So you have downloaded a business plan template and you have sharpened your pencils and got out your calculator.
If you go ahead and fill in all the boxes, will this plan be the foundation of a great business?
“No battle plan survives contact with the enemy,” said Colin Powell, former US secretary of state under President George W Bush and four-star general in the US Army. Can we say the same of the ubiquitous business plan? And if you are an entrepreneur, can your launch into the market be compared with facing your enemy?
The analogy is not that far-fetched. Business plans, like battle plans, last only as long as the first ambush, and then you have to think on your feet. This is a vital skill for entrepreneurs. If you are not flexible and able to react quickly to the challenges that will come your way, you risk being shot down.
The importance of a practical, adaptable, “working” plan is in danger of being completely obscured by the rigid business plan formulas that are demanded by banks and financiers, business plan competitions and business plan consultants. New entrepreneurs can be forgiven for believing that once they have a plan that ticks all the boxes or has been developed by a professional, they are on the high road to success.
It is a myth that is perpetuated, in particular, by well-intentioned but ill-advised entrepreneurial support initiatives that measure their own performance by how many candidates they have “trained” to write a business plan.
While it is essential to start with a good plan, it is important to adapt the plan to changing circumstances. For example, media mogul Rupert Murdoch planned his company’s strategy with military precision, but based his planning on weekly account statements.
A quick review on social media site, Linked In, of what some entrepreneurs think about business plans endorses my view: “Plan, plan, plan again, and keep it sensible – two year max with rolling position and review against actual all the time!” says one commentator. Another uses his business plan as a road map which has to be regularly updated to accommodate changes, the destination may remain the same, but the route keeps changing.
These are the views of seasoned entrepreneurs.
Where we run into trouble in South Africa is where emerging entrepreneurs are encouraged to believe that a formal business plan is a ticket to profitability. Not so.
Entrepreneurship is a tough battle. While it can result in some of the most rewarding achievements of your life, you have to be aware of the challenges and be prepared to tackle them. You have to really relish the prospect of hidden minefields, obscured visibility, well-concealed snipers and cunning adversaries.
A good way to prepare for the onslaught is to start by thinking about how you will drive your cash flow. New entrepreneurs should begin by developing a cash flow plan and drawing up several versions, factor in potential challenges, such as rising interest rates, non-payment by debtors, electricity cuts, theft, declining demand, seasonal variations in supply and demand, and so on. In this way you will start thinking ahead and begin to see how important it is to adapt your plan as you go along.
But what happens when you apply for finance? Banks want one optimistic, well-researched cash flow forecast. Is this when you should go the conventional route and tick the right boxes? Yes, until finance institutions come up with a more practical assessment process.
It is short-sighted that the decision-maker allocates finance on the strength of a neatly bound and typed plan, when he should be looking at natural talent for dodging bullets and digging trenches, or for working through the night to come up with a new tactic.
The sustainability and success of your business does not depend on your plan; it depends on the quality of your planning. This process must go on through setback and rally, advance and retreat, victory and defeat. Planning does not stop until the war is over.
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