Why Business Plans Are B.S. For Small Business Owners
Once upon a time… Sam was worried about his electrical supply business, and rightly so. The initial burst of growth over the first three years of the business had halted in the fourth year and in the fifth his sales and profitability were now going backwards.
Once upon a time…
Sam was worried about his electrical supply business, and rightly so.
The initial burst of growth over the first three years of the business had halted in the fourth year and in the fifth his sales and profitability were now going backwards.
Sam urgently needed more bank funding to keep the business afloat until he could drum up some more sales.
So he first met with Pam, his CPA, to complete a loan application, and that started by reviewing the business’s financials.
“Not pretty” she observed.
“Agreed” said Sam. “But I can’t figure out why we’re in free fall. Sure the GFC had an impact but we actually grew in the early stages of that and now we’re going backwards. And I really need this loan so the business can survive the drought we’re going through at the moment.”
An uneasy pause filled the room.
“Do you have a business plan Sam?” Pam asked, even though she knew the answer.
“Er … not as such” replied Sam.
“Well that may explain why your business is in decline. The importance of a good business plan is one of the fundamentals taught at every MBA college and if you hire any business consultant worth their salt it’s one of the first things they’ll want to put in place. Besides” she continued, “the bank’s going to want to see a business plan including your financial projections before they’ll even think about giving you a loan”.
Sam could see the logic of Pam’s argument but protested: “Okay but I’ve got no idea how to do a business plan, let alone financial forecasts. Frankly, that sort of stuff gives me a headache.”
“Well naturally I can help you with the numbers side of the plan. And as for the rest of it that’s no problem either” said Pam as she reached for the stack of business cards in her top drawer and handed one to Sam. “This guy’s a friend of mine but that’s not the reason I’m referring you to him. He’s not only got an MBA he’s also a qualified business coach and he knows how to put together a plan that’ll impress the socks off the loans officer at your bank.”
And they all lived happily ever after…
Quite the opposite in fact.
Sam met with Rudy, the business coach, who explained that yes, he could help but that he’d need $2,500 up front each month.
Sam didn’t have that sort of cash to spare so he paid with one of his credit cards and made a mental note to apply for another credit card, just in case he needed it to fund Rudy’s fee in the upcoming months.
After all, according to Pam and Rudy, getting that business plan sorted was not only the key to better business performance, it was also critical to getting the business growing again.
After a stressful couple of months, the business plan was completed, the loan applied for and thanks to the impressive chart in the plan which showed an upward trend in sales and profitability, the loan was granted, albeit with onerous monthly repayment conditions.
On the one hand the loan brought Sam some breathing space but on the other hand he was more stressed than ever. Sure, he’d paid off most of his outstanding creditors but how the heck was he going to service the loan repayments?
“Not a problem” said Rudy. “All we need to do is implement the plan. We’ve done the hard yards. You’ve now got a mission statement so you know what your purpose is. And your vision statement gives you a clear sense of long term direction. Also, you’ve now got that really nice wall plaque that tells your team what your business values are.”
“Well yes” said Sam, shifting a little uneasily in his seat “but how is that going to get me the new clients and new sales I need?”
“Whoa, steady on Sam” said Rudy. “Sure we need to get some marketing happening but first we need to make sure your staff Position Descriptions and your supplier agreement are updated. After all, there’s no point in getting new clients in if you’re not well organized in the back room”.
Sam thought for a moment. “Well okay. You’re the expert Rudy and you come highly recommended from Pam so I guess we better get started with the paperwork huh?”
Rudy and Sam worked together for another four months putting Human Resources and supplier systems into place, holding team meetings, recording agreed actions, reviewing the financials which continued to deteriorate and creating quality control checklists and documenting other systems.
But after six months of headaches and extra hours, Sam finally snapped.
And at their next meeting he let Rudy have it.
“Rudy I’ve now spent fifteen grand with you and after six months of blood, sweat and the occasional tear, I still don’t have any more clients and not even one additional sale to show for it. It’s like my ship’s still sinking and all we’re doing is straightening the proverbial bloody deck chairs!” he protested.
Rudy was ready for this. Sam wasn’t the first client to express such a concern.
“Hey Sam, relax. You’ve come a long way and now we’re ready to start the marketing. Don’t give up yet, we’re just about there. We’re going to redesign your Yellow Pages advertisement, get you onto Facebook and start your Blog. After all, most marketing is going on-line now and so of course we need to get your website made over as well. Also we need to do a review of your product range, complete a customer satisfaction survey and we should probably hire a research firm to find out what the market place really wants. All that’ll give us a whole lot of valuable information that we can use in our marketing.”
At that point Sam exploded. “Are you freakin’ crazy Rudy? That’s going to cost me a small fortune. I’m struggling as it is and if I don’t get new clients in soon I’m going to have to shed some staff or shut the doors. Rudy, it’s time you left. We’re through.”
Rudy didn’t mind too much. He’d seen this before. And after all, he’d still banked fifteen grand. Sure, it was a shame that Sam didn’t ‘get it’.
“I mean, what does he know?” Rudy thought. “I’m the one with the MBA and I’m the one who earned my business coaching diploma with first class distinctions.”
Unfortunately this sorry story, or variations on its basic theme of wasting money on BS theories that don’t put money into the business account, has been repeated hundreds of thousands of times the world over.
The moral of Sam’s story is this: it’s effective marketing that makes the difference, not a business plan and not any fluffy stuff such as Visions, Missions or Values statements.
And no matter how exciting they may look, no amount of upwardly trending growth charts of row upon row of increasing dollar amounts will make one fig of difference in your business.
And even if your product or service is terrific and your clients love you, that’s also not the thing that will make or break your business.
The history of business is littered with a million or more businesses that had a product or service that was good enough or even great.
To paraphrase the pragmatic and ever-inspirational Ed Johnson:
“They say that if you build a better mousetrap then the world will beat a path to your door. The hell they will. It’s the marketing that makes the freakin’ difference.”
Summary: once you’ve got a product or service that people like, stop messing with it and make the time to continually grow your “Marketing Muscle” and then flex it every day of the week.
Once you know how to get people buying your stuff, then, and only then, should you start messing with the management side of your business.
How can you build your marketing muscle? Simple…
If you want to grow a physical muscle you need to do two things: feed the muscle the right diet and then exercise it.
And it’s the same with growing your Marketing Muscle: feed your mind the right diet of proven marketing ideas and then exercise the muscle by implementing those ideas.
Then, and only then, you may live happily ever after…