- Business and Employment
A Project Management Plan: The Key to Success for Launching a Small Business
Ready for Launch?
Launching Your Own Business: Hope and Fear
Many people are launching their own businesses these days. One common reason is that people can't find a job, and we have to do something to make money. Others see that a job won't bring financial stability: The old 9 to 5 until your 65 is gone. Professional life is now 70 hours until you're 70, and then you'll have nothing to live on. Other people have criminal records or other issues from the past and have a hard time getting hired. Many people have great ideas and great gifts to give the world.
And all face one solid fact: 95% of all new businesses fail in the first five years.
There are endless articles about why businesses fail and endless books, web sites, and expensive programs promising the path to success.
As a consultant to small business, I've seen it all. And it all comes down to common sense. Almost all business failures are predictable. I look at their situation, and I can see it coming.
Sometimes, I can help them turn it around in time.
All the time, if I'd been called in earlier, I could have prevented the failure of the business.
No, I'm not boasting or claiming to be a genius. I'm just applying the common sense that has kept my own business going for 19 years. I'm saying: Most small businesses fail for common-sense reasons: Lack of planning, or failure to follow the plan.
Does a Business Need a Plan
Do you think a business needs a business plan.
Ego and the Bottom Line
Why do business owners plan way too little? There's a simple reason: The good-old American attitude, "I have to do it myself." From John Wayne shooting the cowboys in black hats to Frank Sinatra singing, "I did it my way!", the United States is full of people who think that learning is only for stupid people and professorial geeks.
I can't speak for businesses outside the US, but I suspect that each culture has it's own form of ego independence that blocks cooperation.
The simple truth is that success is difficult. Entrepreneurs are very good at what they do, that's why they're ready to launch their own business. But no one is good at everything. And small business success depends on doing everything right, almost all of the time. Those who achieve success in small business don't have to be brilliant, but we do have to be humble. We have two options: We can either learn from the successes - and failures - of others, or we can learn from our own failures until the money runs out.
The 1:10:100 Rule - The Power of Planning
There is a universal rule that has been proven true across the board, in every human endeavor, industry, and business. It is the ratio of effort you see in Figure #1: The ratio of effort to correct a mistake in planning work; in doing or building; and in maintaining the result. And the ration is 1:10:100.
If there is an error on a blueprint that an architect can fix in one hour for $500, then, fixing the same error during construction will take 10 hours for the whole project team and cost $5,000. And fixing the same problem after the building is done and tenants have moved in will take 100 hours and cost $50,000.
The same has been proven true in Information Technology. An error in design that can be fixed in one hour takes 10 hours to find, debug, and test in programming, or 100 hours to handle through releasing an upgrade of the software after a version with the bug in it was released. This has been tested over and over, and 1:10:100 is the lowest ratio that has ever been found. At the high end, using best practices in early planning for manufacturing, efficiencies as high as 1:2500 have been generated. That is, a $100 investment in good planning could save you from a $250,000 mistake, and will certainly save you from a $10,000 mistake. Expensive mistakes like that will sink a small business. That is why insufficient planning is the #1 cause of failure in new business start ups.
The lesson: Invest in good planning, then use your plan well. That way, you'll be in the 5% of businesses that succeed.
Figure #1: The 1:10:100 Rule
The Four Plans Everyone Knows About
So, let's say that you're starting a business, and you decide to be smart. You're going to invest in the best business planning you can do. And you are completely open to good advice from successful entrepreneurs and business owners. Here is the advice that you will get.
- Strategic Business Plan. Any CEO will tell you that a strategic business plan is essential for success. This shows why you are in business, and what you are going to do, at a high level. It is also a guide for future decisions.
- Business Financial Plan. Any CFO, bank, or entrepreneurial investor will require one of these. It is usually just called a business plan. It says where money will come from, how it will be used, and how investors will be paid back. It also puts you on a schedule for getting into the black, that is, earning more money each month than you are spending.
- Marketing Plan. Every marketing guru will tell you you must define your target market, create a message, and decide how you will reach your customers, day in and day out.
