Tag Archives: robert donnelly

The Plan-for-Planning Process – Step 7

Step 7 – Contingency Plan

The seventh, and last, chapter/section in the business plan is the contingency plan section (or the “what if?”). Since very few plans happen exactly as planned, and to demonstrate good planning acumen assuming a question like: “What will you do if you do not make the plan?” – from anyone who reviews the business plan, you need to contemplate the two obvious scenario’s:

  • What will we do if business is “better than” planned?

And

  • What will we do if business is “worse than” planned?

This then anticipates that the management team has developed Key Performance Indicators (KPI’s) that can be tracked every month. KPI’s being those 6 or 7 key indicators of business health for any business.

These KPI’s should have “trigger points” where it is obvious that the business is doing either “better than” or “worse than” the volumes in the best case scenario contained in the business plan. Reaching these trigger points should indicate that it is time to implement one of the predetermined contingency plans outlined in this section of the business plan.

Tracking these KPI’s in combination with the review of progress against the quarterly strategic milestones in the strategy section, the management team has a proactive methodology for maintaining control over the business.

Once developed in the way in which advocated in the plan-for-planning process, any management team can easily create a winning business plan.

The Plan-for-Planning Process – Step 5

Step 5 – Asset Management

The fifth chapter/section in the business plan is the financial section. It should contain the projected Profit & Loss Statement, the Balance Sheet, Cash Flow projections, and key financial ratios for the business plan.

All of these financial statements should contain commentary where required to explain and clarify any specific numbers.

Additionally, any substantial capital expenditures over the business plan period should be noted and explained in the Asset Management section.

Summary level examples of these statements are:

                                                Projected Profit & Loss

                                                Operating Plan Period

                                                20XX     20XX    20XX

     Sales

     Cost of Sales

     Gross Profit

     Expenses

     Net Profit

                                                   Estimated Balance Sheets

                                                   As at:  20XX   20XX   20XX

        Assets

        Liabilities

        Equity/Net Worth

 

                                                    Estimated Cash Flows

       Opening Cash 1/01/20XX

       Incoming cash

       Outgoing cash

       Closing cash  12/31/20XX

 

                                                   Estimated Significant Financial Data/Ratios

                                                    20XX     20XX     20XX

      Working Capital

      Inventory Turns

      Receivables Collection Periods

      Debt to Equity

      Return on Assets

 

                                                    Projected Capital Expenditures

                                                    20XX     20XX     20XX

     Asset Replacements

     Expenditures on

          Strategy 1

          Strategy 2

          Strategy 3

Reviewing the Asset Management will give any reader a clear picture of the projected financial situation of the company over the business plan period.

The Plan-for-Planning Process – Step 4

Step 4 – How are we going to get there?

Typically called – “Strategies” – this section/chapter lays out the strategies that the company has developed to grow revenues and profits for implementation during this business planning period. You’ll want to answer all of the questions for each strategy to ensure full consideration.

The format for this section is (for every strategy):

  1. What the strategy is (a description of the strategy)?

2.  What the rationale is for the strategy (why we are implementing this strategy)?

3.  Who is responsible for implementation (a specific manager)?

4.  How long is the implementation going to take and what is going to be accomplished quarter-by-quarter (specific activities by quarter)?

5.  How much is going to be spent on each activity each quarter (a quarter-by-quarter listing of expenditures)?

6.  What is the expected return on the successful implementation of each strategy (the ROI for the strategy)?

When completed, this section should present a clear picture of what the management team plans to accomplish to continue to grow the revenues and profits for the company, and how much that will cost.

This section is particularly important because it lays out the quarterly strategic milestones that have to be reviewed on a quarterly basis, so that depending upon the success or failure of the expectations for each strategy for that quarter, decisions can be made as to how to continue to proceed strategy-by-strategy. And how to continue to allocate investments based upon these results.

This way management can better control the investments in the company’s future depending upon the levels of success or failure of each strategy on a quarterly basis.

The Plan-for-Planning Process – STEP 2

In this week’s post, Dr. Business continue with Plan for Planning process by discussing STEP #2:

Step Two – What will help or hinder?

