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Turning Plans into Realities

Posted on December 25, 2011 by John F. Dini

We’ve discussed some simple steps to getting started on your annual business plan. (see previous post: The Seven Questions of Simple Planning). Once you have the questions answered, you can begin moving towards the actions that transform your plans into realities.

The first two of the Seven Questions ask what your revenue goal is, and what needs to happen for it to be reached.Let’s say the target is a 10% increase, and the “need to happen” is expanding to a new geographic territory. For most business owners, once you have decided to do something, the action items are pretty plain. You just need to write them down.

For a new territory you could make a simple bullet point list of the things that need to be done. It doesn’t have to be complex or detailed. Your staff can get a lot from just reviewing the boxes to be checked off. So it might look like this:

Define the territory
Develop a list of prospective customers
List competitors
Analyze competitor prices
Hire a sales representative

Create job description
Determine incentives
Place want ads
Review resumes
Hire and train

Prepare marketing materials
Launch

You now have a rudimentary sales and development plan for your 10% growth goal.

The third question is about your expectation for profits as a percentage of sales, and the fourth is about improvements in your company. Those can be two separate goals (remembering SMART, Specific, Measurable, Attainable, Resourced and Timely from two posts ago) or they can be related. If your increased profitability is going to be as a result of more effective operations, as it usually is, then the steps to your profit goal are likely to be the improvement steps for the business.

The fifth and sixth questions are about your role in the business. Again, the first of the pair is about “what” is going to change, and the second is about “how.” Avoid being duplicative in your answers. “I am going to be less involved in day-to-day operational decision-making” shouldn’t be followed by “I am going to delegate more.” That is redundant, one being another phrasing of the other.

How are you going to delegate? What duties will become someone else’s? Which departments, functions or responsibilities will you hand off? When will you do this? Who is going to take them on? Again, a list of your duties with notations on the changes next to each item is sufficient to start.

The final question of my simple seven is to develop a measurable goal for your personal scorecard. Don’t think this is a throwaway. I will tell the story next week of how that one answer changed a client’s life. For now, just decide what is most important to you in your personal life. What are you going to do about it?

Now ask “How?” If you are going to improve your physical health, what is that going to entail? Are you joining a fitness class? When? If you are vowing to be home for dinner with the kids three nights each week, which nights are they? Specific is the first condition of SMART.

Now you have four goals for the next year (three business and one personal), and four outlines of the steps you need to take to achieve them. One business goal is for growth, one is for improved profitability, and one is for developing your role as a CEO and owner.

You are starting 2012 with a basic plan of action. Is it comprehensive? Of course not. Unless you have a management team more than two deep below you, however, it is probably enough to move forward.

Is it more than 80% of your competitors have? It certainly is.

Posted in Entrepreneurship, Leadership, Management, Thoughts and Opinions | Tagged business planning, business strategy, management, small business advice | 1 Comment

One Response to Turning Plans into Realities

beverage consultants says:

January 6, 2012 at 6:17 pm

These are great tips, I really like that one about thinking of prospective customers. I’ll have to make a list like this, it is the new year after all!

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The Seven Questions of Simple Planning

Posted on December 18, 2011 by John F. Dini

The Creation

In the beginning was the plan
And it sprang from the assumptions
And the assumptions were without form
So the plan was void of substance
And darkness fell upon the face of the workers

And the workers spake unto their supervisors, saying
“This is a crock of shit, and it stinks!”
So the supervisors went to their managers, and told them
“This is a pail of dung, and none can abide the odor.”
So the managers went to the division heads, and said
“This is a container of excrement, and its odor is very strong.”

And the division heads went to their vice presidents, saying
“This plan contains the ingredients to make things grow, and it is powerful.”
And the vice presidents went to the director of operations, and said
“This will result in rapid expansion, and it is potent in its effect.”
And the director of operations went to the CEO, telling him
“Our people agree that this is robust, and will accelerate our capabilities.”

And the CEO looked upon the plan, and saw that it was good.
And the plan became policy, and was implemented throughout the organization.

That joke (or one much like it) is so old that I remember getting it for the first time on our newly installed fax machine. I had to copy it immediately on one of those new-technology “plain paper copiers” because the thermal fax paper would fade.

