Rethink the Step-by-Step Approach to Business Plans

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Everybody wants business planning laid out in a simple step-by-step way. The idea is attractive: Start here, go there next, then there and, hooray, you’re done.

Unfortunately it doesn’t work that way, at least not with business planning. Whichever step-by-step sequence you follow, at some point you’re going to double back toward the beginning to revise.

I’m not advising complete avoidance of that type of methodology. I’ve been working with step-by-step plans for most of my adult life, although it seems like I’m constantly changing the order of the steps. I do, however, think it’s best to recognise that planning is a constant process, not something you start at the beginning and work through to the end.

The Traditional Approach to Business Plans

Take, for example, the following sequence, which I’ve used in a lot of seminars, articles, software and books.

• Situation analysis. Put together your mission statement, mantra, objectives, keys to success, company summary, business offering and market analysis.
• Strategy. Focus on well-defined market segments and product areas, set priorities, differentiate and position strategically.
• Plan. Create financial projections, milestones, activities, dates, deadlines, budgets, specific responsibility assignments, tactics and details.
• Management. Review progress, track results, revise, correct and manage. Compare the plan to what is actually happening. Develop and manage accountability.

That sequence can be useful. It’s certainly helped me teach and explain how a company might go from nowhere to a first-draft business plan. So it serves its purpose; but it isn’t accurate. No thoughtful manager or business owner is going to have the discipline to finish a situation analysis and leave it alone while developing strategy, or to develop the plan’s details without referring back to situation analysis and strategy. They keep referring back, rethinking, discussing and analysing. Assumptions change during the process. Business planning is always active, alive and changing.

If you like business and the business you’re in, this is hardly a bad thing. The world and assumptions change, and plans help keep you oriented and remind you of long-term goals.

An Alternative Look to Business Plans

Here’s an alternative sequence I sometimes use. This one starts with the market need and works through the specific company identity to the detailed plan and then the analysis of results.

• Market need. Figure out the market need or want. Remember that what buyers want is often as valid as what they need.
• Business offering. Determine how your company can satisfy that need best with positioning, differentiation and a good story.
• Making it happen. Establish dates, deadlines, marketing messages, media, responsibility assignments and financial projections.
• Accountability. Review the plan compared with actual results, track achievement of original plans and goals, review why things were different, how assumptions changed, revising as necessary to maintain the long-term orientation without doing anything just because it’s in the plan.

Here, too, the sequence helps people get going and used to planning. In this case, the business offering and the market needs must be interactive, because the strategic core is not just what the market needs but what your company can do well and differently from the rest. Then when you get to the “making it happen” step, you’ll have to review what you want to do with the resources you have. That often involves revising the positioning and strategy of the business offering and, ultimately, going back to the market need.

I’ve used the phrase “step-by-step” a lot in my work with business planning through the years. I’ve done a lot of task-oriented, wizard-steps-oriented work, setting up a sequence so people can theoretically go from the first step to the last step and have a finished business plan. I do it that way because so many people want it that way. It’s not harmful; but it isn’t realistic. It’s not just a plan, it’s a planning process.

It also helps to remember some of the basics: Your business plan will never be done; you’ll always be working on it. Assumptions change, so use your planning to stay on top of the interplay between what was going to happen and what actually happened and what you need to do to stay on the right long-term course.

About the Author

Tim Berry is the founder of Palo Alto Software, a co-founder of Borland International, and a recognised expert in business planning. He makes several notable appearances in Fire in the Valley, Swaine and Freiberger's classic history of the PC industry, and is the originator of plan-as-you-go business planning. He has an MBA from Stanford and degrees with honours from the University of Oregon and the University of Notre Dame.