Typically called – “Key Problems & Opportunities” – this section/chapter identifies short term (within the next year) problems that the management team must deal with/resolve, and short term opportunities that can be exploited over the coming year.

Problems and opportunities also come from the SWOT analysis described in Step One. Every company has short term problems and opportunities that need to be described in their business plan. To have a well done and complete business plan theses issues have to be highlighted with the actions planned to deal with them discussed in detail.

The format for this presentation and discussion is:

  • Description of the problem e.g. Training and development of sales personnel.
  • Action plan: Contract with a professional sales training company for quarterly one day detailed seminars on professional selling techniques.
  • Measurement: Individual salesmen’s improvement in their selling techniques as measured by: 1. Increased sales, and 2. Feedback from customer surveys.
  • Description of the opportunity e.g. Implement Customer Relationship Marketing (CRM) system.
  • Action plan: Research CRM systems for the one best suited for our business/marketplace during the first quarter.
  • Evaluate and select a system during the second quarter.
  • Begin implementation during the second half.

When done well this section/chapter of the business plan describes management’s proactive plans to deal with the problems and opportunities identified in the SWOT exercise. It represents positive actions that are being taken to deal with issues of critical importance during the first year of this business plan.

It should reinforce stakeholder’s confidence in the management team and motivate them to delve further into the longer range plans outlined in the business plan.

The Plan-for-Planning Process – Step 1

One of the major reasons businesses fail is either because they do not have a business plan, or have not updated the plan that they once developed.

A business plan is a story about your business: Where are you now? Where do you want to be? And, most importantly – How are you going to get there, and by when?

After helping hundreds of company’s develop business plans and teaching business strategy for many years, I explain my five step Plan-for-Planning Process in my book.

Step One – Where are we now?

Typically called – “The Executive Summary” – this section/chapter explains where a company finds itself  at the beginning of a new planning period in terms of:

  • Their sales and profitability at the end of last year.
  • Their position in their marketplace vis-à-vis their competitors.
  • The results of the most recent SWOT analysis.
  • What their unique value proposition is.
  • Management’s description of their vision for the future of the company.

This section can only be completed after the management team has gone through an evaluation of the current situation the company finds itself in. This encompasses an honest SWOT analysis. SWOT being:

  • Strengths – What is our core technology i.e. what do we do better than our competition?
  • Weaknesses – What don’t we do well i.e. in terms of execution of our strategies?
  • Opportunities – What immediate options do we have that we need to implement as soon as possible?
  • Threats – What can cause us to lose customers, and what can we do about it?

Since a business plan is a story about a business, and as a story it has to be interesting and motivating for stakeholders to want to know more. Think about the introduction to any good book that you have read – hasn’t it encouraged you to want to read on?

Another important value to a well done business plan is that it can be shared with all the company’s stakeholders to give them confidence that they are part of a growing successful and profitable business. The most successful companies broadcast their unique value proposition, as well as the implementation of  well thought through strategies that support their vision for their future.

A well done business plan is akin to reading the annual report of any successful public company wherein the company explains: where they are now, where they plan to be in the next 3 to 5 years, and the strategies they expect to implement to get to where they want to be. The continuing ability of the management team to achieve their goals supports and grows the brand equity of the company. This should be the goal for your business plan, too.

Are mentors important for entrepreneurs?

In this week’s question, we ask Dr. Business “Are mentors important for entrepreneurs?”

Dr. Business says:

“Entrepreneurs are techies of one sort or another, and typically have never taken any courses on the fundamentals of running a business. As a result they need help and mentors are the ideal individuals to guide them during the critical start-up of their new business. They can help right from the beginning by sharing their feelings about the commercial viability of the entrepreneurs idea. Many entrepreneurs have great ideas that just will not fly either because there just aren’t enough customers, the cost are prohibitive, the technology too complex for the current market, or the competition too great.

