General Business Planning

(Note: this is from my business plans coaching column this month at Entrepreneur.com. I’m reposting it here, with permission, for convenience of our BIG blog readers. Tim.)

Plans are wrong, but nonetheless vital. There’s a paradox for you. It’s a simple statement, one that I hope is somewhat surprising coming from a business planning expert; but it’s still very important. And it gets right to the heart of what business planning is all about.

More than ever, those who plan look to projections that often miss the mark. Nobody I know, and in fact nobody I’ve even heard about, accurately predicted the sharp plunge in the economy last fall. So of course those who actually use a business planning process are implementing a lot of course corrections, reviews and revisions.

It’s a great example of how this paradoxical statement — plans are wrong, but nonetheless vital — makes sense. As we look at the year to come, most of us are dialing down our forecasts. Does that mean we wasted our time making them? Not at all. How do we even make sense of where we are if we don’t have a map that shows us how we got there?

If you had a plan earlier this year and results differed greatly from what was expected, I hope you’re taking the time to compare those results, in detail, to the earlier plan. Look for where the differences were greatest. Look for where expenses were tied to sales. Look for the bright spots where sales held up. Look for how the numbers were supposed to come together, and not just how they didn’t.

And if you didn’t have a plan, then think of this as a good time to get a planning process started so you have a better view of your business in the future. Start making simple sales and expense projections. Don’t worry that they’re wrong; just make sure you go back each month and plot where and how and in which direction they were wrong so you can correct them.

You should only be wrong a month at a time, and as you use that plan-vs.-results analysis to look more closely at how things are going, you adjust again and improve results for the next time around. With each month, your grasp on reality gets better.

And then, as things go back up — and they will — you’ll be able to use what you learned to see the signs, anticipate and act accordingly.

This kind of planning process is what’s meant by the phrase, “The plan may be wrong, but planning is essential.” Then there’s another old military saying: “No battle plan ever survived the first encounter with the enemy.” What does happen, though, with battle plans as well as business plans, is you don’t know how to recover or how to adjust the plan if you didn’t have a plan in the first place.

Tim Berry
President and Founder
Palo Alto Software

Tags: business plan, business plan course correction, business plan review, business planning, plan-as-you-go business plan, Tim Berry
Posted on January 9th, 2009 | No Comments »

It is a New Year and time to …

Yes, yes, you’ve heard that a lot lately. Still, it is no less valuable nor less appropriate for having been used before. Prior to becoming a cliche, it was good advice.

The other morning the snow and ice convinced me to work from home for a few hours before driving into the office. So I assumed that I could simply sign-in to my office computer using our virtual network. Dang! That didn’t work. It turns out I didn’t know that my new office computer has a different IP address, and my log-in wasn’t recognized. I just assumed it was the same as my old computer.

Next I decided that I’d edit our company blogs using WordPress on the Internet. I assumed I could pull out my old laptop, set up the wireless connection, then sit back with a big cup of caffeinated black cup filler and start reading. Rats! That didn’t work either. The plug-in wireless card for my old laptop has given up the ghost. I just assumed that it would connect as it had last month.

So I rummaged around for another CAT 5 cable and strung it around the room to plug in next to my chair by the fireplace. Arrrrgh! I assumed the cable was good. Nope. I remember now! The window installation contractor told me last summer he’d dropped a chisel on the cable and cut it part way through. No problem. I’ll just crimp a new end onto it.

Blast it! I assumed I had a supply of crimp-on plugs. Plenty of 4-wire and 6-wire, but not a single 8-wire plug to be found. Grrrrrrrrrr.

I assume you can see where I’m going with this anecdote of assuming I could work from home? Yes? No? It’s the presumptuous assumptions we make about our businesses.

When we start a business we make a number of important assumptions. We assume our location will attract customers. We make a variety of assumptions about the demographics, lifestyle attributes, and trends of our target customers. We assume that our target customers will buy our products and services. We assume that our suppliers will be able to keep us stocked with goods at a certain price. We assume that our bank will continue to approve our line-of-credit. We assume that our hot, innovative, cutting-edge product will stay on top of the everyone-must-have-one list. And so on.

So now we’ve been in business for a while, and it is a new year. I recommend, I implore, I insist, I cajole, I triple-dog-dare you to take a close hard look at all those assumptions. Are they still applicable? In a sense, they shouldn’t be assumptions any longer. They should be verifiable facts.

Ask your bank if the line-of-credit is still available. Check with your suppliers. Can they still deliver and at the same price? Who are your real customers? (NOT who you assume they are, but who actually comes through your door and gives you money.) Ask them for feedback and suggestions and compare that with what you assumed. What’s changed in your area that might affect your business? For example, did your floor traffic increase or decrease when that new movie theater complex opened down the street? Did a new techno-gadget consign your product to instant obsolescence?

