Entrepreneurs are often celebrated for their uncanny ability to understand others – their customers, the market, and the ever-evolving global...
In the dynamic world of entrepreneurship, our choice of words matters. Our vocabulary can often become a veritable alphabet soup of jargon, acronyms, and those buzzwords (I'm looking at you, "disrupt").
And let's not get started on business cliches – "circle back," "synergy," “deep-dive,” etc.
Yet sometimes, it's worth pausing to consider the words we casually sprinkle around in our business conversations. In a previous article, we explored the differences between strategic and tactical business planning, two related but distinct approaches to guiding a business. Now, we're going to delve into another pair of terms that often get used interchangeably but have unique implications: "business plan" (the noun) and "business planning" (the verb).
The business plan, a noun, is a tactical document. It's typically created for a specific purpose, such as securing a Small Business Administration (SBA) loan. Think of it as a road map – it outlines the route and the destination (in this case, the coveted bank loan). But once you've reached your tactical goal (in this case, getting the loan), it often gets shoved in the glove compartment, forgotten as part of the organization's action plan until the next road trip (i.e., additional funding).
Business planning is not a static concept, but rather a dynamic verb. It's an ongoing process that necessitates continual adjustments. It's about creating a holistic, interconnected value-creating strategic plan that benefits all stakeholders. This includes attracting top-tier employees, ensuring a return on lending or investment, and making a positive impact on the community, whether online or in real life.
That being said, the customer remains at the heart of this process. Without customers, there are no sales, no revenue, and no value. Everything else is contingent on this key element.
If we were to compare the business plan to a map, then business planning would be the journey. It's a continuous process of making strategic decisions, adapting to new paths, and steering the business towards its goals. Sometimes, it even involves redefining objectives midway.
So, let's do a "deep-dive" (I couldn't resist) into these two terms, examining their application in the real world. Along the way, we'll uncover some tools that can aid us in the ever-evolving process of strategic business planning and the more finite task of crafting a winning business plan.
The Business Plan is a Document
Alright, let's take a closer look at a phrase we've all tossed around: the business plan. Imagine it as the detailed blueprint of your organization's goals, strategies, and tactics. It's like the North Star for your entrepreneurial ship, shedding light on the key questions: what, why, how, and when (speaking of questions, here are some FAQs about the business plan).
Writing a solid business plan isn't easy, especially if you're just dipping your toes into the world of business planning. But don’t worry; we'll get to that (eventually).
So, let's break it down. What does a business plan document consist of, exactly?
- Executive Summary: Just as it sounds, this is a quick overview of the nitty-gritty that's in the rest of your business plan. It's the introduction to your organization, highlighting your mission statement and serving up the essential details like ownership, location, and structure.
- Company Overview: This is where you will detail your products and/or services, their pricing, and the operational plan. If you're opening a restaurant, this section is where you present your menu, and it's also where you talk about your ingredient sourcing, the type of service you'll provide, and the ambiance you're aiming for.
- Market Analysis Summary: This section demands a comprehensive analysis of your industry, target market, competitors, and your unique selling proposition. Without access to top-notch (and often not free) research tools, it can be challenging to find current industry data. Check out our guide on the best market research tools to get started.
- Strategy and Implementation Summary: Here, you'll lay out your short-term and long-term objectives along with the strategies you'll implement to attract and retain customers. This is where you’ll talk about all the different marketing and sales strategies you'll use to charm your future customers.
- Management Summary: This is your chance to spotlight your company's key personnel. Detail the profiles of your key leaders, their roles, and why they're perfect for it. Don't shy away from acknowledging talent gaps that need to be filled, and do share how you plan to fill them!
- Pro Forma Financials: This is where you get down to the dollars and cents with a detailed five-year revenue forecast along with crucial financial statements like the balance sheet and the profit & loss statement.
A business plan is an essential instrument, not just for securing funding, but also for communicating long-term goals and objectives to key stakeholders. But, while a business plan is essential for many circumstances, it's important to understand its scope and limitations. It's a tactical tool, an important one, but it's not the be-all and end-all of business strategy. Which brings us to our next point of discussion: business planning.
Business Planning is a Process
If we view the business plan as a blueprint, then business planning is the architect. But let's be clear: we're not building just any old house here. We're building the Winchester Mystery House of business. Just as the infamous Winchester House was constantly under construction, with new rooms being added and old ones revamped, so too is your business in a state of perpetual evolution. It's a dynamic, ongoing process, not a one-and-done event.
In the realm of business planning, we're always adding 'rooms' and 'corridors' – new products, services, and market strategies – to our 'house'. And just as Sarah Winchester reputedly consulted spirits in her Séance Room to guide her construction decisions, we consult our customers, market data, and strategic insights to guide our strategy. We're in a constant state of assessing, evolving, executing, and improving.
Business planning touches all corners of your venture. It includes areas such as product development, market research, and strategic management. It's not about predicting the future with absolute certainty – we’re planners, not fortune tellers. It's about setting a course and making calculated decisions, preparing to pivot when circumstances demand it (think global pandemics).
