I was talking recently with the owner of a relatively young business who was in dire straits. It became apparent that he had made a series of mistakes that had put his business on the brink. When I asked him if he had a business plan, he proudly offered a 20-page bound document. He had obviously had help preparing it, but it looked really impressive and contained what appeared to be some good numbers.
However, on flicking through the pages, I could quickly see that the predicted meteoric growth was unrealistic, and that many of the planned activities and actions had not been done, or were done very poorly. His thinking seemed to be, “If I have a great plan, surely my business will work”. It might have if, indeed, he was following the plan or had adapted his plan to his changing fortunes.
Any number of studies will tell you that 80% of new businesses fail within the first five years. Many of these failures could have been prevented by having a more comprehensive business plan aimed at steps needed to guide the business through its growth. Yet how many of these same businesses that kick off with excellent plans, still fail? I can tell you from my own experience that the numbers are quite staggering.
How can this be? I have been thrashing around a new plan with an exciting new business and it has taken us weeks and numerous iterations to develop what we now think we can follow. In so many cases, business owners buy a generic business planning software program and over a few hours, fill in the blanks before printing off a plan they hardly understand. Once the plan has done its job and allowed them to get a bank loan or recruit partners, it is put into a desk drawer to gather dust.
Software does not have the intuition to ask probing questions of the owner, push them to think and rethink where their business is heading, and then stay with them to make sure activities and actions in the evolving plan are executed with discipline and precision. When the owner abdicates their plan to canned software, or to a person who writes it out for them, with minimal input, the results are almost as bad as if they had never had a plan.
The magic of the business plan is not the ‘plan’ itself, but the process that the business goes through in putting it together, and then using it as a living document to guide and direct the business.