Outthinking your competition relies on having a well thought out, written Business Plan. This episode provides insights into why you should have a Business Plan and how it provides you an excellent format to outthink your competition.
For more information relating to the podcast and how you can gain access to advisory services to assist you with your business, see www.lseconsulting.net.au
Outthinking your competition relies on having a well thought out, written Business Plan. This episode provides insights into why you should have a Business Plan and how it provides you an excellent format to outthink your competition.
For more information relating to the podcast and how you can gain access to advisory services to assist you with your business, see www.lseconsulting.net.au
Welcome to CEO thinking episode 2. Thanks to everyone that listened to the episode last week. It was the first episode and I have to say that I've had positive feedback so it's good to hear that you're gaining value from the podcast.
Last week I introduced the podcast and then I introduced the concept of three key foundations for businesses that I've found through my time as CEO and starting businesses. They are the three key foundations that I named my business after and that is leadership, strategy, and execution. To kick off CEO thinking I started with leadership which is the foundation of business success because without leadership, really nothing happens.
I'm going to build on that now in this episode. I want to build on the leadership aspect and move on to what I consider to be fundamental to business success and that is innovatively out thinking the competition by developing and clearly documenting the innovative thinking that you're making in a business plan that embodies the strategy and enables the strategy’s execution.
So, in this episode I'll cover 3 areas relating to outthinking the competition.
· Firstly, to outthink the competition I'll cover why a business plan is essential.
· Next, I'll cover the area of what's stopping you and talk about the resistance to writing a business plan (which I have found through my consulting with business leaders there is substantial amount of resistance to writing a business plan and then):
· Finally getting the plan written and I'll cover implementing the business plan in later episodes.
So, let's start off with why a business plan is essential. If you're going outthink your competition, it's one thing to have the ideas in your mind but to be able to articulate them and put them down in writing and put them in a cohesive way in a plan is essential. Writing a business plan is time out to work on the business which most of the competitors won't do. If you're going to be ahead of your competition, you must think of things, and work in a way that is different from your competitors. Later, I'll go through some statistics to show that just by writing a business plan you are thinking ahead of your competition.
To write a plan demands clarity of vision. You've got to be clear on what your mission is and you've got to sit down and write the goals that you are going to achieve. The statistics that I will present a little later indicate that businesses without a written business plan run a major risk of failure. The old saying “Failing to plan is planning to fail” holds true. I've seen this many times where people career along, and something is working for them for a period of time only to find out that it runs out because they haven't had a view of where they're going, and they aren't following their written business plan because in many instances they don't have one.
The process of writing a plan offers insights into your organisation capabilities, and the external opportunities and threats that it's facing. It demands analysis of your strategic position. It leads to the requirement for research so that you can write the business plan and expand your thinking based in facts that you've uncovered or at least a substantial amount of consideration of all of the factors that you require for your business to be successful.
Innovation is enabled by taking an objective view of the business in the marketplace. In sitting down and writing out a plan you need to take an objective view of the business in the market so that you can document how and what you're going to do in terms of running the business. It's the document that forms the basis of leadership so that the people in your organisation can be clearly informed of the plan and understand how they can contribute.
The plan will include key performance indicators, the metrics that you will track, and how you will actually track them with your people so that they are clear on how they are progressing towards the business objectives. As you implement the plan it enables the tracking of the progress and the adjustment of the plan as feedback from the results that you're obtaining are clear.
So why is a business plan essential?
Well throughout my career, both leading businesses and consulting, I've been amazed at the lack of business planning. In taking over management of business units, geographies, and ultimately companies, I didn't inherit a business plan for any of them. To turn around or grow these businesses it was necessary to devise a business plan, working with the executive team and the respective experts within, and sometimes outside, the organisation.
To build a plan to turn the organisation around and lead it to success, I've been able to gain finance to start businesses and to further invest in businesses based on having a well-built business plan. If you are going to sit down with someone who you are wanting to gain finance from to support you and your business, they will want to see that you have clearly thought about the business, that you understand both the upside and the downside, and that you can demonstrate to them with your written plan that you can see, and show them, how it will be successful.