In Location, Location, Location Tim Berry posted about a venue that was a successful restaurant for 30 years, and then had a series of failed eateries in the same space. It would seem that a basic assumption had changed.

You and your business cannot afford to blindly trust that the assumptions accepted as true once will remain true always.

• Confirm what still holds true
• Identify old assumptions which are false
• Determine, if you can, why these assumptions were incorrect
• Make new assumptions where necessary
• Incorporate these changes into your monthly and annual business planning.

Steve Lange
Senior Editor
Palo Alto Software

My thanks to my co-editor Sara Prentice Manela for suggesting this post to me, after patiently listening to me whine tale of woeful assumptions.

Tags: assume, assumptions, business startups, established business, startups
Posted on January 8th, 2009 | No Comments »

Palo Alto Software Ltd is delighted to announce that we will be running a number of business planning workshops in London, U.K., commencing on 27 January 2009. These business planning workshops will be run in conjunction with Company Partners, a Wokingham-England based business matching service, and will be held at the British Library in Central London. These workshops will be the perfect complement to our best selling Business Plan Pro product and will cover everything from pitching your business to understanding key elements of your business plan such as sales forecasting.

There are a small number of early bird tickets still available for this inaugural business planning workshop.

Alan Gleeson
Palo Alto Software U.K.

Tags: business pitch, business plan, business plan training, business plan workshops, elevator pitch, pitch
Posted on January 7th, 2009 | No Comments »

Harumph. Google ads. This is a blog post reviewing Business Plan Pro; a nice review. I appreciate the comments. But, thanks to the magic of Google ads, it’s surrounded by ads for schlocky business plan templates. Dumb ads, making dumb promises.

For example: “download” a winning business plan? That’s nonsense. If it was already written, it’s not going to win anything but your wasted money. Or, worse yet, a business plan costing $18.95 that claims to be “investor/bank ready. Full research. Automated 3-year financials.” Does anybody buy that pitch?

And this stuff is interleaved into an article reviewing serious business planning software. Sigh … brave new world.

Tim Berry
President and Founder
Palo Alto Software

Tags: business plan, business plan software, google ads
Posted on January 7th, 2009 | No Comments »

I read a really useful post by Brad Sugars on Entrepreneur.com the other day and it reminded me of what Tim Berry and John Jantsch often have to say.  The post was about marketing planning and listed five things to avoid when putting your plan together. These words particularly caught my eye:

A good marketing plan is like a battle plan or a game plan; it should serve as a guide and a blueprint for the actions you need to take to grow your business. It should also have some flexibility because as you start testing and measuring tactics, you’ll need to shift strategies from time to time, to capture or gain share in a particular market. That said, a good plan doesn’t need to be complicated.

This post resonated with me because planning is what we ‘preach’, but it also resonated with me because it is so true. John Jantsch, marketing guru, always has tips on how to effectively market your business, and Tim Berry, business planning expert, always has tips on how to effectively plan and create a business or marketing plan. So much of what Brad had to say seemed to align perfectly with what John and Tim regularly blog about and teach.

As you enter into 2009 and think about how to keep your company charging forward, think about your marketing plan. Have you truly thought about and narrowed down your ideal customer? Do you have a marketing budget or know how much your marketing initatives cost? Do you have a handle on how to acquire new leads and customers? Are you tracking your progress? Make sure you have some sort of plan in place - but be flexible and know it is not set in stone. It is simply a guide to help you get to where you want to go and see your business succeed.

Happy planning in the New Year!

Kristen Langham
Manager of Business Development
Palo Alto Software, Inc.

Tags: Marketing, marketing planning
Posted on December 30th, 2008 | No Comments »

Time and again we’ve read a plan where someone thinks they have a unique service or product and proclaims they have no competition. Wrong. So very wrong. Everyone has competition. It’s a fundamental.

This week our Back to the Fundamentals article points out that Competitors are a fundamental reality of doing business.

Tags: , "Back to the Fundamentals", competition, competitors
Posted on December 30th, 2008 | No Comments »

It is fundamentally important to understand . . .

1. You need customers. The first thing you need to start a business, maybe even the only thing you really need, is customers. It all starts with at least one customer.
2. Who is your target customer. In detail. Not just generalities and demographics, not even just psychographics, but who is this person, what drives her, what does she really want from you, what does she like to read, eat, watch? Where does he live, and with whom? What does he drive?
3. Who isn’t your customer. Sometimes the secret to success is who isn’t your customer.

This week Tim Berry discusses the importance of knowing your customers, and knowing that Not everyone is your customer in an article in our series Back to the Fundamentals.

