This is the way to build the best business plan for high performers.
Every organization is faced with the challenge of creating a business plan that will result in high performance and growth. Where do they turn for help? Business planning templates are plentiful and can easily be found on the internet.
They are all pretty similar in content and format and generally follow accepted principles of academics and consulting pundits.
A good business plan should be built to execute
But I think most traditional planning approaches miss the mark because they don’t recognize the common challenges facing most organizations, that:
- are not able or willing to invest substantial financial resources (as is often the case when hiring strategic planning consulting firms) in building their plan;
- have good ideas on what a good strategy looks like, but have difficulty implementing it;
- are under pressure to create their plan quickly or risk losing their market position to the competition.
A business planning process must recognize these realities and should meet these critical requirements; my strategic game planning process does.
It must be simple — Long winded strategy documents may satisfy the academics’ thirst for exhaustive analysis and theoretical completeness, but it won’t enable professionals to implement their new ideas very quickly.
I have seen people spend way too much time grinding out a plan just to feed the prescribed content and format rather than produce a simple strategy that tells their story with only the relevant chapters in it.
So, toss out the parochial planning boilerplate and adopt my proven strategic game plan process that produces the right business plan by answering three critical questions:
- HOW BIG do you want to be?
- WHO do you want to SERVE?
- HOW do you intend to COMPETE and WIN?
More detail on each of these three questions later…
It must be inexpensive — My strategic game plan can be created in just 3 days or less because of its simplicity. Time is not wasted on feeding the template with information you don’t require to produce a business plan that will perform well in the markets you serve.
The strategic game plan is created in a workshop mode with the leadership team responsible for launching the new idea. It generally involves the leadership team including other players who have an important role in implementing the plan. In under 3 days your game plan is produced — with minimum paper damage to the environment — at minimal cost.
It must be action oriented — You won’t produce any results if your plan is theoretically pristine, follows all the prescribed planning rules but doesn’t drive action; nothing happens, no value is created, potential customers won’t notice you and you will fail. It’s as simple as that.
The reason I call it a ‘strategic game plan’ is that it is totally focussed on what has to be done to achieve the inches of progress needed to move towards your strategic goal. It’s the appropriate balance of strategy and tactics which results in the right stuff getting done to progress your new idea.
It must be focused — This is where the discipline of the mandatory replaces the art of the possible. You don’t achieve real progress by chasing a myriad of possibilities.
The strategic game plan uses Roy’s Rule of 3 to focus energy and priority on the critical few (3) things that are likely to determine 80% of the outcome you intend to achieve
Trying to achieve ‘the possible many’ will waste your time and energy and will likely kill the success of your plan; Roy’s Rule of 3 as the filter, is effective at controlling scattered thinking.
It is in this area that most planners fail in the development of their strategy. They have too many things to accomplish in order to succeed. The opposite is actually true: the more you attempt, the greater the likelihood you will fail.
It must define your uniqueness — If what you have to offer the market isn’t different from others competing with you, why should you attract interest?
If your offers can’t be distinguished from competitive offers why would potential customers be interested in them?
This is the most critical element of your business plan and I have developed a concept called the ONLY statement (more on ONLY further on) to address how to declare the distinctiveness of your organization, product or service.
“This is the ONLY product that…” is a claim that is binary: it is either true or it isn’t and it is backed up with proof points that legitimize it.
Most strategists love to use words like ‘better’, ‘best’, ‘leader’ or ‘number 1’ in their differentiation claims but they don’t work; no one believes these words and they can’t be measured and proven in any event.
The best business plans produce early financial returns which depend on how fast the plans can be implemented to grow revenue. My strategic game plan process was designed with speed, simplicity, cost effectiveness and competitive advantage in mind.
Now let’s explore in detail each of the three questions that will create your strategic game plan.
HOW BIG do you want to be? — HOW BIG is the first question to answer in building your strategic game plan.
Traditional strategy-building methodology has definite limitations. It typically begins with an analysis of strengths, weaknesses, opportunities and threats. It then moves on to developing an overall strategic direction.
Objectives and action plans are struck. Finally the expected financial results are produced. They are the output of the strategy-creation process.
