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This guide contains excerpts from “An Overview of Lean Business Planning” written by Tim Berry, the founder and Chairman of Palo Alto Software, Inc. and “Introducing Lean Planning: How to Plan Less and Grow Faster” written by Noah Parsons, the Chief Operations Officer for Palo Alto Software, Inc. The original articles can be found at https://articles.bplans.com.
Palo Alto Software is the maker of Outpost and the online business plan app “LivePlan.com” and also the curator of bplans.com. Bplans.com is owned and operated by Palo Alto Software, Inc. as a free resource to help entrepreneurs build better businesses. Palo Alto Software, Inc. develops, publishes, and markets award-winning software to help entrepreneurs write business plans, pitch for funding, and track their progress towards their goals.
Historically, entrepreneurs have taken months to craft a detailed business plan without gathering feedback from potential customers. They viewed business planning either as a necessary hurdle to starting their business or, more often, as a thick stack of papers to present to a banker for funding. With this approach, your business plan ends up being a collection of assumptions instead of a proven roadmap for growth.
Here are the most common objections to writing a business plan. Do you recognize yourself in any of them?
The traditional business planning process may be broken, but it is still vital. Planning helps you figure out your focus and priorities – in other words, your business strategy. It creates a guide for you to follow and helps you actually get things done.
However, you shouldn’t just create a plan and be done with it. A good plan is one that you’re constantly adjusting and refining as you gather more information about your business and your customers.
Don’t believe us? Studies show that businesses that set goals and track their progress grow 30 percent faster than those who “just wing it”. Clearly, planning is still essential for a business’s success. So, it is time to fix the traditional business planning process with one that works over time.1
Lean business planning was pioneered by Toyota Motors over 70 years ago. The lean manufacturing or business plan was based upon the idea of a continuous process and applies perfectly to business planning. It’s a shame that so many people think of a business plan as a static or formal document. In reality, effective business planning is a streamlined series of incremental improvements.
A lean business plan does what every business owner and aspiring start-up needs to manage their business: strategy tactics, execution, and essential business numbers. It guides the company toward its goals and also tracks progress, expectations, and accountability.
The lean business plan exists for internal management use only; it is not designed for outsiders’ use. It should be limited to bullet points for essential data and a collection of lists and tables. Then, review and revise your lean plan on a monthly basis to keep it fresh.
The lean approach is a faster and better business plan solution. This 4-step process will help you manage a company successfully.
Here is the process:
Creating a lean business plan is not enough. It should be one part of a process that includes regular reviews and revisions. Ultimately, your lean business plan must remain a living document--that is what generates the benefit to the business. You develop the plan to get the process started, then track progress and performance metrics, and review the plan regularly to turn it into management action.2
If you are launching a start-up or considering starting your own business, the lean plan will help you determine if your idea is any good and what you may need to change to build a viable business.
The Lean Planning process starts with a one-page Lean Plan that you should be able to finish in an hour. Your Lean Plan should keep the management team focused on what is really important. Use bullet points to list only the most important strategic items.
Your one-page Lean Business Plan will include sections on:
Sample of a one-page strategic plan template. A word document template is available on this website for your use.1
This section should contain a few bullet points to outline your strategic focus on a specific problem, your solution to that problem, your specific target markets, and why your company is ideally suited to match that solution to the problem and the market.2
Businesses exist to either solve a problem for customers or to meet a desire. If all you have is a solution in search of a need, you are going to have a difficult time building a successful business. Starting your Lean Business Plan with a focus on the customer shortens the time required to determine if you have a good idea that has a chance of becoming a successful business.
Keep your description short, no more than a few bullet points.
List here how you are going to solve the problem for the customer. Again, keep your answer short, only a few bullet points that correlate to the problems listed in the previous section.
In this section list your ideal customers. If you are early in the process of deciding whether to start a new business, don’t worry about detailed market research and the size of the market; that will come as you revise your plan during the Lean Planning process. In the beginning, focus on who the ideal customer is and what their attributes are.
