A new package arrives and you’re so excited you rip open the box and immediately plug in your new gadget totally ignoring the directions. Does this sound familiar? Of course it does, we’ve all been there. Why waste time with all that fine print when you can cut to the chase and jump right in? So many businesses begin this way especially when it’s demands take off right out the gate. This is a good thing right? When your business is moving fast, there’s immediate pressure to meet the demand. As a business consultant and my years establishing and running businesses, I totally understand the drive to get things going fast and get that cash flow moving fast! Starting a new business is a lot of work. Things like funding, business filings, bank accounts, branding, logo design, company website, marketing, advertising, supplier and vendor relationships, hiring and training employees, and much more. So the question I ask is
“Do you really need a business plan when things seem to be going well so far without one?”
The answer to this question may be discovered in a little historical research. Let’s take a look at one of my absolute favorite go-to books, Art of War, by Sun Tzu. He was a renowned Chinese general, strategist, and philosopher believed to have lived during the Eastern Zhou period of ancient China. At first glance, this is a book about military strategy, however, when you dive deeper into its pages, you soon discover that these war strategies are also effective business strategies! For the sake of our discussion, let’s assume the following relationships:
- Ruler or commander = business owner
- Officers = managers Army or soldier = employees
- Spoils of war = happy customers / successful business
Sun Tzu refers to the importance of laying plans for war with these words, “It is a matter of life and death, a road to safety or to ruin.” Wow! Should business really be that serious? Shouldn’t there be an aspect of fun? Absolutely — It’s exciting to have a spark of an idea and then fan it into flame. But if you move too quickly before creating a business plan, what damage will that have on your business in the long run? It’s safe to say that the only death we’re referring to here is perhaps the death of your business or the death of a dream. But, just how costly is this kind of death and how can we avoid it?
According to the Small Business Association Office of Advocacy, Small businesses account for 75% of all startups each year and approximately 20% of new businesses fail in the first year, approximately 50% of businesses fail after 5 years, and only roughly only a third of small businesses survive beyond 10 years.
Consider the consequences and devastating effects these failures have on business owners, employees, and their families? With this in mind, don your armor, strap on your sword, take up your shield and warrior up! Prepare your business for war!
Sun Tzu states there are “5 Constant Factors to be taken into account in one’s deliberations when seeking to determine the conditions for obtaining the field”. In business terms, these 5 factors will inherently exist in an industry and must be considered when creating your business plan. More specifically, when “obtaining the field”, there will always be entry barriers and competitors to overcome to claim market share. Let’s go over these factors which Sun Tzu presents and as best as I can, I’ll translate each factor’s business application.
(1) The Moral Law: causes people to be in complete accord with their ruler so that they will follow him regardless of their lives, undismayed by any danger.
BUSINESS PRINCIPLE: If a business has a clear mission and it’s employees understand this mission, there will be “harmony”. Employees will likely be more loyal, hard-working, and dedicated. Also, they’ll be least likely to become overwhelmed when the going gets tough since they see the end to the means.
(2) Heaven: signifies night and day, cold and heat, times and seasons
BUSINESS PRINCIPLE: All businesses will experience a “climate” in their respective industries and local markets. There will be unique “seasons” that are typical for an industry. Research and understand what those “seasons” are for your business. Look for the patterns that exist in the waxing and waning of your competitors in the marketplace.
(3) Earth: comprises distances, great and small; danger and security; open ground and narrow passes; the chances of life and death.
BUSINESS PRINCIPLE: Consider logistics for the business’s operations. What systems need to be in place to insure the day-to-day workflow and projects are managed and runs efficiently? Consider relationships with specific suppliers/vendors,Issues concerning packaging, preservation of products, delivery and time sensitivity.
(4) The Commander: stands for the virtues of wisdom, sincerity, benevolence, courage and strictness. (This is a reference to 5 cardinal virtues of Chinese culture: humanity or benevolence, uprightness of mind, self-respect, self-control or proper feeling, wisdom, and sincerity or good faith.)
BUSINESS PRINCIPLE: Define the philosophy and character of your business. What will your business be known for in its industry, its local market, and its community? Will the business provide a valuable product or services that solves a problem? Establish the guiding principles how business operations will be conducted. Align the philosophy and character of the business with its owner(s). Consider words like integrity, sincerity, dependability, efficiency, and good faith. Finally, how will this philosophy and character determine what employees are hired, how they’re trained and managed to ultimately create the desired customer perception?
(5) Method & Discipline: are understood the marshaling of the army in its proper subdivisions, the graduations of rank among officers, the maintenance of roads by which supplies may reach the army, and the control of military expenditure.
BUSINESS PRINCIPLE: Establish business processes that guide the flow of production to maintain efficiency. Determine what departments are needed; each having a clear understanding of their purpose and role. Lay out a clear path of promotion for employees that is readily available and evenly distributed. Set standards for quality control and have systems to make sure they are followed. And finally, each department is responsible for maintaining its own budget minimizing expenditure and maximizing profitability.
Sun Tzu goes on to say, “These five heads should be familiar to every general: he who knows them will be victorious; he who knows them will not fail.
SUM THINGS UP:
Discover and meet a need, provide value, inspire loyalty, teamwork, and innovation, have a clear mission, goals, and standards, and develop the flexibility to adapt. Navigate through obstacles and create consistency out of inconsistency and you’ll be thrilled with the results! Your business will not just survive but it will evolve and grow. So to answer our question, does a business really need a business plan to be successful? The answer is a resounding yes! Set your business up to achieve long-term success. So read the fine print, do the research, and lay those plans and win the spoils of war i.e. happy customers and business success!!
References
Sun Tzu, The Art of War, “Laying Plans”, p 3-5, 2011 Edition, Fall River Press