing to the company’s success. Without objectives everything else in planning and execution is a waste of paper, time and effort.
Objectives should be like a pyramid, with the big objectives at the top, but at every layer underneath there should be the sub objectives that make the bigger one happen. A well run organisation should therefore look like a pyramid, in terms of objectives, with everyone working on their goals which build up together to achieve the big picture goals. This form of management managing by objectives MBO, (not to be confused with a management buy-out MBO), allows people to focus on their objectives, which are aligned to higher goals.
Try not to have too many objectives to achieve. I always recommend no more than 5 per person. The reason why 5? Because it keeps people focused and not drowned in statistics. Even at the company level remember the old KISS concept of simplicity, if you have page after page of objectives some will suffer unless you can resource them. Focus on what really matters to the business, what drives performance and how are they made up. For people think about their Key Performance Indicators, KPI’s they are doing a good job if… Classical KPI’s usually include: revenue, margin, customer numbers, retention, growth, production, saving, are amongst the most common.
High performance companies often drive all their goals by setting team objectives which are then broken down into Key Performance Indicators (KPIs) for each individual employee. Try not to give any individual or manager too many. An easy way to achieve that is to ensure they can remember and recall them with ease when you meet them.
The benefits of setting objectives:
1. Objectives define the entire purpose of your business (or unit) in a couple of sentences or bullet points or set of numbers.
2. Objectives are often identified as key performance indicators at the individual persons performance.
3. The objectives that you set determine the quality of the strategy or tactics that you will adopt.
4. Goals allow you to Manage By Objectives MBO which avoids time in argument and also helps in introducing a more participative management culture where employees are encouraged to set their own objectives.
5. Clear KPI’s per person is a successful way to evaluate performance as long as the KPI’s are numerate or translatable into a numerate language.
Remember SMART criteria to define attributes of good objectives:
SMART criteria include:
1. Both short range and long range targets should be set.
2. Both quantitative and qualitative
3. Clear. Put them in writing, to be achieved within a specified time frame.
4. Measurable. So that they can be compared with actual results.
5. Challenging. This is so that staff will put greater effort and be more motivated.
6. Achievable. Avoid overly optimistic goals as this might be counter productive due to their demotivating nature. Goals should be realistic, reasonable, reachable and beatable. Avoid hidden goals and don’t be over specific.
Hope that gets you thinking? Want to learn more click here
Business planning is often talked about as a challenging process to go through either to start a new business or as the essential process of taking ownership of an existing business. Many business plans fail to achieve their objective, not because they represent a bad idea but because they fall into classic business planning pitfalls or fall over blinding obvious credibility cliffs.
The business-planning process is in itself a very worthwhile pursuit, they take a lot of effort and resource. A business plan’s primary purpose is to convey an idea with a view to achieving a specific goal, most typically in securing funding.
Always remember that a business plan needs to be tailored to its target audience, if you have different audiences you will need to be able to flex your plan to that audiences specific needs. That means shaping it, edit it and amending it to achieve your objective.
If you would like to know how to avoid these top ten pitfalls and credibility cliff edges then click on the subject titles which are links at any time to see my step-by-step videos on how to avoid these pitfalls and credibility cliff edges.
Here’s the top twelve business planning mistakes I come across most frequently:-
Every business plan needs to describe the opportunity in detail. It must also detail how that opportunity can, and will by this plan, be exploited profitably, effectively and successfully. A good business plan can visualise the opportunity and articulate the company’s ability to reach a viable opportunity, this is a credibility cliff.
Tomorrow is a difficult place to plan for, but being able to identify and make that opportunity viable is the most critical test any business plan has. It is also the most common reason they fail. Your executive summary and the wider plan describes the viability of the opportunity in terms such as:-
What is the problem which people will pay to have solved?
Does your solution solve this issue for a specific target market?
Why would someone buy your solution over someone else’s?
Why are the benefits of your offering so compelling?
Can you reach that target market with a compelling message quickly and directly?
Where any assessment of a business starts and often finishes is at the numbers, specifically on the projected Income Statement or Profit & Loss. Projections are just that, but they are vital and must be based upon clearly stated assumptions. Many business plans are written with numbers which just do not stand up even to a first glance.
Dream numbers: in overestimating income and understating costs.
Your numbers have to make sense and be realistic, if you are a new start-up then they must grow rationally from nothing, but costs will be incurred before turnover is generated, these need to be realised and recognised in your financials.
The financials must also make sense and be presented in a format which presents a clear case for the investment and the return you will deliver. Ultimately, they need to be credible, defensible and consistent.
All opportunities are only prospective ones without evidence that the target market can be accessed profitably, this is a big cliff to fall over.
Entrepreneurs are inherently product focused, concentrating their energies on ‘the winning idea’ to the exclusion of many other important elements such as how they intend to access their customer base, a classic cliff edge for any plan.
“Built and they will come” is a great dream but a poor plan.
A business plan must include a comprehensive, credible and costed analysis of how the company is going to access their target market in a cost effective manner. Too many plans focus on the product not the market opportunity, they focus on teh solution not the problem they are solving.
For that to happen your plan needs to really understand the target customers, their needs, and purchasing priorities. Turning historical data into information and drawing knowledge from it ascertain insight into their future purchasing habits. Only then can you demonstrate cost effective routes to market within a business plan.
4. Executive Summaries Which Aren’t
Somewhere between a pitfall and a cliff edge, is the failure of the Executive Summary, to be either a summary or aimed at executives. The only part of any plan that will certainly be read is the Executive Summary and yet they rarely provide an effective summary of the business plan. A good plan highlights the key proposition of the plan and sells the proposal.Too many Executive Summaries either throw everything down in a jumbled mess, making them pages long and randomly pulling facts together, or they are so bland they say nothing!What’s a good Executive Summary, one that states the proposition clearly and succinctly, a page is sufficient for any plan. The Executive Summary should clearly explain the whole picture including what investment is required and what it will deliver. The point of an Executive Summary is to inform the executives, so many it punchy, outcome focused and only ever write it at the end.