In my experience, the financial results get scrutinized by the top executive and often get modified because they simply aren’t aggressive enough. For example, cash flow doesn’t turn positive soon enough so revenues and expense assumptions are revised to produce positive cash flow earlier in the planning period. Sound familiar?
As a result, higher growth and a better financial projection are driven out of the strategy by changing input assumptions to the plan, rather than by adjusting the strategy to deliver more aggressive financial results.
This is a huge mistake. Assuming that the drivers and assumptions behind the plan are reasonable and acceptable, forcing more aggressive numbers from a strategy without changing the inherent nature of the strategy is a fool’s game; the improved financial performance will not happen.
The strategic game plan process treats growth and financial expectations as inputs to the strategy-building process. Do you want to grow top line revenues 25% over the next 24 months? Or would you be satisfied with growing at 10%?
This is the first question the planning team addresses after considering all underlying factors such as the economy, market growth, competition and other variables influencing how quickly you may be able to ramp up revenue.
Your growth expectations should determine the character of your strategy
Clearly a 25% growth target would require more resources and would entail greater risk than the more modest 10% growth scenario.
In addition, the character of the strategies would be different. The 25% growth strategy would require a different set of actions than the 10% incremental option.
For example, bolder growth expectations will incur higher expenses to fund them in order to increase awareness of your product or service and create demand for it as opposed to a more modest growth plan — advertising and social media costs increase with higher revenue expectations.
Declare up front the growth and financials you intend to achieve and THEN develop the strategy to deliver them. And if you have been growing at 10% don’t expect doing more of what you have been doing will be good enough to deliver on a 25% plan. It won’t happen. You will have to be more creative, more aggressive and be more accepting of more risk. If not, suck it up and be prepared to stay with your 10% strategy.
HOW BIG rules — Creating HOW BIG is a challenging task. Here are the guidelines to keep in mind as you do your work.
- Your growth goal should be bold enough to drive you to be innovative and creative. If you don’t have to stretch to create the tactics and programs to achieve your revenue target, your growth goal is too modest.
Think about HOW BIG as your declaration of intent without knowing specifically how to achieve it. A good HOW BIG should force you out of your comfort zone;
- Use revenue as the growth metric as it is the best expression of how the market is responding to your new idea. And it’s easy to measure.
Avoid using other higher level financial measures like EBIT and net income as they are ‘too far from the market’ and are too easily manipulated;
If you believe your HOW BIG is ‘realistic’ — which means you already think you know how to achieve it — it’s not bold enough. Pick another number;
HOW BIG should make you perspire; yes, it’s risky but worth it;
- Your growth goal should disrupt market trends not continue them; it’s the way of reflecting the amount of innovation your new product is bringing to the market and the way you intend to sell it.
If the general market for the type of solution you are providing is growing at 5%, for example, your HOW BIG target should disrupt that rate and be somewhere north of that rate. If not, you’re fooling yourself by believing your growth goal requires innovation.
And furthermore, trend lines imply predictability, and who thinks performance and goal achievement can be predicted in a world of uncertainty and unpredictability?
Trend line thinking has no place in an uncertain world. HOW BIG detests extrapolation
- Choose a 24-month business plan period. It better aligns with execution and allows for faster response to unforeseen events.
The problem with long planning periods is the mistaken assumption that you can put off action to the later planning years and not have to worry about doing something now. It’s the classic ‘hockey stick’ mentality that suggests that you will be able to make up for underperforming in the early years of the plan by overachieving in the latter periods of the plan.
HOW BIG is the lynchpin of your business plan; it describes the risk profile of your plan, and the amount of innovation required to achieve it. Everything in your plan is connected to it.
A successful plan requires action NOW, in the moment, not 4 years from now
WHO do you want to SERVE? — The second question to answer in building your strategic game plan is ‘WHO do you want to SERVE?’ — which customers do you intend to target to deliver your growth goals — the HOW BIG?
Your challenge is to select customer groups that have the capability to generate the top line revenue you are expecting. You may have the products and services your current customers want, but if they don’t have the latent potential in the longer term to get you the revenue you need, and the wealth you expect, you shouldn’t be chasing them.
