Is A Business Plan Necessary?

The number of businesses that I come across that operate without a business plan is astonishing; that those businesses continue to survive and in some case flourish often bemuses me, but upon reflection maybe it shouldn’t, albeit it still galls me.

I am coming from the point of view that a business does need a plan, in what shape or guise it’s in is more subjective.

My horror, I suppose, comes from a passion and a desire to see a business succeed and somewhat akin to watching a child run across the road, I have an in-built desire to thrust my point of view across and to shout about how it should be –  “The World According to Carr”

I have come to the view that in many cases, I can understand why a business operates without a plan. The natural inertia of the doors opening in the morning and the phone ringing means that the business can trundle along its path for many a season without a substantive need to revisit its raison d’être. If that scenario is coupled with a Management Team that perhaps lack the skills or appetite for business planning then logically a plan may be absent.

I have considered whether or not a personality type that has a natural predilection for a planning and organising would be a key driver in establishing this weighty tome, after all a fast thinking, Market Trader, would be certainly not be the same  character as my cautious Financial Director; I think that this is really what Sir Alan Sugar alluded to when he commented that Engineers couldn’t run businesses’. The latter point of which, I firmly disagree.

So against a backdrop of culture, ambivalence, skill set and personality type, why do I believe so strongly that a Business Plan is so necessary?

It’s because the organisation’s strategic focus comes from the primary objectives of the business – the very existence of the business. Any activity that fails to contribute to that focus must be superfluous and anything otherwise, hinders efficiency.

Let me be a little more precise in what I’m saying and give examples. I have come across the CEO of a substantive PLC  of whom, when I asked if I could see the business plan for a division, he handed me the financial forecasts. Another business that I visited was somewhat smaller at £3m t/o and sold web design and IT support – “Plan?- no Mike” laughed the MD, “it’s whatever we can get”

Aside from my corporate career I have also bought, two smaller businesses and grown them both to well over £1.5m t/o. With both of them I had a very clear unambiguous focus about what needed to be done and what our targets were.

I don’t believe in the weighty tome as the way forward, in today’s markets, unless it’s a very mature business, opportunities and risk move too quickly, instead I err towards a  rolling “TOP” – a Three year Operating Plan consisting of Financials, an Operating Plan and a Sales & Marketing Plan controlled and monitored by Key Performance Indicators.

Those three legs of the plan are the foundations from which the organisation structure, systems and data flows. The iterative process of separating out these functions and documenting them means that not only is the strategic focus absorbed and conveyed throughout the rest of the business but inherent with that, comes the efficiencies, not just of operating process, but also of decision-making; frustration tends to drop because rationality of expectation is set and accountability and achievement are all measured against a backdrop of cohesion of thought.

I’ll post further on business planning. I’m not dogmatic in my thoughts, but consider this.

The Austin Mini was famously designed by Issigonis, on a table napkin, in a Birmingham restaurant. As a product it was world-class but Ford systematically analysed its costings in a book they called their “Blue Book” and came to the view that BLMC had under priced the Mini so badly that they were losing money on every one they sold.

The last time I looked, Ford Motor Co was still running.

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About Michael Carr

Specialising in Strategy, Systems and Organisational Design I've had a varied and rewarding career and been fortunate to work for some superb companies such as Courtaulds, Unipart International, Akzo Nobel and more recently Jaguar Landrover, all luminaries of a solid, disciplined and a conservative, though never lacking in innovation, approach to business management and development. Augmenting my career with studying for my MBA at Warwick in the early 90's has given me a balanced and I believe rich resource set to draw upon in my Consultancy Practice. My Clients have been good to me, tolerating my idiosyncrasies, giving me enough rope to go along the journey that I was taking them and hopefully in return I've been able to repay them by raising the bar and their business performance, giving them the results and achievements they were looking for. I really enjoy my work and love the challenge - isn't that what it's all about?
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