Why Business Plans Are BS For Business Owners

Once upon a time...

Sam was worried about his electrical supply business, and rightly so.

The initial burst of growth over the first three years of the business had halted in the fourth year and in the fifth his sales and profitability were now going backwards.

Fast.

Sam urgently needed more bank funding to keep the business afloat until he could drum up some more sales.

So he first met with Pam, his CPA, to complete a loan application and she started the meeting by reviewing the business's financials.

"Not pretty" she observed.

"Agreed" said Sam.

"But I can't figure out why we're in free fall. Sure the GFC had an impact but we actually grew in the early stages of that buy now we're going backwards. And I really need this loan so the business can survive the drought we're going through at the moment."

An uneasy pause filled the room.

"Do you have a business plan Sam?" Pam asked, even though she knew the answer.

Another uneasy pause.

"Er... not as such" replied Sam.

"Well that may explain why your business is in decline. The importance of a good business plan is one of the fundamentals taught at every MBA college and if you hire any business consultant worth their salt it's one of the first things they'll want to put in place. Besides" she continued, "the bank's going to want to see a business plan including your financial projections before they'll even think about giving you a loan".

Sam could see the logic of Pam's argument but protested: "Okay but I've got no idea how to do a business plan, let alone financial forecasts. Frankly, that sort of stuff gives me a headache."

"Well naturally I can help you with the numbers side of the plan. And as for the rest of it that's no problem either" said Pam as she reached for the stack of business cards in her top drawer and handed one to Sam.

"This guy's a friend of mine but that's not the reason I'm referring you to him. He's not only got an MBA he's also a qualified business coach and he knows how to put together a plan that'll impress the socks off the loans officer at your bank."

Sam took the card, called the coach and they all lived happily ever after...

... not.

Quite the opposite in fact.

Sam met with Rudy, the business coach, who explained that yes, he could help but that he'd need $2,500 up front each month.

Sam didn't have that sort of cash to spare so he paid with one of his credit cards and made a mental note to apply for another credit card, just in case he needed it to fund Rudy's fee in the upcoming months.

After all, according to Pam and Rudy, getting that business plan sorted was not only the key to better business performance, it was also critical to getting the business growing again.

After a stressful couple of months, the business plan was completed, the loan applied for and thanks to the impressive chart in the plan which showed an upward trend in sales and profitability, the loan was granted, albeit with onerous monthly repayment conditions and the requirement for the inevitable noose-tightening personal guarantee.

On the one hand the loan brought Sam some breathing space but on the other he was more stressed than ever.

Sure, he'd paid off most of his outstanding creditors but how the heck was he going to service the loan repayments?

"Not a problem" said Rudy. "All we need to do is implement the plan. We've done the hard yards. You've now got a mission statement so you know what your purpose is. And you vision statement gives you a clear sense of long term direction. Also, you've now got that great looking wall plague that tells your team what your business values are."

"Well, ah... yes" said Sam, shifting a little uneasily in his seat "but how is that going to get me the new clients and the sales I need?"

"Whoa, steady on Sam" said Rudy. "Sure we need to get some marketing happening but first we need to make sure your staff Position Descriptions and your supplier agreement are updated. After all, there's no point in getting new clients in if you're not well organized in the back room".

Sam thought a moment.

"Well okay. You're the expert Rudy and you come highly recommended from Pam so I guess we better get started with the paperwork huh?"

Rudy and Sam worked together for another four months putting Human Resources and supplier systems into place, holding team meetings, recording agreed actions, reviewing the financials (which continued to deteriorate) and creating quality control checklists and documenting other systems.

But after a total of six months of headaches and extra hours, Sam finally had enough.

And at their next meeting he let Rudy have it.

"Rudy I've now spent fifteen grand with you and after six months of blood, sweat and the occasional tear, I still don't have any more clients and not even one additional sale to show for it. It's like my ship is still sinking and all we're doing is straightening the proverbial bloody deck chairs!" he protested.

Rudy was ready for this.

Sam wasn't the first client to express such a concern.

"Hey Sam, relax. You've come a long way and now we're ready to start the marketing. Don't give up yet, we're just about there. We're going to redesign your Yellow Pages advertisement, get you onto Facebook and start your Blog. After all, most marketing is going on-line now and so of course we need to get your website made over as well. Also we need to do a review of your product range, complete a customer satisfaction survey and we should probably hire a research firm to find out what the market place really wants. All that'll give us a whole lot of valuable information that we can use in our marketing."

At that point Sam exploded. "Are you freakin' crazy Rudy? That's going to cost me a small fortune and it's gonna take even more months. I'm struggling as it is and if I don't get new clients in soon I'm going to have to shed some staff or shut the doors.

Rudy, it's time you left. We're through."

Rudy didn't mind too much. He'd seen this before. And after all, he'd still banked fifteen big ones.

Sure, it was a shame that Sam didn't 'get it'. "But I mean, what does he know?" Rudy thought. "I'm the one with the MBA and I'm the one who earned my business coaching diploma with first class distinctions."

----------------

Unfortunately this sorry story, or variations on its basic theme of wasting money on BS theories that don't put money into the business account, has been repeated hundreds of thousands of times the world over.