I've worked with clients where they've asked me to come in and work with them to build a business plan. One of those clients I worked with rang me after we'd finished the business plan, sometime later but not too much further down the track, and said how delighted they were because they had been able to sell the business based on the business plan that I had assisted them to build.
You will continually hear me quote Peter Drucker and if you'd like a copy of his book ‘The Practise of Management’ you can go to the www.LSEconsulting.net.au website and place your order there. Peter Drucker in that book, which was published in 1954, and it has is now being used and continues to be used as a fundamental management text, Peter Drucker said “The purpose of business is to create a customer”. Now, in your business plan, really the whole context of the business plan is that you are demonstrating how you will create customers with your business.
Situations I've inherited had vague processes to push product or a service, but no coherent business plan built to create customers. Many of my consulting clients have the same situation. They have what they believed to be a great offering but no business plan to support creating customers in the near, medium, and long term.
I really find it amusing when I ask business leaders “Do you have a business plan?” and they say “Yes yes!” then I ask them “Well if you have a business plan, let's get it out, let's put it on the table, and let's see what's in the business plan” only to find out they say “Oh it's not written, it's in my head”. Let me be very clear. If you don't have a clearly written, well-constructed business plan, it's not a plan, it's more of a wish list, or even a dream.
The statistics support this position. If you go and do some research, you can see a lot of facts with regards to businesses that are started and how long they exist. If you break the businesses down into non employing businesses, micro businesses, other small businesses, medium sized businesses, and then large, based on the number of employees they have, the entry survival rate of these businesses is quite significant.
Quoting the Australian Bureau of Statistics with regards to business entries and exits from June 2019 to June 2023, the three-year survival rate of non-employing businesses is 46.6%. So what that actually says is that these non-employing businesses, in other words sole traders, less than 50% of them survive for three years.
As the size of the businesses goes up, the survival rate tends to improve. 62.4% of micro businesses, that employ one to four people, lasted for three years. Other small businesses, that's five to 19 employees, 67.9% survived more than three years. In the medium businesses, that's between 21 and 200 employees, 76.8% lasted more than three years, and finally large businesses, that's 200 plus employees, their entry survival rate was 89.5%.
Now, if you contrast those numbers of survival over three years with statistics that are presented by the NSW government with regards to businesses and whether they have a written or unwritten business plan. And as I said earlier, I really don't consider anyone that says they have an unwritten business plan is actually having one. I will reiterate, if you can't write it down it's probably more of a wish or a dream. Those businesses with written business plans tend to correlate with the percentage that survive over the three years. Now there's no direct facts that say if you don't have a business plan you won't survive for more than three years, but let's just contrast the business size, their survival rate for three years and the percentage of those businesses that have a written business plan.
I don't have statistics with regards to non-employing businesses with regards to written business plans but the next business size, which is micro, 1-4 employees, only 6% of those businesses had a written business plan,and yet their survival rate was 62.4% of those businesses lasted 3 years. The ‘Other’ small businesses, with 5 to 19 employees, only 13% of those had a written business plan and only 67.9% of those businesses survive for three years. In the medium size businesses, 20 to 199 employees, 76.8% of those businesses survived for three years and yet only 32% of them had a written business plan. Now if you look at the large organisations with 200 plus employees, 72% of those businesses, according to the NSW government, had written business plans and their entry survival rate for greater than three years was 89.5%.
So, as I said, there's no direct statistic that says if you have a written business plan you will survive, but when you contrast the written business plans by the business size and the entry survival rate over three years you can draw conclusions to say that having a written business plan may well contribute to lasting more than three years.
So we've established the fact that having a written business plan may improve your chances of having a successful business so let's move on to what's stopping you.
I hear all sorts of reasons why business leaders don't have business plans. The number one reason that I find is that they have not committed to writing down their strategy and their business plan for the business. And I get all sorts of reasons. When asked “Why don't you have a business plan?” is “Oh, I don't have time!” so the question that that then prompts me to ask them is “Do you have time to deal with the issues that will arise from not having a business plan?”
