Continuing the journey around the most common mistakes that we experienced when screening start-ups for one of our clients, we already identified inadequate scaling as a crucial issue, in our first article, and went deeper into the motivations behind going solo, or – with other words, and a bit more generally – becoming a one-man show, in the second one. We found the roots in the lack of trust, and had some words on the consequences such as the presence of the ‘need-to-know’ culture, the dominance of fear and the single-eye perspective, which we all consider very problematic.
In this present article we put a rather general issue into the focus. Our experience is that the vast majority of businesses have problems around this, however the magnitude is very different. In few cases we receive honest answers, like ‘we have no experience’, ‘did not know how to approach’, ‘we were told that it was all right’, etc, but – surprisingly – we also met entrepreneurs coming up with complete theories, concepts (or shall we call them excuses?) behind this deficiency, explaining that it was just their intention and they thought it was fine like that.
We are not about to judge anyone, that is completely out of our scope. However, the fact, that we are approached with questions, requests or involved into internal discussion regarding topics that give us the impression of having struggles, tells a lot. Here comes the thing.
3. LACK OF BUSINESS PLAN
As was mentioned in the introduction, once realised the lack of it, we received very different, and some cases, rather surprising explanations. Important to note here, that we were screening companies, which have been open for being acquired (either as a whole or a part of the business). And yes, this is what we have found…
Lack of business plan means two things in this regard: no plan at all, and things going as they are going, or something called ‘business plan’, in some cases ‘strategy’ (we may have an article about the proper distinction, later), which is not even a ‘vision’, that is not suitable at all. How do these enterprises operate then? Actually, most of them do, though their owners do not have the slightest idea about their value, not to mention their potential.
Everything is in my head. We hear this quite often, especially when there is one or few people dominating the activity and/or the operation, and some trust issues are detected in the background. Manifestation may take the form of some internal games (who is more powerful, important, irreplaceable, etc.), seeking leverage on the scarcity of information. It also happens that asking one dominant person gives a completely different impression for us than asking another.
Very unfortunate, that this completely undermines the business as the whole, as there is no basis for measuring any development, triggering adjustments where necessary, besides damaging the immunity of the company. Furthermore, when it comes to setting goals or measuring the success of certain actions, it becomes almost impossible to provide a close-to-reality picture either internally or externally. We have much experience in drawing a picture about a company from financial, commercial and legal documents, but these cases are really challenging, as the lack of business plans often go together with the lack of business-model, as well, so accounting and reporting does not go beyond legal obligations. Consequently, it is almost impossible to establish what is really going on – as business activity.
Everything changes quickly, anyway. Change management is a complex issue, especially when change comes from an accelerated growth and/or development process, which would naturally be the case when it comes to start-ups. Unfortunately, our experience is that hardly any distinction is made between changes initiated internally, for reasons such as increasing efficiency, cost-optimisation, etc., and changes triggered by the external environment, that we prefer to label as an adaption process. The former is mostly associated with operational matters, in order to make the organisation suitable for the business activity, while the latter is about responding to the external impulses coming from the market environment – in line with the underlying business idea.
For the matter or fact, we also hear reasoning that the more things are in motion (more changes going on), the more easily the organisation gets used to it. Well, our position is that when there are too many changes in parallel, there is no way to see what is intentional and what is accidental, such as to see what is supposed to be a change rather than just a correction, and compared to what, exactly.
Such experience gives more the impression of a chaos than a responsive and flexible atmosphere, and many short-term decisions based on a snapshot of the business may easily lead to many – unnecessary – corrections. All entailing in consuming resources without guaranteeing any positive outcome.
Summary and conclusion. Whatever is the reason for not having a proper business plan, the fact is that there is no proper foundation, base case, however you call it, compared to which any changes, deficiencies, weaknesses, or even development, progress could be understood and measured. It also means that every decision made in the particular organisation is based mostly on perception, or, in a worse case, impressions, rather than facts.
A business plan, no matter how accurate it turns out to be over time, is important for – at least – two reasons: all details shall be thought over in a consistent manner, which may give some anchor instead of unstructured, accidental, impulsive ideas dominating the business; and makes it possible to measure and follow, understand and accommodate what is happening (and not happening) in the company. If it becomes unavoidable to make adjustments, it probably triggers thoughtful and well-considered ones (as there was a ground for deciding on the adjustments), and gives a reasonable direction, as well. All in all, if not the document itself, but the process of elaborating it, the process of thinking behind, is what makes the real difference.
Do you have questions or need some help right now? Feel free to reach out to us.