Business Plan or Wing It?

Right out of grad school in my first job, it was my job to start companies. I worked for a group of early-stage investors who found ideas they thought were promising and we turned them into viable companies. At one point my colleagues and I joked we could go from nothing to a functioning company in a morning.
On one hand, this was true. Once we’d met with the founder and made a plan, we knew how to quickly execute on all the paperwork, contracts, accounting systems, management systems, and more needed to put up the structure.
On the other hand, of course, there was a lot of work that went into planning and preparing before we started actually making the company a legal entity. Many of our founders had already started doing business, others just had an idea. Either way, there were generally multiple strategy sessions where we met with them and laid out a plan and talked them through some of the decisions they needed to make before launch.
So Basically a Business Plan
While we never formally referred to what we did as making a business plan (strategy session was the norm), that was essentially what we were doing. We’d get a sense of how the business was basically going to operate then we would talk through each functional area in a fair amount of detail, making good notes, so we could ensure that it would all work together. Did the corporate structure make sense for the planned ownership and funding goals? Did the financial plans take into account insurance needs? Were the human resources plans reasonable and scalable? Was there any consideration given to the IT infrastructure needed and the costs associated with that?
As we worked through each functional area, we often had to circle back and adjust previous decisions. At the end of the strategy sessions, while we might not have had a formal business plan, we certainly had a clear idea of what needed to be done and who was going to do it going forward. From there, execution could be quick.
But Let’s Just Wing It
I’ve come into so many businesses that don’t have plans. They’ve cobbled together what they need to legally continue (maybe, if they’re familiar with the regulations), but they’re basically winging it and wondering why they can’t grow. They’re constantly putting out fires, their cash flow is not steady, they lack direction and are wondering why they aren’t an overnight success.
Other businesses have a clear operations plan, but nothing else. They know how to sell their widget or service are do that smoothly, but want everything else to run smoothly as well and are frustrated with their bookkeeping, marketing, and the fact that there was no backup of their information when it was needed.
How Do We Fix This?
Whether the situation is when we start working with a new company, we always start with a strategy session. During this, I systematically walk the owner(s) through the various functional areas asking about systems and goals. What systems are in place for managing and tracking (excel is fine for many purposes!!), where do we need to put systems in place? Looking at just this functional area, what are your goals? Then we loop back around to where we generally start, looking at big picture goals. Once we’ve got that information, we can start to make a plan.
Does this sound familiar? If you’ve read any of a number of business books, you’re probably familiar with the ideas used during a strategy session. Looking at big goals and then breaking them down into smaller chunks. Setting the metrics by which you’ll track success. Making sure everyone on your team understand and is acting in alignment with the goals.
I do insist on going through functional areas, though, because failing to do so can mean neglecting something key to success, underlying processes that support your business when they are running smoothly and cause problems when they are neglected. If it’s not clearly defined who is responsible for tracking payments to independent contractors and sending out tax forms each year, then it might be forgotten. Tax forms meet no one’s long term goals, but are critical for a smoothly running business.
Don’t assume, define and document!