Tags: "back to fundamentals", customers, who is customer, who is not customer
Posted on December 22nd, 2008 | No Comments »

That is a scary question for lots, if not all businesses. We spend so much time focused on getting our businesses started, and then successfully running our businesses, that we give very little thought to disaster recovery planning. Really, planning for disaster sounds like we are betting on failure. Betting against ourselves. Yet we think nothing of getting health insurance and auto insurance and home insurance — betting against ourselves, betting that something bad is going to befall us.

So, why aren’t you betting against your business, as it were? Let’s change the view. Your disaster recovery plan is betting ON your business. You’re now going to bet that regardless of what disaster (natural or man-made) comes your way, you and your business are so successful that you are going to pull through and keep right on going.

Now, when I say disaster, do you immediately go to Hurricane Katrina? Mississippi River flooding? Santa Anna wind-fed wildfires? Yes, certainly you need to have your financials backed up off-site, maybe on a different server, or on some tape drives. Tax records for current and past years should be saved, and supplier and distributor contact information recorded somewhere besides your desktop computer.

But what about the small disasters? Right now the Northeast states are frozen solid and without power after an ice storm. Here in Eugene in the heart of the Willamette Valley, three inches of new snow and temperatures in the low teens have almost locked up the city because only the skiers have snow tires and know how to drive in this stuff. The rest of us are a hazard. Just a simple thing that we so casually depend on - driving to work - can be a minor ‘disaster’ for our businesses.

Fifty years ago, if we were blanketed by an ice storm we didn’t expect every business in town to be open. We were all in the same boat and knew it. In today’s global Internet economy we expect everybody to be open, busy, and available to us 24/7. How are you going to handle your business needs in times of minor crisis?

As an example, several years ago a summer windstorm knocked down many trees around our office. No power to our building at all. No computers, no phones, no lights, no tech support, no customer care for several days. Yet our Internet sales from our off-site servers kept up with business. We ended up buying a portable generator to get just enough juice to run our phone system to play a recorded a message for incoming calls explaining why we weren’t there.

Small businesses can be just as hard hit if a key employee has a car crash and ends up in the hospital, uncommunicative, for days, or if all 3 or 4 employees get the flu at the same time. You don’t want your business operations to slam to a halt because people weren’t cross-trained or no one else knew procedures.

One step you can take is to institute a system of transparent communications in your company, so that incoming and outgoing email communications continue smoothly. With Email Center Pro, email management for businesses, you can manage all of your email queues from one location and efficiently route email from one mailbox to another and from one user to another. Email is securely saved off-site, and, in the absence of an employee, someone else in your company picks up the communications thread immediately.

What would you do to backstop your business if calamity should strike? Give some thought to protecting and recovering your company, your records, your business and your customers in the event of disasters, both large and small.

Steve Lange
Senior Editor
Palo Alto Software
Email Center Pro

Tags: , crisis plan, disaster plan, disaster recovery
Posted on December 17th, 2008 | No Comments »

I attended the Techcrunch Talk hosted by Mike Butcher in London yesterday (December 16th). It was a fantastic event with a host of excellent contributors including Barry Vitou (Winston and Strawn),  Sean Seton Rogers of Balderton, Andrew Scott of Rummble, Greg Marsh of Index Ventures and Colette Ballou of Ballou PR.

Here are some of the key lessons from the event:

1. Need to monetise early

The days of entrepreneurs  being able to spend two years on a concept before it brings in revenue appear to be well gone. The revenue model also needs to be built in up front rather than tacked on afterward.

2. The more revenue streams the better

If possible, seek to supplement income for your new idea while it is in development, e.g., can you undertake some consultancy? Better still, can you find someone who will help pay for a prototype?

3. Manage cash flow

Ensure your business plan includes a realistic cash flow forecast, break-even points and milestones. Click here for more information on cash flow management.

4. Next year is the year of bootstrapping

As funding dries up, cash burn rates need to be managed very carefully. Bootstrapping is likely to become increasingly important for entrepreneurs.

5. Need to reduce cash burn with new solutions

Entrepreneurs need to closely analyze where they are spending to assess whether there are significant cost savings to be made from switching to newer more competitive solutions, e.g., outsourcing hosting to Amazon hosting.

6. Need for better business plans

One thing evident from the pitches, was the need for better business plans given the more competitive market for funding. Many high net worth investors have suffered in the past year (across a range of asset classes), reducing the number of angels currently looking to invest.

For more information on the Techcrunch event click here.

Alan Gleeson
Palo Alto Software Ltd - UK

Posted on December 17th, 2008 | No Comments »

Whether you name your business after yourself or find a catchy play on words, choosing the name for your business is a fundamental task.

This week Tim Berry, well-known business-planning author and blogger, offers advice on naming your business in our Back to the Fundamentals series here on Bplans.com.

Tags: , backto fundamentals, business name
Posted on December 15th, 2008 | No Comments »