Do you have a clear idea of the direction your business is taking?
Is it in the form of a business plan? Planning can be helpful in whatever you do in life, whether personal or professional. As the Cheshire Cat replied to Alice when asked which way to go, “It really depends on where you want to go.”
It is important to understand where you want to end up.
Why write a Business Plan?
In the UK, people starting a business are usually in their 40s. Maybe they have around 12 years of industry experience under their belt. Their new business is often something they used to get paid for, but have now decided to do themselves. In the early years, there was often an attitude of ‘all income is good income’. The company evolves with a disparate clientele. There is no clear plan.
If this is you, you may be wondering how to take your business to the next level. You are at the point where a comprehensive business plan will help. This will help you crystallize what you are trying to achieve and in what timeframe. Also, the resources you will need to leverage and the milestones along the way that you will need to measure.
What is the best business planning tool?
2022 is the twentieth anniversary of Verne Harnish’s book, “Mastering Rockefeller Habits,” and it’s just as relevant today as it was when it was first written. Since then it has been my beacon. I used it during my tenure as the CEO of three fast growing companies. The principles have helped me grow these businesses from zero revenue to £30m in five years. Now I coach CEO clients and their leadership teams using this framework.
In chapter three, Verne introduces the concept of a one-page strategic plan (OPSP). I can honestly tell you, hand on heart, that I have never found anything better than this. In my opinion, every leader of a scaling company should work from this model. Brevity is basic, but that doesn’t mean it’s light. As the great philosopher Cicero said, “If I had had more time, I would have written you a shorter letter.” Being concise takes effort.
What will a business plan achieve?
If you want your business to go from “good to great” (in Jim Collins’ terminology), use the OPSP. This will help you plan for increasing your talent density, place A-Players in roles, and ensure that the entire management team matches this profile. This will clarify the future direction and where you are headed, with clear steps in place. The OPSP structure will align your leadership team on the course. And that will give this trip a sense of pace. In fact, “alignment” and “rhythm” are the two most common words used by customers to describe the benefits of OPSP.
Perhaps you intend to be in the top 5-10% of companies in your industry, outperforming the average company five or even ten times? OPSP will help make this a reality.
We have noticed a distinct trend among our customers. They tend to branch off into two distinct paths between nine and eighteen months after writing their OPSP. Some decide it’s too much of an effort to stick to the plan. They become average again. Others stick with it and put the necessary work and dedication into it. These businesses are starting to grow exponentially – such is the power of a good OPSP.
Business plans help you do fewer things faster
It usually takes us two full days to write a draft OPSP for the first time. Once it’s finalized, we iterate and keep iterating and refining until everyone is happy.
Starting with the end in mind, the focus is on doing fewer things faster and better in service of the plan. The strategy is to say “no” more than you say “yes”. And you’re going to have to test some assumptions. Figure out what it is and challenge them. The outcome of the process will help you agree on things to do in the next 90 days. The beauty of the OPSP is that it takes you from 50,000 feet down to 500 feet to see measurable actions for the next quarter.
Start with Purpose, Core Values and BHAG
Start by defining your BHAG – your Big Hairy Audacious goal that you would like to achieve in ten to twenty years. We’ve already written about how to find this, as well as the purpose or reason for your business existence. Both are fundamental to a business plan and require deliberate thought.
Core values are also crucial because they provide a framework for maintaining control over your beliefs for the long term. Values are the definition of your company’s culture. This is an abbreviated way to capture behaviors that you consider non-negotiable in your business.
Part of thinking about values and purpose is figuring out how to bring them to life in your business. This “Rockefeller habit” will make a big difference in the success of your plan.
Set goals in your business plan
Now start looking at a closer horizon of three to five years from where you are now. Typically, we look at how fast a customer grows and how quickly they are likely to double in size. The horizon can only be one year if you are growing 100% per year. It’s more normal to look around three years old.
Once you have agreed on this horizon, determine the three to five main axes that will allow this objective of three to five years to become a reality. Later in the process, we will work on your strategic differentiators. But at this point, we’re looking at how you access the market and present yourself against your competitors. What does your positioning look like?
These main axes may not be entirely correct, but we have other tools downstream that allow us to test and understand this.
Look at the next twelve months
Starting from the three-year horizon, focus on the year ahead. What are the one-year goals for revenue, profit, margin, and cash? And what are the non-tax objectives? There will be key initiatives or, as we call them, annual OKRs. We break them down into five smaller goals and a critical number for the year. Jack Stack, in his book “Great Game of Business”, suggests highlighting a weakness in your balance sheet or income statement. Is there something important that you need to fix?
And as for the critical number. Think about what drives your economic engine. At all three businesses I built, we were relentlessly focused on monthly recurring revenue. This is the critical number that we have measured throughout the year. You can decide on NPS, churn, or another measurable number.
Start execution planning
The second half of OPSP is primarily about execution planning – the cogs and bolts of how you will achieve your goals. This is where you integrate all of the results of your SWOT analysis, focusing on opportunities that could see you beat the plan. These are potential benefits that you noted in the plan. You may not be ready to pursue them yet. Also think about threats that could mean they’re not happening.
The process moves to quarterly planning. What are your financial and critical numbers for the quarter and the five “rocks” you will focus on? Work on a theme for the next 90 days, and give it a name and a measurable goal. How are you going to celebrate when you hit this?
Define individual OKRs linked to the business plan
Last but not least, consider how you will distribute your OPSP across the organization. How will you link it to each person? Each individual working in the company should have a set of personal priorities or OKRs that are linked to the overall company OKRs. Start with the leadership team and work your way down the organization, so everyone has their top five goals and key results for the quarter. These must be directly related to the BHAG. There should be a sense that each team member contributes to your company’s overall mission.