If the mentor feels the idea has merit then the best that they can do for the entrepreneur is to guide them through the development of a business plan, and most importantly the break-even analysis for their first year of operations. The business plan is critical for two reasons (1) as a much needed education for the entrepreneur, and (2) as the basis for explaining and justifying the value proposition for potential investors. The break-even analysis lends even more credibility to the presentation to prospective investors.
Other types of mentors are accountants who can also help entrepreneurs understand the value of developing timely financial statements and budgeting. And, lawyers are essential to any business, and especially start-up’s who need help with a variety of contracts. Lastly, mentors who are experts at marketing can be very helpful in the current era of social media and mobile marketing.
The best advice I have for any entrepreneur is to establish an Advisory Board of mentors as soon as possible before launching your new business. They will save you from yourself.”
Thanks, Dr. Business.  As always, if you’ve got a specific question you want Dr. Business to address, email it to us.

A GUIDE BOOK TO PLANNING

Starting a business is never easy.  If it was, everyone would be doing it.  The challenge for most is the unknown.  When you haven’t started and run a business before, you really don’t know what to look out for.  This is where many turn to the Internet for answers.  We will spend hours searching from site to site to find the best advice.  I know.  I’ve done it many times myself and I’ve started a few businesses that way.  In fact, I started a new one this summer and am still in startup mode.  There are two ways to start a business: planned and unplanned.

My first business I thought I was very smart and could figure out everything I needed to know when I came to it.  Unfortunately, I didn’t know as much as I thought I did.  There were many legal, insurance and finance questions I couldn’t answer.  I had to stop the business to understand what these issues meant.  It really became a nuisance when I would have to stop selling my services to go figure something out.  It took me a couple of businesses to figure out that you really want to plan out your steps as much as possible before you start the business.  There’s nothing worse than having to hold a customer off while you go obtain some certification or license so you can offer them your service.  Planning early allows you to focus on selling the business when you start.  After all, that’s where the money comes from.

In my most recent business, something outside of my expertise, I decided to do the right amount of planning prior to kickoff.  I’m actually selling services to the government so I can’t afford to be unprepared.  So, I chose a detailed planning process to prepare the business.  Since this business was outside my expertise, I needed a guide to help me keep from wasting so much time figuring things out.  I’ve worked with Robert Donnelly for years and chose the guidebook he released some years ago, entitled “Guidebook to Planning.” It is a great start, complete with examples, illustrations and even forms.  Donnelly has a lot of experience in entrepreneurship.  In fact, some of the information from this book has been utilized in training classes he developed for BUSINESSWEEK and INC magazine.  This guidebook is a compilation of a lot of experience and will save you considerable time developing that invaluable plan for your startup.

While my latest business is still in startup mode, I haven’t had to spend any time going back to setup something I missed in the beginning.  Right now, I spend my time selling the services to potential customers. It’s exactly what I want to be and need to be doing.

Check out Donnelly’s Guidebook at Amazon.  Get the book.  Use the process.  Then, contact him to answer questions that still plague you.  It doesn’t get any easier than that.  Remember, you can always do things the hard way.  Why not take the time to give yourself a great start?

guidebook to planning

Ask Dr. Business – What is the first analysis an entrepreneur needs to perform?

In this week’s post, Dr. Business tells young entrepreneurs about the first thing they need to figure out when starting a business….and it isn’t what you think!

This week’s question:  What is the first analysis an entrepreneur needs to perform?

Dr. Business says:

You would think that anyone starting a new business would have a business plan – right? Wrong!

An even more basic is the need to develop a break-even analysis for their first year in business. When you consider that most entrepreneurs are using their own money and money that they have convinced relatives and friends to invest, shouldn’t they at least do some analysis as to how are they going to recover that investment, and at a minimum break-even for that initial year?

Every new business requires two levels of investment. The first just to get ready to do business, and the second the monies required to operate the business after you have opened the door. Even if you are only developing a new App, it costs money and time to develop and test the App. Then it requires more money and time to market the App. Hopefully, you will generate enough revenue from the App to cover these investments of time and money during the first year of operations. If not, then obviously you have lost money.

The question then is do you have enough money to continue the business? The statistics are that most new businesses fail within the first 12 to 18 months. Why is that? Primarily because there was no plan and as a result the founders ran out of money.

