Welcome to the latest blog in my series on building a successful consulting business. In this piece, I will be looking at business planning. It is an extract from Guide 03 (Business Planning) of the ‘Five-Year Entrepreneur Series’.
This set of articles looks at why having a plan, and a planning capability, is so fundamental to your future business success.
Over the course of this next set of blog posts, we will also take a look at what is the right balance between planning and doing. If you are not already doing so, you should be encouraged to start developing a planning process that is configured to work for you.
Hopefully, by the end of this series, you will know what a good plan looks like, understand the fundamental role that ‘leverage’ serves in a professional service business and leave with ‘a plan for the plan!’.
All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dream with open eyes, to make it possible.
T. E. Lawrence, The Seven Pillars of Wisdom
So, why plan?
Of course, there is the rather glib answer to this question of the ‘he who fails to plan, plans to fail’ variant. That said, an oft-voiced retort to this, purloined from the military, would be ‘no plan survives contact with the enemy’. Or, put another way, no plan survives the transition from conceptual conjecture to actual engagement with the real world. So, are you better just to save the energy, potentially wasted in dreamy flights of fancy, and get on with the doing? Simply put, no. Which is why the military, for example, who fully recognise that detailed planning rarely ‘goes to plan’, also recognise, and invest large sums of money in, the development of their planning capabilities. Why so? Well, because when the fog of the real world is all around you, a key success factor is having a shared, baseline understanding of your ultimate goals, your parameters for movement and everyone’s roles and responsibilities. The value is not just in the bit of paper you have labelled ‘Plan’ but, rather, in all the preceding analysis, scenario/contingency planning and shared conversation that gets you to this point.
If I had to point to one, single determining factor as to whether a business owner is going to achieve their goal of value release within a defined period of time it would hinge on this … whether they can point to an actual, shared plan. Not a conceptual one in their head, or an un-captured set of discussions (that are invariably remembered differently by everyone) but some actual documentation of clear targets, timelines and responsibilities.
Frankly, it astounds me how many professional service firm owners – particularly in the management consultancy field (who supposedly advise their clients on such matters) – do not have this. It is, of course, no wonder that any whimsical ambition they potentially have to release value in the coming years rarely manifests. Whilst a positive response to the question ‘Do you have a plan describing how you are going to build and release value?’ is no guarantor of success, I can assuredly say that answering it in the negative is a near guarantee such an event will never happen.
I am, however, still guilty of mild hyperbole here. Your time is precious so you deserve to know the tangible reasons why it should be, partly at least, allocated to both planning and the on-going development of a planning capability within your forming team. I would cite the following reasons:
(1) Foundation for Performance Management
First, and foremost, your plan should ultimately – through structured analysis and working – get you to the point where you have clear targets. The most important targets will be your financial ones – specifically, though not solely, revenue and profitability. Once set, these targets should be left alone for a concerted period of actual delivery, performance assessment and variance control.
Most companies will work on the basis of a main planning exercise annually (with, say, a forward horizon of two to five years) with the potential to refresh baseline targets quarterly if something truly anomalous comes along. It is only with these clear targets, that you get practiced in the honest endeavour of measuring what you actually do – such that you can compare it with your plan. It is only, furthermore, in the honest conduct of this (plan cf. actual) comparison that you can engage in, and continuously improve, the activity of analysing why the difference came about and taking the decisions and actions, if there is a negative variance, to redress it. If you don’t engage in this performance management activity you will never get any good at it – both from a forward forecasting perspective and an ‘in flight’ correction perspective. Both are invaluable capabilities within a successful business. In short, the first reason for planning is such that you have a foundational baseline on which to assess, and continuously improve, your own performance.
(2) Team Motivation
The best professional services firms have an open, engaged culture where every member of the team understands the firm’s vision, mission and objectives and their contribution within this. You can only enable a positive ‘psychological contract’ (or positive motivation over, and above, an actual employment contract) with your colleagues if they can see the ‘golden thread’ that coherently connects their objectives and efforts with those, ultimately, of the firm. The best way to bring this to life is to involve – for as long as size allows – the whole team in the planning exercise. At the very least, in my opinion, everyone in your firm should have possession of the plan. Only then do you have the potential to truly engage their best labours in the prosecution of it. You have to remember that you seek to attract the brightest, the most motivated, in your sector and such individuals will not stay for long if your firm has no plan, or, has a plan but a culture that keeps it hidden away in the owner’s drawer.
For all the reasons stated in the preceding paragraph, you will only attract the best staff if you can demonstrate you have a pre-considered sense of what you stand for and a clear direction of travel. In the early stages of start-up, there is probably no better indication as to the mental faculty and intent of the leadership team (maybe just you for now) than this document. From my own experience, I certainly know that, in the early days, my initial plan was of huge value in attracting the right calibre of person to join me. During this initial period – when you are a very small company – you are almost inevitably in a hard-sell mode as there is always wariness in the mind of the courted new joiner. They are joining something small, untested, with manifest continuity and solvency risk; more often than not, they will be leaving somewhere far more secure to do so. The best way of persuading them you are serious, and likely to succeed, is to share such a worked-up plan with them. In short, in the early days at least, a plan is the best recruitment tool you can have.
(4) Facilitates the Sale Process
Looking to the other end of the timeline – as our ultimate goal is to keep the option of a value release point open – you should envisage entering a competitive bidding exercise at some point in the future. I will aim to cover this in some detail in another article, but suffice to say now that an onerous component of this will involve putting together a detailed ‘Information Memorandum’ (IM) on your business. This document will be scrutinised by potential acquirers of your firm – who will have an insatiable appetite for the detail that concerns your business’ operation and performance. In many ways, the IM is an aggregation of your company’s preceding business plans. Even, however, with the existence of detailed, annually revised plans this is a very time-consuming affair. Without pre-existing plans, it is a virtual non-starter. Just believe me when I say you would not want to even enter this exercise, if you had no pre-existing, related documentation to call upon.
(5) Purchaser Due Diligence
Further to all these points, any serious, potential purchaser is clearly going to want to evidence the management capability inherent within the business. Again, there is no more potent evidence for such disciplines than that of a set of well-structured, historical plans (used in the context of your performance management processes). If this is coupled with evidence of a regular, well-run planning process that involves your whole team – thus securing their engagement – you will tick a mighty big box in the buyer’s mind.
I am no psychologist, but I would argue there is a tangible, motivational value inherent in setting planned objectives. The classic self-help book Psycho-Cybernetics, written by Maxwell Maltz, set out this theory and it now forms the basis of much self-help literature, personal development and elite athlete training methods (1960, Psycho-Cybernetics Foundation). There is a real mind–body connection, and potency, in visualising and documenting positive outcomes. Developing a positive inner goal is the means to developing a positive outer goal. Simply put, the better you are at visualising your business goals internally (with all the conversations and contemplations that lead to plan creation), the more chance you will have of outer (actual) success.
In a future article, I will look at ‘planning versus doing’ … and getting this balance right.
To be continued …
If you are interested in re-charging your business ambition/strategy/plans, Dom runs his (three-day) Five-Year Entrepreneur Retreat twice a year (March, September) – see here for previous delegate testimonials and details on future presentations. If you would like to make a reservation (capped to 14 attendees per Retreat) please drop a line via the contact page.