Another associated key element of the plan which relates to this element is the estimations of projected turnover.
While every business plan talks in positive terms (hopefully), the obvious and persistent danger is that the innate optimism of all entrepreneurs and their tendency to exaggerate every business opportunity. If you have no established routes to market then you need to identify the start-up period within your turnover and cost model. This has major implications for cashflow and on where investment will be needed, which all experienced investors will expect that you have taken into account.
This pitfall is most easily managed using a realistic method for estimating income is to calculate the number of customers the business intends to capture and the average revenues. These two averaged inputs are easier to calculate and also to justify within a business plan.
I could have put this pitfall at number one very easily. What is the main purpose of the plan?
If the plan’s objective is to seek funding then it is vitally important to clearly describe the investment opportunity. While the plan describes the concept in detail, it must also address the primary purpose of the plan. So many plans fail to make it explicitly clear what the company’s needs to be successful or what the investment will mean to the company.
A good business plan answers the following key business planning questions:
Why investors should investing in this business rather than anywhere else?
When will they recoup their initial investment and how and when it can be realised?
What is their expected return on investment?
How the company has managed all aspects of risk?
Is the investment merely cash or do they need to bring other assets such as expertise to the table?
If you can answer these key questions, the intended audience will feel comfortable and be able to recognise that they fit the brief.
7. Non-Existent Cashflow Management
Particularly relevant to a new business, this is often an invisible cliff edge which business plans fall over on, is the ability of the business to articulate the differences between cash and profit. Running out of cash is the highest risk any new business or re-engineered business faces.
Good, positive, and conservative cash flow management is vital when businesses pursue investment opportunities where there are significant cash flows out, in advance of the cash flows coming in. This is the classic business plan cliff, which sends potential investors running.
If a business plan’s financial model is based upon selling on credit, then they receive the cash in the future, but need cask to pay expenses before that income hits their account, then they have a cashflow risk. This outflow of cash is the single biggest reason companies fail, its not margin, its rarely the product, it is invariably that they run out of cash.
8. Non existent Management Teams
Throwing a few CV’s into a business plan does not create a delivery team. Likewise a generic organisational chart with missing pieces and TBC (To Be Confirmed) is not going to inspire confidence with investors to part with their cash.
Entrepreneurs can often sell an idea but they do not always inspire they can select a balanced team of people with the right skill mix, from the financial management to key leadership roles and the right operational team to deliver your ambitious plan.
Having a structured management team with operational structures is essential for success. Track records matter, as much as having clear roles and responsibilities laid out in delivering the operational plan which underpins the business plan.
9. Poor Evidence of Demand
A significant area of concern when planning is justifying the sales forecast or demand levels for a product or service. This breaks down into the two main elements used in forecasting: the use of historical facts and the dependency of subjective assessment.
Sales forecasting, is the vital tool to identify the basis of all projected revenue figures that can be considered credible in the wider context of the plan. Unless there is verifiable demand for the idea, the risks grow out of all proportion, particularly if the initial start-up or investment costs are high.
Minimising risk in a business plan is all about gaining an understanding the potential demand and how the company will with this plan create or drive that demand rather than concentrate on ‘the product or the idea’. This classic cliff edge is a silent killer for investors, they don’t believe in it.
An effective business plan needs to be consistent throughout as all the various strands are brought together into one single entity, the plan. It is pitfall which entrepreneurs gloss over, but investors relentlessly prod before committing to any plan.
If there are multiple authors of the plan the risks of inconsistencies will exponentially increase. Extrapolating data can also cause problems, using research data and then jumping from possible market size to sales potential and then sales forecast are classic pitfalls which need to be thought through.
Presenters of the plan must have a simple narrative that runs through their plan, using key facts and staying ‘on script’ so as to ensure that a cohesive story is communicated. The numbers must also be consistent with the broader content so that there are no contradictions between them.
There is always competition. Yet the number of times the phrase“there are no competitors” appears in plans is considerable.
It does not matter how unique the proposition is there will also be some other business competing for people’s money. While there may not be a direct competitor it will certainly be a transfer investment that customers will be making. The business plan must recognise where the customers invest is coming from. If competitors are not identified in a business plan then the only credible assessment is that the company has not been diligent enough in its research.
Also remember that no company lives in a vacuum, as soon as you launch (or before) the marketplace will change. What will the competitive landscape look like in a few days, weeks, months or years? Can you create or establish significant barriers to entry, or is it likely that a successful market entry will be followed by better-placed competitors with greater resources, etc
You never get a second chance to make a great first impression.Your plan needs to be right the first time and the content needs to be accurate, clear, concise and correct.
More often than not business plans need to be completed by a certain date and hence the final stages can be rushed, a classic pitfall.
Consequently, in many instances the final output does not do justice to the plan. Attention to detail at the end is vital, so ensure you have a completed plan with references and formatted correctly. Also ensure the content of the plan has been edited down to a digestible size, use appendices for details.
Get someone removed from the process to proof the plan. If a presentation is part of the process, it should reflect the Executive Summary.
In Summary The Top 12 Business Planning Mistakes are caused by:-
Business plans by definition have a purpose of communicating a course of action so make sure they do that primary role. Support inevitably means resources with the primary aim of the plan often being to secure financial investment. Explain the invest what it will be used for and how it will be protected from these classic pitfalls and cliff edges.
Writing a successful business plan is all about preparation, about being as thorough in your research and planning as is possible. By avoiding the cliff edges and pitfalls above, the chances of the plan objectives being met increase substantially.