Last week I spent some time with the new shareholders of a recently acquired medium sized business. Having owned the business for a few months, they now understand what they have, and some of the issues and opportunities they have inherited.
Unlike many in a similar position, they have a basic budget and business plan. However, I sense that these documents have been prepared in order to satisfy the needs of their bankers rather than deliver a coherent plan to enable the Company to grow and develop. In fact, their current plan doesn’t really offer anything that gives them information or analysis to help them to do a better job of running the business.
This situation occurs often. Too many business plans are really a SWOT analysis accompanied by a list of things to do. People are running businesses of all sizes, without a plan to help them take their business to where they want to go. In fact, in most cases, managers don’t even know where they want to go.
So why is it important? The people that are most successful in business are the ones who have a very clear view of what they are doing and why.
Last week’s meeting has prompted me to share some ideas about business planning. I am often asked to help organisations to develop their business plan. I’m not one of the new age consultants who think it can all fit on one page. But equally, I do like to keep it simple. In doing so, I try to ask a lot of questions in order to get clear about the objectives and aspirations of the shareholders or executives in the business. While there are often many questions, one is more important than all the others combined.
Clarity of Purpose
I always start with the same question:
“So, what are you trying to achieve?”
You will be surprised at the number of people in senior roles, even in major organisations, who cannot answer that question. In fact, on one occasion 18 months ago, I asked that question of a CEO and 11 senior executives, only to get 12 different answers.
Our reasons for being in a business will vary widely, almost to the point of everyone having a different rationale. It can sometimes take a lot of time to get really clear about what you are trying to achieve. And that’s ok. It’s worth taking the time, because in my experience, this decision will drive many of the others that you will make in your business journey.
For many years now I have called the answer to this question “clarity of purpose”. I genuinely believe that organisations only fail for one of two reasons. The first one is the obvious issue that we often discuss – a lack of appropriate financial management and control. The other reason is a lack of clarity of purpose.
Clarity of Purpose is your Cornerstone
Once you establish that clarity, it should become the foundation stone upon which your entire business plan, and often your business philosophy, is built. Seeking that clarity should be the very first step in your business planning process. And the many steps that follow should all relate in some way to that purpose.
Think about it. As you go through a typical business planning process, you are likely to consider a number of questions, including:
- Describe our Company Values?
- How would you describe our Company Culture?
- Do we have a clear Mission Statement that is understood by our people?
- Describe our Strengths, Weaknesses, Opportunities and Threats.
- What are the major issues affecting our success?
- What are our top 5 business priorities?
- Do we have the right people to enable us to reach our goals?
- What do our customers think of us?
- What do we want our customers to think of us?
These are all pretty standard questions that will typically come up in a business planning session. And yet, unless you are really clear about what you are trying to achieve, the answers to many of these questions become irrelevant because they don’t relate to anything.
For example, let’s say you are running a discount jewellery business. You sell high turnover, low quality, low price, low margin product. You “pile it high and sell it cheap’ as the saying goes. Privately your main purpose might be to sell as much as you can and make as much money as possible. Publicly, you might put a marketing spin on it and restate your purpose as being “for every person to be able to own jewellery”. In this event you probably operate a basic store in a secondary location. You don’t pay your people a lot, don’t put a lot of effort into their product training or employment conditions, and you don’t place high value on loyalty. In fact, they can stay or go.
By contrast, let’s now imagine that you are now managing a high value, retail jewellery store. You sell a small quantity of high value, high quality items at a high margin. Your core purpose might be “to help people to celebrate special occasions in a most memorable way”. In this case delivering outstanding customer service, harbouring values such as integrity and trust, and maintaining absolute confidentiality would be critical to your success. As a result your approach to recruiting, training, remunerating and retaining your key personnel would be totally different.
In fact, all of the answers to the list of questions above, would be different in each of the two scenarios I’ve outlined. In other words, your ability to be clear about your purpose, or what you are trying to achieve, means that you will respond differently to the various management challenges and therefore make better decisions that are consistent with those objectives.
Real Clarity Makes Decision Making Easier
Here’s another thing to consider. Time after time I see organisations getting distracted from the key opportunities in their business. Today we have email, phone messages, social media, online sales, increasing competition, cheap imports, not to mention dodgy characters turning up in person or online, all competing for attention from us. The solution? Clarity of purpose. The clearer you are, the less distraction.
In fact, real clarity makes our decision making much easier. Let’s go back to the jewellery business. Imagine you are offered the wholesale purchase of a high quality $30,000 stone. Now let’s say you are running the first store outlined in the example above. You ‘pile them high and sell them cheap’. The decision is easy. You are not going to be interested in buying this stone.
If you are running the second store however, the high quality retailer in the smart showroom on the High Street, you are almost certainly going to be interested in buying that stone. Because you are clear on what your business is about, you understand what is important to your business and your clients, and as a result your decisions are easy. In short, your purpose determines your behaviour.
This is not limited to retailers. In my experience, the best media are very true to a clearly defined audience, and programming or editorial decisions are therefore easy. Media outlets that struggle are those that are trying to be all things to all people and as a result do nothing well. The best real estate agents focus on a defined geographical territory, or a type of property or a price range. The best swimming teachers are unlikely to be coaching Olympic swimmers and Olympic Coaches don’t teach beginners to swim. Clarity, specialise, and focus is what works.
Too often we start those planning days with SWOT analyses and questions about Values and Mission Statements. Try to think about why you are there in the first place. This question applies equally to the business you are running or the career you are attempting to manage. When you think about it, it applies to the management of your family, your daily health and fitness routine, and even your relationships with your kids.
So ….. What are YOU trying to achieve?