Business Plan or Budget?

Posted on 04/11/2012

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If you don’t have a coherent strategy then a business plan is irrelevant. If you do have a strategy then a business plan is vital.

But what do we mean by a business plan? In short, there are a few things a business plan must have and do. First and foremost it must prompt you to focus on your customers/clients/residents (I mean, really focus – the Philip Kotler Marketing-type focus). Other things are:

  • Provide you, your leadership and your key stakeholders with a sense of what you want to achieve through a period of time;
  • Provide ‘line of sight’ (alignment) between your vision and mission and those you will engage or prevail upon to provide life to your plan (staff, volunteers etc);
  • Give you and your leadership some markers or triggers for review or action along the way (review of data, feedback, client/customer analysis);
  • Be communicable, tangible; and
  • Survive for a period equivalent to a key ‘strategic period’ (a ‘strategic period’ is a period of time for which the key aspects of your internal and external environment remain static. For a technology firm this period of time may well be shorter than for an organisation in the health sector, for instance).

Note that I didn’t suggest the business plan had to be yearly. Or that it had to be 60 pages. Or that it had to go through a massive process of (re-)generation with all and sundry every one, three or five years and be followed by a glossy 40-page summary replete with stock photos of…goodness-knows.

But to return to the initial remark – why have a business plan at all? It is perhaps true to say that those NFPs delivering government services like the one I work for have, generally speaking, succumbed to the pattern of regular ‘financial feeding’ from our masters. We know that as long as we perform we will get ‘fed’ at regular junctures. In this environment, who needs a strategy?

While this is, perhaps, true if our aim is to continue to exist for existences’ sake; if we exist to break down barriers and truly ‘disrupt’ social problems then we need to break free from this cycle of ‘certainty’ and enter the far more treacherous – but far more rewarding – world of ‘uncertainty’ and opportunity. Life, as we know, is about choices and so, for us to really deliver something of genuine value, we need a plan.

The great management thinker and author, Peter Drucker, suggests that because we, as organisations, have no ‘bottom line’ we “…are prone to consider everything [we] do to be righteous and moral and to serve a cause…”

“Non-profit organisations need the discipline of organised abandonment even more than a business does. They need to face up to critical choices.” [Peter F Drucker, Managing the Nonprofit Organization, 2005, my italics]

The phrase ‘organised abandonment’ is a powerful and evocative one. It suggests ;discernment’ to me. And to ‘discern’ we need to understand, assess and decide/make choices. It reminds me of the critical concept of ‘opportunity cost’.

Business plans, by helping us to focus us on those clients/community we are naturally ‘best’ at serving (‘differentiation’) and ignoring those things we are, perhaps, not so good at doing, means we will increase the chances of most efficiently gathering and directing resources to deliver outcomes for those we seek to serve. Have you heard the phrase ‘What isn’t measured, isn’t managed’? Well, a business plan should identify what we truly should be doing, allowing us to measure our effectiveness.

So, stop simply managing your budget and plan your business.

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