25 March 2006

Planning - it's got benefits, but ...

In planning workshops I often ask the group I am working with why they should have a plan. I get a wide range of answers. For me, a plan provides clarity. A plan delivers into day-to-day operations by someone closing a telephone conversation by saying that “I’m sorry, we don’t / can’t / won’t do that, it isn’t part of our current plan”. That saves the business time, because it doesn’t have to devote resources to review whether the telephone conversation represents a new business opportunity with limitless potential. Those opportunities are always there – there are many more ideas than successful implementations.

Some consultants seem to believe that the answer to every problem is to develop a Business Plan. The Red Splash view is a bit different. If a business needs to convince a 3rd party that it is robust and stable – to provide the confidence that the cashflow is sufficient to repay a commercial loan or that the planned growth will provide a high exit multiple for an equity investor – then a Business Plan is almost certainly essential. When there are no 3rd parties to convince then why go to the bother of having a formal Business Plan?

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