Let’s take something as simple as opening a bagel shop or pizzeria as an example. First, space has to be leased and constructed to accommodate the equipment required to make bagels or pizzas. Then, the equipment has to be purchased, installed and tested.  After which, the rest of the space has to be developed to accommodate customers, as well as adding a phone, fax, computer, and other equipment. This represents the initial investment just to be ready to make bagels or pizzas. Then ingredients have to be bought, employees hired, menu’s created, and some marketing and promotional materials developed to let prospective customers know you are in business. Once the doors are open, this second level of investments have been made, and will continue to accumulate as operating expenses.

Now the founders have to determine how many bagels or pizzas they have to sell every day, week, and month, to cover all the money that has been invested just to break-even, and is that possible? The question also remains “why should customers buy your bagels or pizzas, as compared to those of all of your competitors nearby”?

As this example illustrates, the planning that has to be done for any new business just to determine if it can break-even in the first year of operations is critical. It also demonstrates how easy it is for entrepreneurs to fail without doing this basic exercise before they begin.

Have you ever thought about how many bagels or pizzas your favorite bagel shop or pizzeria has to sell every day to make any money?

There is an old maxim: Nobody plans to fail…the just fail to plan.

Ask Dr. Business – Do I really need an MBA to start my business?

In this week’s post, Dr. Business answers the question about the need for an MBA to start a business.

Here’s what Dr. Business had to say on the topic.

The more education in business that anyone can get before starting a business is always a good thing. However, getting an MBA is not a prerequisite for young professional entrepreneurs who want to start a business. While all the courses they would take would help them with one aspect of their new business or another, MBA courses are really designed for those middle managers who want to continue to climb the corporate ladder, not start an entrepreneurial new business.

The exception to that is the MBA course on Entrepreneurship & Innovation that I teach. It is an elective and as such attracts MBA students who have an interest in starting a business, or at least getting to know more about all that is involved in the process. The primary deliverable in the course is the development of a business plan for an idea that they have had for a business for a long time. The value of the course for these MBA’s is that it gives them an opportunity to see if their idea for a business is commercially viable, or not. More importantly, they get to see how all the other MBA courses that they have taken contribute to managing a successful business in one way or another. Every year several of my MBA students in this course actually use the business plan they developed in the course to start a business.

There are a multitude of sources for young professional entrepreneurs to get advice and support. One of the best sources is the multitude of incubators and accelerators that are available now at many colleges, or affiliated with universities in one way or another. Colleges and universities also have successful alums volunteering to be mentors for would-be entrepreneurs. Lastly, there are a multitude of books that have been published and continue to be published on entrepreneurship and how to start and manage a profitable business. Success stories are also published almost every day in the business press.

The best advice I have for young professionals is to watch ABC’s TV show “SharkTank” to get a first hand view of how NOT to do it!

Join us next week when Dr. Business breaks down another burning question in the mind of the startup entrepreneur.

Ask Dr. Business – How do I know if I want to be an entrepreneur?

This week’s question:  How do I know if I want to be an entrepreneur?

Dr. Business:  Everyone has an idea for a business, but not everyone can be an entrepreneur and convert that idea to a commercially successful enterprise. Why is that? Primarily because the concept of entrepreneurship is inherently about taking risks, and most people are risk averse. Additionally, not all of their ideas are viable enough to be profitable, or there just aren’t enough customers, the cost of making it happen is beyond their means, etc.

Another major requirement for success as an entrepreneur is a deep rooted passion to the extent that it consumes them. Entrepreneurship can be a long hard road to success.  Passion for your purpose is vital.

Lastly, is the lack of experience in running a business. For all these reasons, I require the students in my course on Entrepreneurship to develop a business plan to see if their idea is commercially viable and to help them understand what it will take in terms of time, money, and pain to start and manage an embryonic business. It’s an exercise that can save them from themselves. The popular show “Shark Tank” is a wonderful platform for anyone wondering if they want to be an entrepreneur to observe what happens to would-be entrepreneurs and their ideas.