In this section, list the businesses you will be competing against. How are these companies solving your target problem today?
This is the final block to be completed in the Business Strategies section of the Lean Business Plan. In this section you need to provide a short explanation of why your solution to the customer’s problem is superior to your competitor’s solution.
This section of the one-page Lean Business Plan is a short outline of how you are going to make your strategic vision happen.
List your sales tactics for implementing the strategies section of your Lean Plan. For example, will you have a physical sales location, only sell online, or do both? Are you going to use outside sales people or telemarketing?
List your marketing approach to letting potential customers know about your solution to their problem. Marketing tactics include pricing, messages, media, social media, promotions, etc.
In this block of the plan, list the key people who will work with you to implement your strategic vision. If you are a start-up, you may need to list the positions you will hire for instead.
In this section of the plan list the people you will need to work with to make your strategic vision a reality. This may include key suppliers, legal counsel, CPAs, etc.
Lean Planning is all about getting things done. In order for your plan to succeed, you’ll need to create a work schedule, listing the tasks that need to be completed, designating who is responsible for seeing that it is done, and finally creating a deadline for the tasks to be completed. Your schedule creates accountability for getting the plan executed on time.
If you are a start-up company or you are trying to decide if you want to start a business, this is where you get out from behind your desk and begin talking to potential customers and suppliers. Your goal in these discussions is to validate that you have defined a solid strategy and tactics to implement that strategy. Upon completion of these discussions, you may need to make significant revisions to your plan.
Even if you have a problem that is worth solving, a solid solution to that problem, and a target market that needs your solution, you do not have a viable business unless you can provide your solution profitably. The final section of the one-page Lean Business Plan is a basic forecast of sales and expenses to ensure that your great idea is a viable business.
Putting together some basic bottom-up sales forecasts and budgets for expenses will quickly tell you if you have a business that will be able to pay its bills. At this stage it is important not to paint an overly rosy picture of your financial prospects. The sales forecast should be as realistic as possible. 1
Now that you have completed your initial draft of your One-Page Lean Business Plan, you are ready to begin putting the plan into action to see if your idea will actually work. If you are a start-up or considering starting a business, your next step is to validate the ideas in your plan.
At this point, your Lean Business Plan is simply a set of assumptions about a potential business. The goal in the early stages of starting a business is reducing the risk of failure.
You must ask yourself:
Starting a new business is full of risks. It is incredibly risky to simply build your business based on a set of assumptions about your target markets and how they will react to your solutions.
Look at your first version of the Lean Business Plan as a set of assumptions that need to be proven to be true or false. Validating these assumptions is a very challenging step because it requires you to talk to your potential customers about your strategies and tactics.1
Once you have examined your assumptions, you can go back and revise your plan based on your insights from interviews with potential customers. This process of revising the assumptions and interviewing potential customers and suppliers removes many of the unknowns and reduces the risk of failure for a new business.
As you review your results, you may decide that your solution to the problem needs to be tweaked. You may decide that your sales or marketing tactics should be changed, and that your cost structure will have to be altered in order to be profitable.
Lean Planning is a process, not a document. It is all about continuous improvement. You have quickly defined a strategy, experimented to see if the strategy will work, reviewed the results, and revised your plan before you have even started your business.
The One-Page Lean Business Plan is not a formal business plan. It is designed for the internal use of management to ensure that the management team is focused on what is important. However, the One-Page Lean Business Plan makes a great initial draft for a formal business plan.
If you need to present a business plan to a bank for a loan or to someone seeking venture capital, the one-page plan will not be sufficient, but it is an excellent starting point. Because you have done a lot of the leg work in proving that your proposed business appears to be viable, you have reduced the risk to the individuals who will be funding the startup.
1 “An Overview of Lean Business Planning” written by Tim Berry, the founder and Chairman of Palo Alto Software, Inc.
2 “Introducing Lean Planning: How to Plan Less and Grow Faster” written by Noah Parsons, the Chief Operations Officer for Palo Alto Software, Inc.
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