As a consultant, I spend a fair amount of time reading business plans – sometimes to familiarise myself with the firm I am working with and often to help them deal with a tricky strategic problem. I see many excellent plans – but also a number of shockers. So as we hit January – a key time for many firms in the planning cycle – I thought I’d highlight some of the most common problems – and possible remedies.
1. Lip service and form filling – Some firms send templates to their business units and ask that they complete them. So some simply fill in the form to provide the requested information without really thinking about what they are writing. They have a plan – apparently – but it is of little use to them or the firm.
Stop and think. What do you need from your plan? What does the Board or anyone else need from your plan? Produce what you need to run your business and then communicate the essence to others. The templates are to help the Board manage the finances, compare investment opportunities and monitor progress, your plan will remind you of what you and your team needs to do to drive the business forward.
2. Information overload – Analysis is a key part of the business planning process – you need to look at what has happened before, what is happening now and what is likely to happen in the future. Analysis helps you identify the key issues to address and the opportunities to exploit. You also need a benchmark against which future progress is measured. But pages and pages of analysis are of little use unless used to underpin and explain your choice of goal and strategies to drive the business forward. Business planning is a journey – the insights gained along the way are valuable – but it is the decisions that you make as a result that will guide future action.
Step back from the analysis. Allow yourself some time to synthesise. What are the key issues and opportunities? What choices and decisions will you make as a result of the analysis? The plan needs to give confidence to the readers that you have a firm grip of the situation and know how to move the business unit forward. By all means complete the analysis – it will give you and your partners confidence – but don’t cram it all into the business plan which only needs a summary in the Appendix.
3. Inward, operational focus – This often happens when a department produces a plan. The focus is on the internal structure and operation – perhaps looking at increasing efficiencies – without enough consideration of the market, clients, value proposition and competition. The recession has necessarily forced partnerships to consider cost-cutting and efficiency – the cost side of the profit equation – but has allowed businesses to neglect the future growth aspects.
Take a structured look at your present markets and the clients – what is it that they need? How is your business positioned against the competition? How are you going to compete against others? How are you going to reach your market and what is it that you are going to “tell and sell” or “collaborate and learn from” them? Then look at markets where there are new needs or less competition or where you have some insight or advantage you can exploit. New market or service/product development strategies won’t always generate profits in the short term, but they need to be part of the business plan.
4. Business as usual – This type of plan assumes that next year and the year after will be a continuation of what has happened in years gone by. The plan focuses on the operational elements of continuing to operate in the same markets with the same services supported by pretty much the same structure at present – possibly with an anticipated uplift in income and/or profit.
Your plan needs to address “the business for today” (operational) as well as “the business for tomorrow” (strategic transformation). If you are totally focused on running the business as it stands then this indicates that there might be a problem with management. The time horizon is short term and the business might not be adapting early enough to imminent changes and opportunities. Spend some time thinking of the different things you need to do in order to build a successful business for the future.
5. Wishful thinking – These are the plans that forecast a market-busting growth rate (e.g. above 5%) and focus on what needs to be done to support this growth. Yet there are no strategies for increasing demand that will support the growth. This is where firms find themselves working harder and harder to achieve less and less because they are trying to sell more into an overcrowded or changed market place. If you want growth, you will have to identify markets where this is possible, perhaps develop new products and services and craft strategies to generate more business than you do at present.
Ask for help from your marketing/business development team or an external adviser to guide you through a structured analysis of your current market and any potential sectors you are considering. Ensure that you consider the growth rates achieved by the best in your market as well as the worst. There are many strategies to support organic growth which should be considered. And lateral hires and acquisition/merger should be analysed carefully if you want to increase profitability and grow the practice strategically rather than bolting on additional revenue and a whole bunch of new management challenges.
6. Do it all by Friday These plans are sound in terms of the analysis of the issues and the proposed strategy but then – at the critical stage of charting how to achieve the aims – ignore the resource issues, both in terms of cash for investment and management time for effectively tackling the implementation. Lists of actions are included – sometimes even with allocated completion dates and responsible individuals – but with little consideration on how those individuals will accomplish these new tasks while remaining busy with the “business as usual” stuff.
Allocate some time to addressing the implementation separately. Prioritise those tasks that really must be completed early and postpone others until later in the year – or even to next year. Deploy project management techniques to look at the links between projects which may help with scheduling. Do an audit of the skills, strengths, preferences and time available from your management team and senior support staff. Consider whether external resources or other members of the firm can take some of the load. Be realistic in what you ask your management to do – too many partnerships expect team leaders to achieve tough fee-earning targets, shoulder all the management responsibilities for running a department or office and fire fight the day to day crises – as well as the extra workload dictated by the business plan. It may be necessary to ask the second tier to step up to tackle more day-to-day issues whilst the leaders deal with the trickier new strategic stuff which would be a great step forward in your succession planning as well.
7. Mismatch between top down and bottom up This is where the Board has agreed an overall plan for the firm but where those at departmental or business unit level have plans that don’t quite match the overall aspiration or direction. It may also be that the overall plan looks for growth in new markets and services that are not addressed by the current operational units.
Bring the Board and the team leaders together so that you arrive at an agreed overall plan and the component units understand their contribution to its achievement – and this may mean that some teams are taking a more aggressive approach (and thus more investment) than others. Also, consider forming special project teams to explore strategies or markets or services that are beyond the remit of the current structure. This also enables a more rigorous approach to risk management and investment appraisal of new projects.
Every business has a business plan – and some are more formal than others. Business planning should be an educational and collaborative effort – using the analysis and facts to inspire or cull ideas about future directions and possible strategies but also to support the decision making process. One of the most interesting challenges when assessing a business plan is “what is missing?”.
There’s no such thing as a perfect business plan – the markets are moving too fast – so they are constantly under review. Some firms prefer to develop a series of scenarios so that different strategies (and investment plans) can be developed and rolled out quickly as and when a more accurate picture of what is likely to happen unfolds.
But it’s a good idea to step back from the plans and the planning process to assess whether they are serving your firm and its partners, or whether you are slaves to a process that’s taking you nowhere.