Unless I’m just hopelessly behind the times, it’s still funny. The tools may have changed, but the people haven’t. Why are so many small businesses forever trapped in the no man’s land between the excruciating pain of a “Comprehensive Strategic Plan” (it just has to be capitalized) and no plan at all? Isn’t there an easier way?

Our clients all use our “Seven Questions” approach to planning. For some, the answers are the starting point for developing a detailed plan. For others, they are the culmination of their entire planning process, and just summarize the results. For many, it is the total “long-range” planning they will do this year.

We have used the same seven questions for fifteen years. Other consultants around the country have expanded on them, made them more detailed, and added more questions. In the spirit of KISS (the acronym, not the glam band) we have stuck with the originals. We find them quite sufficient to make people focus on what’s important.

Here they are, with accompanying explanations.

Question 1:

What will your revenues be for the coming year, in dollars and as a percentage of this year’s revenues? Just the exercise of deciding what you want to accomplish in the coming year starts you off in a planning mode. Saying you will increase by 7% doesn’t give you a number. Picking a number doesn’t give you a comparison. Doing both makes you look at it with a bit of context.

Question 2:

What is the single most important factor in making that prediction come to pass? It’s easy to pick a number out of thin air. The trick is to figure out how to do it. Do you have to expand product lines or territory? Add a salesperson? Improve marketing? Just saying that you’ll work harder isn’t a plan. Saying you will work harder doing a particular thing starts becoming one.

Question 3:

Our profit margin (gross or net) will go from ___% to ___%. OK, so it’s not phrased as a question. Shoot me. The reason we say “gross or net” is because your plans may affect one or the other differently. Just targeting a bottom line may ignore pricing, cost of goods, or a quest for volume customers. This is the safety valve for question one. Just setting a revenue goal does nothing. Deciding how much you will make from it is vital.

Question 4:

What is the single most important change you can make in your company in the coming year? This is your internal focus. Every company needs to grow, develop and improve. Pick one thing you can do. Is it upgrade technology? Improve systems? Develop middle management? Cross train? Certify in Lean or ISO?

Question 5:

How will your personal role in the company change in the coming year? As the owner of the business, you need to grow in order for the company to grow.Unless you develop new skills, and take on different responsibilities, you are dooming your company to a business version of Groundhog Day.

Question 6:

What is the ONE THING that has to be accomplished in order to realize your goal in question 5? It is easy to say “I will delegate more and do less.” or “I will become more of a strategic thinker.” How will that happen? What specific steps will you take?

Question 7:

How will the ability of my business to provide the quality of life I seek be indicated as a personal scorecard? Running a business can be serial insanity. It’s easy to put off your personal life a week at a time. Weeks grow into months, and the next thing you know another year has gone by. How will you know that you are taking care of yourself? Our clients pick many different goals (exercise, sports achievement, weeks of vacation or nights home with the family), but what they all have in common is that they must be 100% personal, and completely measurable.

You don’t have a plan for the coming year? Start by answering the seven questions. It’s a lot better than nothing.

Posted in Entrepreneurship, Leadership, Thoughts and Opinions | Tagged business ownership, business strategy, leadership, small business advice | 1 Comment

One Response to The Seven Questions of Simple Planning

Doug Roof says:

December 19, 2011 at 2:30 pm

Excellent advice, John. I offer my clients a less rigorous first step, not nearly as good as yours. It too is designed to get their toe in the water, in hopes they will engage in the process and expand upon it. On one page they list the two or three most important accomplishments for the year; then the two or three shortfalls for the year; then the two or three most important goals for the upcoming year.

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Getting Smart about SMART

Posted on December 11, 2011 by John F. Dini

It is approaching 2012, and (hopefully) most of us are finalizing our plans for the upcoming year. In our groups of The Alternative Board, we are asking each member to state their sales and revenue objectives.

We all know that goals are supposed to be SMART, the acronym for setting a goal that is well…smart. When I ask an owner whether he or she sets SMART goals, they usually reply “Oh sure. That’s Specific, Measurable, and uh…uh…”

Not knowing the acronym past the first two words isn’t all that surprising. Many goals really address only the first 2 points. “We will increase revenues by 10% in the coming year.” That is both specific and measurable. Unfortunately, it doesn’t say anything about how those revenues are supposed to be generated. Is it coming from price increases? Does it include new stores or new lines, or it is an increase of legacy business? Who is responsible for the increase?