Business planning is not a 'set it and forget it' endeavor. It's akin to being your company's personal fitness coach, nudging it to continually strive for better. Much like physical fitness, if you stop the maintenance, you risk losing your hard-earned progress.
Business Planning Case Study: Solo Stove
Now that summer is here, my Solo Stove stands as a tangible testament to effective business planning.
For those unfamiliar, Solo Stove started with a simple yet innovative product – a smoke-limiting outdoor fire pit that garnered over $1.1 million on Kickstarter in 2016, far exceeding its original objective. Since then, it has expanded its portfolio with products tailored to outdoor enthusiasts. From flame screens and fire tools to color-changing flame additives, each product is designed to fit seamlessly into modern outdoor spaces, exuding a rugged elegance that resonates with their target audience.
This strategic product development, a cornerstone of business planning, has allowed Solo Stove to evolve from a product to a lifestyle brand. By continually listening to their customers, probing their desires and needs, and innovating to meet those needs, they've built a brand that extends beyond the products they sell.
Their strategy also includes a primary "Direct To Consumer" (DTC) revenue model, executed via their e-commerce website. This model, while challenging due to increased customer acquisition costs, offers significant benefits, including higher margins since revenue isn’t split with a retailer or distributor, and direct interaction with the customer.
Through its primary business model, Solo Stove has amassed an email database of over 3.4 million customers. This competitive advantage allows for ongoing evaluation of customer needs, driving product innovation and improvement, and enabling effective marketing that strengthens their mission. The success of this approach is evident in the company's growth: from 2018 to 2020, Solo Stove’s revenue grew from $16 million to $130 million, a 185% CAGR.
While 85% of their revenue comes from online DTC channels, Solo Stove has also enhanced their strategic objectives by partnering with select retailers that align with their reputation, demographic, and commitment to showcasing Solo Brands’ product portfolio and providing superior customer service.
Solo Stove's success underscores how comprehensive business planning fosters regular assessment, constant evolution, and continual improvement. It's more than setting goals – it's about ceaselessly uncovering ways to deliver value to your customers and grow your business.
However, even successful businesses like Solo Stove can explore additional strategic initiatives for growth and diversification, aligning with their strategic direction and operational planning. For instance, a subscription model could provide regular deliveries of products or a service warranty, creating a consistent revenue stream and increasing customer loyalty. Alternatively, a B2B model could involve partnerships with adventure tourism operators, who could purchase Solo Stove products in bulk.
These complementary business models, when integrated into the operational plan, could support the primary DTC model by driving customer acquisition, providing ongoing revenue streams and expanding the customer base. This strategic direction ensures that Solo Stove continues to thrive in a competitive market.
The Interplay between the Business Plan (Noun) and Business Planning (Verb)
In the realm of business strategy, there's an intriguing chicken-and-egg conundrum: which comes first, the business plan or business planning? The answer is both straightforward and complex: they're two sides of the same coin, each indispensable in its own right and yet inextricably linked.
The process of business planning informs and modifies the business plan, just as the business plan provides a strategic foundation for the planning process. This interplay embodies the concept of Model-Based Planning™, where the business model serves as a guide, yet remains flexible to the insights and adaptations borne out of proactive business planning.
Let's revisit the Solo Stove story to elucidate this concept. Their business model, primarily direct-to-consumer, laid the groundwork for their strategy. Yet, it was through continuous business planning – the assessment of customer feedback, market trends, and sales performance – that they were able to refine their model, expand their product portfolio, and enhance their growth objectives. Their business plan wasn't a static document but a living entity, evolving through the insights gleaned from ongoing business planning.
So, how can you harness the power of both the tactical business plan and strategic business planning in your organization? Here are a few guiding principles:
- Embrace Model-Based Planning™: Start with a robust business model that outlines your strategic plan. But remember, this isn't set in stone—it's a guiding framework that will evolve over time as you gain insights from your strategic planning process.
- Make business planning a routine: Regularly review and update your business plan based on your findings from market research, customer feedback, and internal assessments. Use it as a living document that grows and adapts with your business.
- Foster open communication: Keep all stakeholders informed about updates to your business plan and the insights that informed these changes. This promotes alignment and ensures everyone is working towards the same goals.
- Be agile and adaptable: A key part of business planning is being ready to pivot when necessary. Whether it's a global pandemic or a shift in consumer preferences, your ability to respond swiftly and strategically to changing circumstances is crucial for long-term success.
Fanning the Flames: From Planning to Plan
The sparks truly ignite when you understand the symbiotic relationship between tactical business plans, strategic business planning, and the achievement of strategic goals. Crafting a tactical business plan (the noun) requires initial planning (the verb), but then you need to embark on continuous strategic planning (the verb) to review, refine, and realign your strategic business plan (the noun). It's a rhythm of planning, execution, review, and adjustment, all guided by key performance indicators.
Business planning, therefore, isn't a one-off event, but rather an active, ongoing process. A business plan needs constant nurturing and adjustment to stay relevant and guide your organization's path to success. This understanding frames your business plan not as a static document, but as a living, breathing entity, evolving with each step your business takes and each shift in the business landscape. It's a strategic roadmap, continually updated to reflect your organization's objectives and the ever-changing business environment.
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