If you have staff do they know where the business is going? if there's no clear strategy how do you and they know what to do in support of where the business is going? And I repeat to them “Failing to plan is planning to fail”.
I get another response that says, “Well we've got this far without one why bother now?” I would suggest to you that circumstances continually change. What's worked may not work in the future so strategic planning considers the current matters and anticipates future opportunities and risks. I've found that having a written business plan, where you've clearly considered your competition, all the forces in the marketplace, and the various environmental factors allows you to continually look at what you were basing your premise on as to how is this business going to be successful, and question some of those thoughts that you may have had when you started out and look at them and say “Well things have changed. We might need to adjust this.” So having that written document that you keep as a living guide to where you're going and a plan as to what you're going to be doing enables you to factor in the changes as they come along.
If it's just in your head, it's too hard to remember what you based your business ideas, and your business strategy and execution on because in the heat of the day, it gets too hard and you just forget about that and it's a little bit like the frog in the water. This is not something that I would suggest you do in any way, but just (I think you'll get the idea of it) if you put a frog in water and then heat the water up, it won't realise and, in the end, you'll boil it. But if a frog jumps on top of hot water, it'll jump off again because it feels that it's hot and this is what happens to us when we're running businesses. We get in there, there's so much going on on a day-to-day basis that when it comes to thinking strategically “Ah well let's all a bit hard!”.
If you can look at your plan and adjust what you're doing against what you planned to do when you wrote it down, you've got a much better chance of being able to adjust and communicating that with your people.
Another excuse that I get from people, as to why they don't have a business plan, is “Oh, others succeed without them!” Well, I would suggest that perhaps they do or perhaps they don't. You may find that, if you're talking around your industry, that if you're talking with someone and talk about your business planning, they say “Oh, we don’t bother with that!” well, they might and it may be that they know very well that from a strategic point of view they’ve got it all written down but they don't want to let anybody else know that they are carefully structuring their approach to the market they’ve got it all written down and their people are all aligned.
The other side of things is the fact that they've succeeded without a written strategy does not mean they will continue to be successful, and I've talked about that already.
So it's purely up to the leaders of the business whether they want to take the risk or not of having a written business plan and therefore the written strategy. But not having time is not an excuse. I strongly recommend to you; make the time. Again, having a business plan offers you a period of reflection. You've actually got to sit down and think about how you're going to structure what you're going to put in your business plan.
If you're going to secure finance, I have been there, face to face, and I can assure you that if you are expecting someone to support you financially, they will want to see very clearly what you're going to do, where the funds are going to go, and how they're going to make a return on their investment.
Add to that, if you write down your business plan, you're planning for future success. It's not something that you've written down that you're going to do now, it's something you've written down to say this is the plan, this is the strategy, these are the goals, this is where we're going, here's our vision, our mission. You're planning and demonstrating that you're working on future success.
This is the Third Point: Get the plan written. Get a format that works for you, and it is not hard to get a format for a business plan. There is various sources, from all sorts of business texts etc., but to make it really easy the Australian Government, at www.business.gov.au/businessplan provides you a very robust business plan format. There's a full size and there's a ‘lean’ version. The banks, our big four banks here in Australia, offer for free. Just go to their websites and dig in and you will find templates and guides. You can also go to the Australian Investment Council. They offer a business plan format, which I tend to use because it's quite comprehensive, and they offer that business plan format because if you're going to go and speak to an investor for your business, if you don't have one of these plans written they don't even want to talk to you.
So the plan will cover key areas for your business and it will cover your business details. Things like your names, your registrations, owner details etc., a description of your product and services, the benefits that you offer, the organisation structure. It will talk about your market and talk about your competitors, and then it will also show your future, what you're planning to do in the future, and then the finances of the business as it stands. So I will talk through a lot of those areas that are included in the business plan in subsequent episodes.