The most popular definition of SMART when Googled is Specific, Measurable, Attainable, Realistic and Timely. I have always had an issue with that. In practical terms, how could something be attainable and unrealistic? Or could it be realistic, but unattainable? Using 40% of an acronym to say the same thing twice makes it pretty dumb, in my opinion.

There are several widespread variants. One swaps “attainable” for “accountable.” That is clearly better. Anyone who has managed a team understands that you can’t expect an objective to be accomplished unless someone is given responsibility for doing it.

There is an adage in management that says “If you say anybody can do it, everybody will know that somebody will do it, so nobody will do it.”

Another variant of SMART trades out “realistic” for “relevant.” That addresses the redundancy issue, but I’m not sure why we need “relevant” as a critical point in formulating a goal. Is that because so many people go through the planning process to develop irrelevant goals? What would they look like? “As the largest widget maker in our market, we will become known for having the nicest employee lunch room?”

One definition uses “results-focused.” Besides the problem with loading any acronym with hyphenated words, it also seems redundant. SMART is supposed to be how you make goals results-focused. Saying we will make a results focused goal by using a mnemonic that says it should be results-focused seems just a bit obvious.

Most folks get the last one, or at least some of the approximations of it. “Timely” is easy to remember, but grammatically vague. Does it refer to a goal that is being set at the right time? A goal that recognizes market or industry conditions as favorable? “Time-bound,” Time-sensitive,” and “Time-framed” are all common variants. They all are somewhat stretched to mean basically the same thing, which is “deadline;” but SMARD just doesn’t have the same ring to it. We will leave the time reminders alone. Pick the one you like. I’m using “Timed,” since it encompasses the idea of a schedule, not just a deadline (and it isn’t hyphenated).

So we can generally accept three of the five. The fact that people remember them, and they are generally consistent, indicates that they are worthwhile. It is the middle ones, the A and the R, that people forget, or keep changing in attempt to improve on the acronym.

Here is my change. Keep the “A” as attainable. Every good goal conversation should engender a discussion about whether we can do it or not. That follows specificity and measurability. It then leads to the discussion of “How?”

The “how” part of the acronym is Resourced. No goal makes sense unless you are committing human and physical assets to it. Resourcing a goal requires that you assign responsibility, allocate budget dollars, and tell those accountable for it what its priority is in their work plan.

So when the sales department is given a goal of 10% increase in revenue, Resourcing builds in the process of “how?” Do they get to hire more reps? Does marketing buy more advertising? Does the incentive plan change? Is purchasing bringing on a new product line? Once you determine “how,” then you can progress to “when.”

So my definition of SMART is:

Specific: What exactly do we want to accomplish?

Measurable: How will we know that we accomplished it successfully?

Attainable: Is this within our capabilities?

Resourced: What human, financial and other assets will we apply to this objective?

Timed: When is this going to happen?

This SMART follows a logic process, avoids duplication, and should be more easily remembered.

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Trimming the Customer Tree

Posted on December 4, 2011 by John F. Dini

Anyone who has shopped for a live Christmas tree knows the drill. They have some on display, but none look exactly like what you want. You start looking through the trees that are still bundled up. If one looks promising, you have the lot guy cut the twine and spread it out for your examination.

The bottom branches are never as nice as the top branches. They get less sunlight, and the branches closer to the trunk are brown and thin. The vendor doesn’t like to trim the bottom, since he is usually selling trees by the foot.

You have a choice. You can buy a tree of the length you need, and use extra ornaments and lights trying to make the lower branches look as nice as the upper ones. or you can spend the money for a bigger tree, and trim off the bottom to leave only the good parts. Either way, those bottom branches are going to cost you time and money.

A business owner told me a story the other day. “At the end of every year we sat down and classified our customers into A, B and C accounts. We would discuss how to better serve our A accounts, and how to find more like them.”

“One year we were doing this with a business coach assisting in our planning. She asked “What are you doing with your C accounts?” We were stumped. We didn’t do anything with our C accounts, we just knew they were C accounts.”

“She convinced us to jettison our C accounts. Numerically, they were about 40% of our client portfolio, but a far smaller portion of our revenue. We helped them find a more appropriate vendor. Since then, we are working less, serving our A and B accounts much better, and are far more profitable.”

