Last week, SEE Managing Partner at PwC and Endeavor Mentor, Bojidar Neytchev led the 5th workshop as part of the Dare to Scale growth program. The focus of the session was Budgeting and Business Planning and amid a foray of anecdotes, stories, and even some practical jokes, Bojidar narrowed down the topic to a few takeaways:
• How do we plan?
• What does a business plan need to include?
• What are budgets for?
Let’s look at each one in more detail.
How do we plan?
Or why you may need to go through some valleys en route to climbing a peak.
While many have heard the saying “He who fails to plan is planning to fail” (attributed to W. Churchill), most founders do not pay enough attention to planning and when they do, many adopt a simplistic, linear approach of setting up a vague business goal somewhere in the future and then calculating the necessary steps to reach the goal. However, more often than not, it turns out that this distant goal cannot be reached simply because reality refuses to bend to our will and wishes.
Instead, Bojidar recommended that founders take a different approach. He referred to a process called backward design (or mapping) which educators use to design learning experiences and instructional techniques for students to achieve specific learning goals. In its business context that means starting with the objectives of a strategic plan – what the plan is expected to deliver and how the founders see their business as if looking from that specific point in the future – and then “proceeds” backwards to create processes that achieve those desired goals. In most businesses, the goals of the plan will be the development of core competencies (resources and capabilities) which can be turned into competitive advantages in the long run.
What does a business plan need to include?
Or why you need to focus on moments that matter.
Bojidar quoted- “the business plan you prepare must be a lie but it must be a detailed and precise lie rather than a vague and general lie”. Every default version of a business plan must contain a detailed description of the market/problem, product/solution, underlying technology, customer acquisition, value proposition, selling and go to market strategy, competition, team, revenue model and funding plans. Bojidar stressed the idea of focusing on moments that matter. “What is the thing that could change your business overnight?” asked Bojo. He argued that when it comes to integrated planning, most important is to examine all interactions across all parts of the business. What is even more important, is identifying those explicit interactions where behavior or set of behaviors have a disproportionate effect on the outcomes and then double down on them in order to be able to beat the field.
What are budgets for?
Or how to make sure budgets are useful and not a time-waster.
Budgets communicate the major elements of the strategic goals and objectives across the whole organization. They assist planning in terms of treasury needs, production, marketing, recruiting and sales. They may be used as a yardstick to monitor performance, investigate differences, act and revise budgets for the following period. Bojo went on to discuss all budgeting types and advised on a more open approach to budgeting on the part of the founders. He introduced rolling budgeting (12-month forward, updated each quarter) and zero-based budgeting as especially suitable for dynamic environments for young businesses. The former ensures timely reaction for pressing matters and stimulates action, and the latter involves a fundamental rethinking and radical redesign of the operations in order to contribute to achieving competitive advantage and realizing strategic goals and objectives. Zero-based budgeting is often paired with organizational restructuring when remaining activities and functions are radically revised and set from scratch.