- Operations Plan. A business with Standard Operating Procedures can prevent 19 out of 20 mistakes that usually disappoint customers and cost money. To learn more, please read How to Use Operations Management Tools in Business.
These gurus will tell you one more thing: Do not copy anyone else's business plan. Of course, you can use a good plan as a model for yours. And you can copy ideas that work wherever you find them. This one thing is essential: Every idea in the plan must be one you thought through for yourself. That way, you know it, and you've committed to it.
Did you know that scuba diving is the most dangerous sport in the world? Let's learn a lesson from the scuba divers who are still alive: Check your own equipment! Your life may not be on the line, but the life of your business is. And remember, your odds of success are only 5%. Odds are 19 out of 20 that your business will fail. Make every decision carefully, understand it well, and be ready to stake the success of your business on it.
Every successful business is built on a great idea, a lot of courage, and many, many decisions carried through. Most of those were good decisions. Some were mistakes. But, carrying them through and correcting course, we do well enough to survive and thrive.
If you've created all of these plans well, you have, to be honest, a fair chance for success. There's one more plan you need - one that almost no one knows about - that will take you over the edge, and radically increase your chances. It's the business launch project plan.
The Secret to Success: The Business Launch Project Plan
Why aren't the four plans above enough? Quite simply: Those plans say what you will do, and why you will do it, but they don't say clearly who will deliver what results by what date. Without a project plan, the other four plans are a bunch of goals with no tactical action. It's like a plan for winning the Tour de France - only you never tell the team to get on their bicycles! The project plan for your business launch and start up is a week-by-week guide to action. It coordinates what everyone will do to achieve the objectives in all the other plans.
Growing a small business is difficult, and delay is inevitable. It is very rare that things run ahead of schedule, or that sales go better than expected. But it is very frequent that our Grand Opening Day is rained out, that our business launch is delayed by construction problems or by a supplier who can't deliver.
Maybe the first salesperson we hire doesn't work out, and we need to hire someone else. We may think, no problem, that's just a delay of a week or two. But have we looked at the effect of that delay on net revenue for the quarter? Probably not. Or we miss a meeting, and think we can make it up. But our team is delayed for a week, sitting on their hands doing busy work, waiting for a crucial decision we didn't make. Each of these small delays means a little less marketing, a few less customers, a delay of income. But when we add all that up, it comes down to this: We run out of money, and we're out of business.
Experts in entrepreneurial finance will tell you that the major cause of small business failure is lack of sufficient initial funding. And, in a way, they are right. But that lack of funding is expressed in unrealistic earnings estimates. And a really good project plan will catch that.
With a really good business launch project plan, you can:
- Check all the details of your other plans, to make sure that there are no errors.
- Know exactly what you need to accomplish each week to meet your original plan.
- Know what reserves of money and extensions of time you need if you run into problems.
- Take advantage of the 1:10:100 rule: See problems much sooner, and solve them much earlier, at lower cost.
- Be open to opportunities to actually do better work and achieve better results than you planned.
A project plan is the tool for making your small business dreams real.
Ready to Move in Any Direction
Clear Plan, Flexible Action
There is another reason that people don't like having plans. They think they have to follow them. Nothing could be further from the truth.
We business owners get caught up feeling like little kids, resenting our own plans. We think: You mean I have to do this? You mean I have to do that? To be honest, it's silly and childish.
The reality is:
- We are free to do what we want; We just have to live with the consequences.
- A good plan is the best we thought of doing at some time in the past.
- When the moment of decision comes, we have a choice. We can follow the plan, or we can do what appears best in the moment.
- If we don't follow the plan, we can come back to it later (not too much later!) and see what steps we skipped, and get them done.
Working with our plan as a flexible tool is like working with a travel itinerary. We can make all our flights and use our reservations. And if an exciting meeting or a fun side trip comes up, we can do that instead.
Then, at least once a month, we compare our work to our marketing, business, financial, operations, and strategic plans. If we are on course or ahead of the game, great. If not, we correct course and keep going.
Great planning, conscious decisions ,and steady work keep us in the 5% of businesses that stay alive, and thrive.
It's exciting. It's more than the key to survival and success for small business. It's a fun, adventurous way to succeed in business and in life!