People that know me know I love a good metaphor (sometimes even bad ones…) The unpredictability of weather over the past… pick a time frame… is a classic for the trials and tribulations we all face throughout life and, more appropriately for this column, any entrepreneurial endeavor.
Enter “The Business Plan.” I am sure this has been addressed at least 100 times, but I also know that most businesses don’t have one that isn’t covered in a healthy coat of dust. It’s simply not a priority, until it is. And, after COVID, how can we effectively plan for these all too frequent Black Swan events anyway? The reality is that you can’t plan for a meteorite hitting your mailbox, but you can plan ahead for getting your mail rerouted.
I have been in banking for well over 25 years, primarily as a business analyst. During that time, I have lived and lent through two major economic disruptions and we are teasing at a third. I have also seen business plans all the way from high school scribbles to Warren Buffet’s. Two things they all have in common are that they were presented by people that are committed to their success and they face a landscape of significant uncertainty. The struggle is real.
At the heart of it, the process of creating a business plan can help distill our priorities and identifying the classic SWOTs and the go-forward “to dos” can give us a sense of what forward looks like. The plans can come in all shapes and sizes, and while they are all valuable, their effectiveness in guiding on-the-run operations is rarely a direct relationship to cost. And they do cost, anywhere from a few hundred dollars of personal time to real-world bills running into the hundreds of thousands of dollars. The one thing that those plans have in common is that… in small or large measure, they are going to be wrong … and that … is OK.
To paraphrase Mike Tyson, “Everyone has a plan till that first punch lands.”
The single most effective determinant of success is not how good your crystal ball is … it’s your ability to adapt. An effective business planning process should provide support for future pragmatism. How well you thought through the facts on the ground ahead of time can make those decisions significantly easier. Even if dramatic, they can instill confidence in the people you rely on and that rely on you, effectively stabilizing the business. Do you know what the issues are amongst employees, what are your competitors doing, what is the elasticity of your product pricing, how effective is your advertising, who are your alternative product suppliers, where is the greatest risk in your A/R rolls, what A/P can you string out, where can you source a meaningful capital injection should you need it? All of these questions can be answered and those answers will become stale very quickly; but, if you go through the process a few times when times are good, asking the questions isn’t some huge red flag, it’s just good business.
So when prices increase 20% or suddenly everyone has to stand 10 feet apart or maybe you just invented the Beanie Baby you are just a little more familiar with your options and your contacts a little more up to date. That is where the sweat pays off …
Walt Geist graduated from Humboldt State University with a degree in economics, currently works in the agricultural finance space and supports local economic development via various volunteer and charitable efforts.