Writing your business plan, I recommend to you gaining support in writing the business plan. If it's the first time that you've written one of these things or you're in a new situation, having someone who's built a plan before, and successfully implemented it and executed it, can help you fast track your business plan and getting it implemented in your business. Do remember that when you get this support it's yours so don't think that you can bring in a consultant or bring in someone that's an expert in these areas and say “Oh, we need a business plan! Just right one for me.” That, I have to say to you, will not work. It's yours. You as the leader of the business, whether you're the CEO or whether you the business unit leader. Or wherever you fit within the organisation, whether you're a sole trader and you're starting a new business, it will be you that has to implement it and therefore you need to own it. And that means you have got to be basically the author even although you're following a format.
Gain input from various sources to assist you for your financial, your legal, your marketing, human resources, etc. One of the rich sources for getting a business plan that will work, and that I've found to be successful, is to go through your organisation, or if you don't have an organisation talk to people who are experts in the various areas that you're looking to do business in, and gain their input.
I have had some of the most rich input into business plans from people who are generally not in senior executive positions in the organisation, but those people, especially the ones that are closest to your customer, can give you very rich input to help you build the business plan for your business to be successful.
Now I specialise in assisting CEO's and executives to write their plans. If you would like to talk to me further about this, you can contact me through the LSE consulting website.
So, outthinking your competition; let's summarise this.
The exercise of writing a business plan and refreshing it on a regular basis enables outthinking the competition. Given the statistics on businesses that I've given you as to the businesses that have written business plans, I believe there's a direct link between having a written business plan and business survival.
I've lived it, where I've either started my own business with a written business plan, where I've spoken to my associates who started businesses and relied on their business plan, and I've also used business planning as part of the exercise of turning around organisations that are struggling.
So decide to write your business plan and take decisive, timely action. To outthink the competition I believe a business plan is essential. You are focusing on thinking about how your business is going to succeed and you're documenting it.
Commit to writing a strategy/business plan for your business with a clear date for its completion. I'll talk more in later episodes about getting things done but if you say I am going to have a business plan, write down the date by when you're going to have it and work towards it and make sure you have the business plan delivered on that date.
Next identify what's stopping you. We all have hurdles. We all get busy. There's all sorts of reasons. Overcome that resistance to writing the business plan and get expert advice to help you overcome the resistance. There's a benefit to having an expert help you write your business plan and that is they should look at the time frame as to when you are going to do the activities you require to put into the business plan and keep you accountable for the date that you will have it written.
As I said earlier, there are ample freely available business plan formats such as the Australian Government, the big four banks, and the Australian Investment Council, but identify a format for a business plan that works for you and your people that will work with you on building the plan. But I just can't reinforce enough, leverage your executive team and your subject matter experts from all levels of your organisation, or outside if necessary, and make sure that you get input from the people who are closest to your customers because they have very rich input for you to put into your business plan.
Gain the appropriate support. Get hold of an expert who's been there and done that. Now they may not have been there and done that in your business, but in the process of pulling a business plan together, get someone who's been able to do that and successfully demonstrated that they've written plans and executed them for success.
Now, as I said earlier, I will cover many areas that the business plan contains, and I'll cover in later episodes those areas and implementing them so that you can consider those individually.
So, that's it for this particular episode about Outthinking the competition. I haven't given you any specifics with regards to your particular business in terms of outthinking the competition. What I'm saying to you is that by writing your business plan and the consideration on your business that you are putting into that document, you are already out thinking the competition. And if you go back to the numbers that I gave you with regards to businesses and business size that actually have written business plans it's very clear that just by having the business plan you are ahead of many of the other businesses out there. And many of those businesses, some of them could be your direct competition that you're competing with.
By working on the plan, writing it down you are outthinking those organisations.
In the next episode I'm going to be speaking with an associate of mine, Jack Crumlin. Jack is an eminent businessman and consultant and I'm going to talk to him about he and his partner Roger Norton who started and successfully ran for many years, and continue to run, a consulting practise called Norton Crumlin Associates which is a successful senior executive capability enhancement practise.
So until I talk to you next week I trust that you have gained something from this podcast and that if you don't have a business plan you put in your diary that date by which you are going to have one. And, if you do have a business plan, put a date in the diary as to when you're going to review it to make sure that its current.
Thanks for listening. I look forward to talking to you in the next episode.