HOW BIG you want to be should determine WHO you choose to SERVE
If you have existing customers and decide to stay with them even though they can’t deliver you growth, they will suck up your precious resources with little return. Don’t get caught in the trap of staying loyal to old unproductive customers; it may make you feel good, but it won’t deliver the growth you want and will jeopardize your entire plan.
There’s no such thing as a bad customer; it’s just that some are better than others
WHO to SERVE rules — Choose customer groups that have these characteristics:
- They are groups where your customer share — wallet share — position is low but growth potential is high. If you currently have a small percentage of their total business there is good growth potential for you if you are easily able to gain a better foothold in it;
- They are currently growing in the double digits and where you have an advantage over others. Look for clusters of customers who are already showing the desire to buy your products in healthy volumes;
- They can be sold quickly. Customers you can get to fast with your current selling methods. If you have to build new sales channels, it will consume energy and precious time that you can ill afford without generating additional revenue.
In addition, as I’ve said elsewhere, it is critical to focus your efforts on the things that matter; those activities that you believe have a good chance at helping to grow your business. Stick with what you know. Bear down on what you’re good at. Concentrate on customers you know. Ask yourself ‘Is this consistent with fast-and-easy?’ when considering chasing new stuff;
Look for fast-and-easy opportunities that will give you the revenue run-rate you need
- They can give you quality referrals. Again, a short planning period requires closing as many high value deals as possible which generally means getting to deal closure without a lengthy sales preamble. High quality referrals should mean that your brand comes recommended and you can get to the solution presentation quickly;
- They don’t need much selling. Where closing a sale can occur relatively quickly and revenue realized soon thereafter. An opportunity requiring a 12-month sales cycle won’t be terribly productive when you only have less than half the 24-month plan period left to enjoy the revenue. Work with clients who will give you at least 18 months of revenue if you want to hit your revenue targets.
- And avoid customers who ask for proposals. Responding to the request and waiting for a decision will gobble up precious time you don’t have. The formal sales process is a time consumer; focus on people who are willing to deal you their business based on trust and past success with you;
- They are ‘close to home’. In a geographic sense, explore the territory immediately around you before trying to exploit distant ones. If you have a good online presence, stay with the market focus you have. Exploring new virtual or physical markets — probably with the need to establish new sales channels— can gobble up your time with questionable short term results. Penetrate and dominate your current markets before you wander afar.
- This is an area where I’ve seen small business leaders fall flat on their face. They spot something new to do that is interesting and at least theoretically is a good idea and they decide to chase it, reducing the energy that is applied to fast-and-easy activities. They lose on both accounts: the new stuff doesn’t materialize and the current stuff suffers;
- They represent high lifetime value to you. These customers show a propensity to pay higher prices in exchange for good value, so resource investments in them will likely provide healthy returns;
- They have been loyal to you in the past and will likely continue to buy from you with less effort than those who will have to be convinced of the value you offer;
- They are segments where your competitive position is strong and where your advantage is clearly defined. This is the nirvana WHO to SERVE tactic. If you are fortunate to have customer segments with high growth potential and where you dominate in the market, pour your resources on ‘em.
- They are few in number. Choose the minimum number of customer groups that will generate the revenue you want.
The more you choose, the more diluted your efforts are likely to be. Choose the critical few groups rather than the possible many.
What do you do with customer groups you currently serve but who are unable to generate the revenue growth you need? Be prepared to walk away from them. You have to let them go.
How will you COMPETE and WIN? — The third and final question to answer in developing your strategic game plan is a critical one and the answer to the question drives a stake in the ground in terms of how you will differentiate yourself from your competitors and beat them handily.
HOW to WIN follows the WHO to SERVE question. Just as the choice of which customers to target follows the revenue goals you have, the competitive strategy you develop must follow your selection of customers to serve.
Your objective in this question is to create your competitive uniqueness relative to the customer groups you have chosen to target and as opposed to the market generally. You may have capabilities that stand out from your competitors in the mass market, for example, but the challenge now is to focus on those strengths that relate to the particular customer groups you have chosen to serve.