It's the classic anti-entrepreneurial mistake of putting management ahead of marketing.

Not that management is unimportant, it's just that there is nothing to management until the marketing is working.

And so that leads us to the moral of Sam's story which is that it's effective marketing that makes the difference, not a business plan and not any fluffy stuff such as Visions, Missions or Values statements.

And no matter how exciting they may look, no amount of upwardly trending growth charts or row upon row of increasing dollar amounts will make one fig of difference in your business.

And even if your product or service is terrific and your clients love you, that's also not the thing that will make or break your business. The history of commerce is littered with millions of businesses that had a product or service that was good enough or even great but that went broke because they didn't invest enough focus into developing and refining systems that would bring in a steady flow of new clients.

To paraphrase the pragmatic and ever-inspirational Ed Johnson:

"They say that if you build a better mousetrap then the world will beat a path to your door. The hell they will. It's the marketing that makes the freakin' difference."

Summary: once you've got a product or service that people like, stop messing with it and forget about management initially. Instead, Make the time to continually grow your "Marketing Muscle" and then flex it every day of the week.

Once you know how to get people buying your stuff, then, and only then, should you start messing with the management side of your business.

How can you build your marketing muscle? Simple... If you want to grow a physical muscle you need to do two things: feed the muscle the right diet and then exercise it.

And it's the same with growing your Marketing Muscle: feed your mind the right diet of proven marketing ideas and then exercise the muscle by implementing those ideas.

Then, and only then, you may live happily ever after...

Business Consultant Business Plan: Leave the Holes

Today we are going to talk about your business consultant business plan and I am going to challenge you to leave the hole. Let me explain what I mean. As consultants we do a lot of thinking. Our job is to think on behalf of our clients, but when it comes to our own business we think too much. Whether you are creating your first business plan or fifth generation new growth plan, I am going to challenge you to leave the hole. Don't try to think through all the iterations before you actually roll the plan out. Don't try to come up with every contingency, every plan A, B, C, D, E, F and G. Do your best to come up with sharp thinking, trust your thinking, and then roll the plan.

Old Mindset: Holes are bad and you must fill them. The old mindset that most of us have is that holes are bad and you must fix them. There is a fear that comes along with holes. We don't want anybody to assume we haven't thought our plan all the way through; we don't want the public embarrassment. However, one thing about holes is that holes don't make mistakes. If you allow your fear of failure to drive you, you will rush to create a new process to solve for a problem that may not exist at all. That rushed process can create plenty of mistakes. But if you have the courage to leave the hole then no new problems will arise. You can manage the situation with more patience and savvy.

Also, consider that a hole is a legitimate data point. Customer complaints are data. Lost revenue is data. Low employee morale is data. Even if you get a zero as the specific output, that is a data point as well. The holes you find are prompts to ask great questions. Think about how the work is supposed to be done. If you realize a hole, this is an opportunity to brainstorm around how the hole got there and solve for the root cause.

New Mindset: Holes make us better. In the spirit of a new mindset, holes actually make us better. Holes remind us of how our best work is done. You review a process, see a hole and think about what's supposed to be there. How do you want it to work in a best case scenario? The existence of holes allows you to brainstorm in that way. Thinking this way gives you an eye for greater opportunity. Perhaps the existing process is healthy, but maybe you notice a hole before that process begins, or after the process ends. Those holes allow you to see what additional value can be added as an introduction or conclusion to your process.

Holes also represent real (and valuable) business pain. If you are supposed to have a five step process and you consistently miss step two, the consistent miss causes your business pain and pain teaches lessons. Pain attracts attention. None of us like to be around pain, but it's hard for us to forget real pain. Business pains are things like lost clients, lost revenue, lost employees, lost opportunities, and lost bid prospects. These pains allow you to zero in on the holes that exist and fix them. Take the opportunity to become a better company.

Have the courage to leave the holes. Sometimes you have to go through loss or pain in order to appreciate what in that process needs to be changed.

The system doesn't work if you cheat it. With that said, you must have the courage to leave the holes and the system doesn't work if you cheat it. If you insert yourself in certain parts of the plan to cover up holes, you are cheating. You are not allowing the process to stand on its own and that's necessary if you are going to make an honest analysis of it.

You can't be afraid to discover a hole. You do your best thinking, put together your best strategy, and realize errors after roll-out. That's what happens in business. You can't be afraid of finding a hole later on in the process.

Don't rob your company of the discipline it needs. You need the courage to leave a hole so that your entire business can see that an error has developed in how you do business. Because the solution may not reside in you as the lead consultant, that solution may reside in some other business relationship. But if you don't have the courage to leave the hole, then your entire community can't notice the hole and rally to fix it. Your business community includes your team, employees, vendors, customers, and clients. You all work together to create the best possible business environment. Be transparent with the holes so everyone can be part of the solution.

As the leader of your consulting business you have to be okay with making a mistake and you have to be OK with possible embarrassment. You've got to be OK with certain systems and certain processes failing. Those failures give you an opportunity to improve and that constant spirit of improvement is what makes you attractive as a consulting company. The fear that drives perfection only makes you weak and it's a matter of time when that weakness is revealed to the marketplace. Have the courage to reveal the holes in your business and then work hard to improve them.