Every business owner reading this column knows how that story is supposed to end as soon as they read “What are you doing with your C accounts?” We all talk about focusing on our best customers. We know that the Pareto Principle (20% of customers generate 80% of revenue or profit) is true. But year after year we look at our C accounts and make excuses.

“We have the time, so why not make a little extra money?” “A lot of those people have been with us for a long time.” “Some of those accounts may grow into something bigger. Remember Jones Enterprises back in 1994? They were nothing when they started with us.”

Certainly there might be a nugget in that pile of Fool’s Gold. When I go to Las Vegas I put money on the crap table. I’ve walked away with a lot more than I came with, once or twice. That doesn’t make playing craps a good business decision.

You can identify the nuggets. In truth, someone who is sharp, knows his or her business, or is fun to work with probably isn’t in your C list to begin with.

The best place to find new business is from your best customers. They usually have better contacts, can give better quality referrals, and represent more credible testimonials. Not to mention the potential for more business from them, if you only had the time to cultivate it. That could be the time you are spending on the C accounts.

Lopping off the bottom of the customer tree will cost you a few dollars in the short run. Just like a Christmas Tree, it gives you a better base to work from, and a more satisfying end result.

Posted in Marketing and Sales | Tagged business planning, marketing, sales, small business advice | Leave a comment

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Thanks for Everything

Posted on November 27, 2011 by John F. Dini

A British friend was commenting to me on how “odd” he found the American celebration of Thanksgiving. “There is no equivalent holiday in Europe, or anywhere else in the world.” he said. “You have an entire day devoted to conspicuous consumption, where everyone anticipates eating and drinking far more than usual, and boasts about how excessive their indulgence was. It’s so quintessentially American.”

Of course, Thanksgiving Day is just a warm-up to what follows; the holiday shopping season. How did we become disposed as a nation to consume as a national sport?

I think it is an expression of luck. We began as a series of small settlements on the coast of the greatest treasure trove of exploitable resources on the planet. Not only did the European colonists find fertile ground for agriculture, but there was ample water, navigable rivers, vast forests and abundant minerals. Success was only limited by how smart you were, and how hard you were willing to work.

Of course there are plenty of issues of exploitation in other areas as well. Indians and slaves didn’t have the same opportunities. I’m not an apologist, and some of our history is shameful, but so is some of the history of every other nation on Earth.

For over two hundred years we’ve attracted the ambitious and creative from all over the world. They came here because they would be allowed to succeed or starve according to their abilities. After a couple of centuries some of the momentum has faded, and we are getting a bit calcified around the edges, but the abundance that has characterized our culture remains.

My clients are all small business owners. A few have outgrown any reasonable definition of “small,” but even those started out that way. Most are the founders of their companies. They set out to build a business with a set of assumptions that apply in few, if any other places on the planet.

They set up their businesses under a system of laws that protects their right to create and keep wealth. We complain about burdensome regulation and taxation, but we don’t even consider the possibility that we might be building an enterprise that someone else with better connections and political power could confiscate just because it is successful.

We have a free labor market. While unions and labor laws restrict the ultimate freedom to shamelessly exploit employees, few of us would argue that is a completely bad thing. We can compete for better workers, and give the one’s who don’t produce the right to find success elsewhere. No one tells us whom we have to hire, or forbids us the ultimate right to fire them.

We can protect our ideas and property. The concept of differentiation is basic in American business. In much of the developing world it’s difficult to develop something that isn’t stolen and copied the moment it succeeds. That includes brands, designs, and creative content. How much does it restrain an economy when its best ideas are hidden and secret?

We are free to fail. At last we are free to do so until we are “too big to fail” which by definition isn’t an issue for small business. Our business markets are still among the most Darwinian in the world. A bad idea, sloppy execution or lack of commitment can cause a small business to disappear without a trace.

What we take most for granted is our freedom to act. We live in a society that is predisposed to action. With an Internet connection or a small store front we can be in business in a matter of days. There is no issue getting power or communications supplied. We can hire employees without proving any ability to pay them. All that it really takes to go into business is a desire to do so.

It’s messy, and there is collateral damage when the dishonest or incompetent screw it up. That doesn’t change the fact that hundreds of thousands of people go into business for themselves every year. Most don’t make it, but if it wasn’t so easy we wouldn’t have the successes either.

So I’m thankful to live in a place and time where I can take a shot, and no one is allowed to determine whether what I choose to do is good for me or not.