Your task is to extract goals from a selected number of discrete customer segments, not the broader market
This is extremely important and critical to having a successful strategic game plan. If you have chosen customer groups ‘A’ and ‘B’ for example, then you need to differentiate yourself from others vying for the attention of these two groups specifically.
You will be searching for ways to deliver what these two groups want in a more compelling and special way than anyone else attempting to attract their attention.
Answering the HOW to WIN question involves in-depth competitor analysis: Who are they; what are their strategies? How do they differentiate? What is their value proposition?
The most practical and compelling way to determine your one-of-a-kind competitive position is to create what I have tagged the ONLY Statement for your organization.
‘We are the only ones that…’ will definitely separate you from the herd If you can complete the sentence!
You don’t want merely to be the best of the best. You want to be the only ones who do what you do — Jerry Garcia, former leader of legendary rock band, The Grateful Dead
This is not a task for the faint-of-heart. Engage your team in the task. It involves looking at every nook and cranny in your organization for opportunities to separate yourselves from the pack: brand, service, product, product support, and how you leverage technology are some examples of where you can look.
Here’s an example of an ONLY that I helped create for a client. It’s simple, clear and compelling and makes a hell of an elevator speech.
‘We are the ONLY team that provides integrated safety solutions that go beyond the needs of our customers ANYTIME, ANYWHERE. We are committed to growing our customer’s business. We ONLY serve safety.’
ONLY rules — Your ONLY must speak to the experiences and benefits created by a product rather than on the product itself. Declaring, for example, that you are the ONLY ones who offer the XYZ product says little in terms of what unique value you are creating for people which is the key for any differentiation statement. And don’t include low prices in the statement or you will have a rude awakening;
Never use a comparative word like ‘better’ or a superlative word like ‘best’ in your ONLY. They are lazy, subjective words that you can’t prove — how can you prove you have the ‘best’ communications network in Canada? — and customers don’t believe them in any event;
Keep it brief. Your ONLY is a sound bite that consumes a few lines, not a narrative consuming a page. If it looks like an essay it isn’t a viable claim;
As stated earlier, your ONLY must speak to the specific customer group you are targeting not the market in general;
Test your ONLY with customers and employees to ensure it is relevant — does it address the high priority wants and desires of the WHO — and true — do they believe you actually deliver on the statement consistently?
Consider your ONLY a draft; it is highly unlikely you’ll get it right the first time. Take your almost-there only statement and start working with it. Refine it as you go. And stay alert for a response by a competitor who may suddenly come awake when they see your move.
Strategic game plan statement — Once your team have answered the 3 questions you are now ready to pull your answers together into your overall strategy statement which is unlike others which tend to be general and helium-filled.
It could look something like this:
“We will grow our top line sales revenue by 3% over the next 12 months (HOW BIG) by focusing our scarce resources on the retired couples segment of greater Seattle (WHO to SERVE). We will compete and win by providing personalized transportation services to assist them in getting around the city. (HOW to WIN)”
Once you’ve crafted your ‘elevator speech’ business plan statement, the even tougher work starts, building an action plan with specific objectives and accountabilities to execute your new plan. Take the time required to get this piece right, otherwise you won’t achieve your strategic intent.
Here are a few execution planning points to consider:
- Select as few objectives as possible. Avoid the brainstorming tactic where the tendency is to define as many things to do as possible. All brainstorming does is dilute the number of resources available to do the real work necessary to advance your plan;
Find the critical few objectives that will yield 80% of the result you’re looking for and get them done
- Assign accountabilities for each objective with a specific timeframe to deliver the expected results;
- In the objectives portfolio, emphasize marketing, sales and customer service more than other more internally focused functions like finance and business development. Customer-facing objectives are critical to revenue generation and loyalty and should be given the priority;
- If your plan includes building customer loyalty, have a specific objective to create a service recovery strategy;
- Include a Cut the CRAP objective to free up resources from unnecessary work to the new tasks required to execute your new plan;
If you follow the methodology I’ve described here, you will not only have a business plan like no other, your organization will also have the superior market performance that goes along with it.