Time for some clichés. “A journey of a thousand miles begins with a single step.” No? How about “The world stands aside to let anyone pass who knows where he is going.”
You are about to take a single step. The path in front of you has quicksand, bogs, steep hills, giddy downhills, siren songs, enemy armies, dangerous animals, a few snakes, some walls, and rivers and seas to cross. As you lean forward to step, are you sure that you are headed in the right direction? How do you know that, exactly? Ahh, you don’t you say. But it seems right. In fact, its obvious. Not so fast.
Let’s start with this. The human brain can manipulate as many as seven facts at once in working memory. At least, the best of us can, some of us are really only good for maybe, four. How many factors are involved in a business? Here are some factors that a simple business – a lemonade stand – might encounter.
Plan Factors to Juggle
Location of the stand, which involves where your support facilities are (kitchen), where you can get cheap rent (driveway), where you can get building materials (table, cloth), where you can get advertising (a sign), who is going to paint the sign, where you get the paint, what prices you are going to put on the sign . . .
How do you make the lemonade, who will do the quality control on the lemonade, where do you get the lemons, what do they cost . . .
How many customers can you get, how much will they pay, how much will they consume, what if they want to pay by credit card !
What do you do if it rains, and how do you staff the stand? Do the staff get paid by wages, commission, or profit share?
We can stop there, since that is already some 19 factors. Here’s a clue. You cannot manage a lemonade stand, without a plan. What makes you think that you can manage any business without a plan. There is a name for such businesses where I come from, they are called bankruptcies.
Where’s the Plan
What’s that you say? Of course I have a plan – its all right here, inside my head! OK, fine – what is the relationship between the location of your stand, your overhead facility costs, the cost of your product, the price of your product, your sales volume and projected profit? Sorry, just thought I’d ask.
Truth be told, most businesses do have a plan. It might be on a napkin, it might be in a 300 page document that no one can read, and is filed under doorstop ten minutes after printing. The napkin and the doorstop have something in common – they cannot be tested, and they are of little help in thinking creatively about a business. Further, they do not help you anticipate what might happen in your business tomorrow, next week, or next quarter, let alone next year. There is a name for businesses whose lack of preparedness catches them unaware - where I come from, they are called bankruptcies. Sorry to repeat myself.
This is called the promotion of fear. You frightened yet? You should be!
Plans are Maps
Lets go back to Lao Tzu’s journey. You know there is a good chance you will encounter lions and tigers and bears. Either bring a net, or plan a different road as a detour. Which brings us to the point. You need a map as a guide on your journey so that you can put on it “here be dragons”. Some of them you know about, some you may not. Gather information from other travellers, and add that data to your map – you may just get there in one piece. A business journey has a map – its called a business plan. Now in some quarters, them’s fightin’ words. You get the picture of some demented bean counter hovering over his computer screen with a green eyeshade, furiously typing numbers onto a keyboard. Betcha he’s drooling and shaking uncontrollably too. Hah! Don’t watch so many bad movies by really bad Hollywood writers (who don’ t like business plans anyway).
This starts a series of posts on business planning. The posts will cover the reasons for planning, methods and techniques for planning, getting some value out of your planning, why you have to do it and not your accountant or a consultant with a M.B.A. We will focus on what planning mode is sensible for an entrepreneur.
Oh and the cliches, I mean quotations? The first is Lao Tzu (604 BC –531 BC), and the second is David Starr Jordan (1851 - 1931). Nothing new under the sun. Think the pyramids were built without a plan? Think again!
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