I am a big fan of the Lean Business Planning concept developed by Tim Berry and using the online planning tool LivePlan offered by Palo Alto Software. Lean business planning adopts the ideas of small steps, constant tracking, and frequent course corrections to planning. It includes only what adds value, without waste. It starts with a core business plan for internal use only, just big enough for optimizing the business. A lean business plan has four essential parts:
- A strategy summary, which is a bare-bones description of strategy for management use only.
- Execution, also a bare-bones description, for management use only. It lays out tactics to execute strategy, like pricing, marketing, product or service development, financing, and so forth.
- Concrete specifics including review schedule, assumptions, milestones, tasks, and performance metrics. Milestones include dates, deadlines, and budgets. Tasks include responsibility assignments and budgets.
- Essential forecasts including sales, spending, and cash flow. And, if you are starting a new business, also your starting costs.
This lean plan is clearly not the “elaborate business plan” usually associated with the traditional business planning process. Unlike the elaborate plan, the lean plan doesn’t include carefully worded summaries or detailed business information for outsiders. It is not even a document. It’s a collection of lists, tables, and bullet points.
You don’t need the big plan. Do your lean plan and keep it up to date with regular review and revisions. And when somebody asks for a traditional business plan (if they do), then add the extra information you need. That might be a market analysis, maybe an exit strategy, maybe a detailed description of product or marketing plan. Do them as summaries, presentations, or appendices.
What is Lean Planning?
Lean Planning is an ongoing business planning process, not a single business plan document. Lean Planning helps you develop a solid strategy for your business, refine your strategy as you learn more about your customers and their needs, and track your performance as you go.
Lean Planning can help you produce the business plan documents and presentations that you might need as part of getting started, raising money, or getting a loan. But, the goal of Lean Planning isn’t to just produce documents that you use once and shelve. Instead, the Lean Planning process helps you build a healthier company that will outlast all the business failure statistics.
I like the Lean Planning process because:
- It’s faster than traditional business planning. You can complete an initial pitch—a “Lean Plan” that’s an overview of your business idea—in 20 minutes.
- Your plan stays up-to-date because it’s easy to update as you learn about your business and your customers. You can revise your plan and strategy in minutes instead of hours.
- It’s concise. Because Lean Planning requires you to document your ideas with limited text, your ideas are distilled to their core essence.
Lean Planning is a process that will help to build a solid financial roadmap. It is a protocol for gathering necessary business information: what your business sells, who you sell it to, how you sell it, and who and what you rely on to get that done. All of this information will feed the financial roadmap.
The Lean Planning process, using LivePlan, helps you to focus on the necessary business information needed to build your financial roadmap, including the following:
- Motivations and goals Describe why you started your business. What motivated you? What do you love most about your business? Do you have financial goals, either personal or business? (For example, provide profit sharing for key staff members, hire someone to fill a key role, or something more personal, like give yourself a raise).
- Your business’ identity, the essence of your company Start with a strong, compelling description of your company and its business opportunity. It helps you to focus on exactly what you do and who you’re doing it for. It also helps you clearly market your business. Crafting a simple headline will communicate the core essence of your company and generate interest in learning more about what you do. Consider the following: What are the keys to your success? Is it your innovative product or service? Is it the unserved market you’ve identified? Is it the proven team of people you’ve put together? Be concise, don’t try to cram everything into the, no more than, 140 characters limit. Just focus on what’s most important. Describe the essence of your company in one sentence.
- Problems worth solving Describe a key problem(s) your business solves for your target customers. The most important thing is to make sure you’ve identified a problem that is worth solving. “Problems” can also appear as unmet needs or wants. Be sure to tackle a problem that is important to your market.
- Your solutions This section is closely related to the “Problem worth solving” section, because here you’ll describe how you solve the problem(s) you’ve outlined. The clearer your problem statement is, the more easily you'll be able to describe your solution. Also, be sure to give a sense of how your products and services solve the problem in a novel or superior way. Again, try to keep your solution description down to as few words as possible. You should be able to describe your solution in just a few sentences or bullet points. Explain how you solve the problem that your customers face. What does your company offer? What is it about your solution that provides a uniquely effective remedy for their pain points? Don’t just name your products or services here. Give a sense of how they solve the problem in a novel or superior way.
- Target market Identify the best customers for your solution. Selling to everyone isn’t a good approach or even necessarily possible. What types of customers do you focus on? Which group represents your primary market? Which others are worth pursuing?
- Competitive landscape Make a short list of your competitors. If you don’t have obvious direct competitors, focus on other ways that your target customers satisfy their needs now. As you add competitors, describe what makes your offering more attractive. Do you offer a lower price? A unique experience? A better location? A more tailored solution for your particular customers? For each competitor you list, describe how your solution is better.
- Sales channels Describe how you get your products or services to market. Are you selling and delivering to your target customers directly through a retail store, website, or catalog? Do you have a sales team? Do you sell through intermediaries — distributors, dealers, resellers, or others? Identifying your sales channels is important to understanding the economics of your business model.
- Marketing activities Explain how you attract attention, build interest in your offerings, and convert prospects into customers. Describe your web presence. What sort of online marketing do you do? Do you advertise online, in print, or elsewhere? Do you attend trade shows or sponsor events? If your direct marketing is largely done by resellers or dealers, what kind of marketing will you do to attract and keep those key partners?
- Revenue What are your primary revenue streams? Don’t worry about listing specific revenue goals when you are early in the process. Instead, describe how you will make money and what products, or services will generate that revenue.
- Expenses List your major expenses here. There’s no need to go into a lot of detail in the early stages. Just list the areas that you expect to spend the most money on.
- Milestones List your primary goals and objectives that you hope to achieve over the next few months. What do you need to get done to take your business from idea to reality?
- Team and key roles Identify the key members of your organization and explain why their involvement is important to your success. Definitely include company owners and members of the management team. You may also want to add key employees with strategically valuable skills or connections, noteworthy roles you plan to fill later, key roles you need to fill, trusted advisors, or other valuable contributors.
- Partners and resources Identify any relationships, equipment, facilities, patents, or other resources that are strategically important to your business model. Some businesses need key partners in order to launch. Other businesses may have intellectual property or other resources that will help them get up and running. List those partners and resources here. You can use this section to cover almost anything of note that is not addressed in the rest of the document.
This information is the basis for creating and documenting your financial road map. It’s like a pitch where you’re jotting down ideas about your business and it’s easy to change and revise things as you go.
The pitch format is essentially a one-page summary of your business concept. It’s great because you can easily share it with business partners and even investors to give them a summary of your business. But, it’s also a very useful tool for business owners because it helps you quickly get an overview your business, identify assumptions that you need to test and validate, and refine your strategy as you learn more about your customers.
Your pitch can also be used as the foundation for a more detailed, written business plan document if that’s something you need for lenders or investors. But, for many business owners, a pitch might be all the planning you need to do, and you’ll be able to skip the entire detailed business plan.
If you’d like help creating your Lean Business Plan … we can help. We specialize in helping businesses create comprehensive financial plans, monitor their financial activity and understand their financial statements. So, if you don’t have the expertise or resources, click here to contact us.