Creating a business plan can be a challenge even during the best of times. But the combination of a recession, social unrest, and a global pandemic can make planning for the future feel like a guessing game.
A business plan can also be an essential growth guide and a touchstone for your business. If you're seeking outside investment or loans, investors may want to see your plan for the future. Creating one can help you model scenarios and find the best approach before you spend a dime.
"It is the process of planning that is the value, not the result," says Daniel Feiman, managing director of Build It Backwards, a Redondo Beach, Calif., management consulting firm. "The planning process, when done correctly, requires us to explore options, abandon assumptions, make decisions, and implement those decisions."
To get the most value out of the process during volatile times, follow these steps.
Understand Your Plan Type
Narrowing down your plan's purpose is the place to start, Feiman says. Operational plans typically map out up to a year in advance. Business plans typically look at two to three years with some differences from what has been assumed in the past few years. Strategic plans look five or more years into the future.
Know Your Customer
In addition to understanding the type of plan you need, you also need to have a strong understanding of your customers and how they are affected by volatility, says Johana Schwartzman, president of Go Blossom Consulting, a Toronto-based business consulting firm. "During the current pandemic, we have seen customer behavior undergo significant changes," she says.
Stay in touch with your customers and gather information about their plans. That will help you adapt to their needs and anticipate whether their spending plans have changed temporarily or if they're making more long-term changes to their business operations.
Integrate Design Thinking
Schwartzman says "design thinking" is increasingly being used for business plans. The Stanford University Design School developed this six-step strategy:
- Interview your target customer to develop empathy for them.
- Develop a customer persona that includes pain points.
- Brainstorm ideas to solve their problems and cater to the persona.
- Develop a simplified version of your idea so you can get feedback on it.
- Test and get feedback on the prototype. Refine until you get it right.
- Assess your strengths.
Honestly assess how your business or product is differentiated in the market, including what the existing competitive landscape looks like, Schwartzman says. "During volatile times, it is important to address any changes that are starting to or may take shape in the landscape, and what risks need to be monitored," she says.
Map Out Contingency Plans
As you start to plan your business' operations and create financial projections, be sure to include the "what ifs" in your plan, says Paul Garcia, a business advisor with Burbank, Calif.-based CoFoundersLab, a network that matches founders with co-founders, team members, and advisers.
Garcia, who has founded four companies and spent 12 years operating startups, says that a good business plan recognizes the variables, how the variables will be monitored, and what action needs to take place in various circumstances. "No business will ever be 100% risk-free, but it can be 100% risk-aware," he says. "The job of the owner is to identify and mitigate all those potential risks as much as possible."
As you plan for various scenarios, one situation could be where you are unable to get any of what you want or expect, he says. Then, look at various expectations, including the best-case scenario.
Feiman says organizations that create, implement, and adjust their unique strategic plans annually almost always do better than their less meticulous peers.
A business plan is not static, Garcia adds. "A business plan is a living document. And even well-established, mature businesses should be regularly updating the business plan document as the environment changes," he says. "Just like keeping good financial records will inform the owner enough to make smart decisions, keeping a business plan evolving crystalizes strategy and makes sure the details aren't forgotten."
By gathering information, keeping your customer in mind, and regularly updating your plan, you can be prepared to pivot and respond to emerging customer needs during volatile times.