The Unexpected Power of a Dynamic Business Plan in Today’s Unpredictable Market

0:00Ryan Deiss:Hey everybody, Roland Frasier here, and today we're talking about why do you need and how can you benefit from a business plan? So a lot of people ask about business plans, and it's really kind of interesting.

0:15Roland Frasier:Business plans used to be a whole lot different than they are right now, because it used to be that we're going to write a 10-year business plan for our business, and we're going to follow that, and then we're going to assume that things aren't going to change a whole lot, and this is going to be the kind of a one-time thing. We're going to write this and then we're going to execute and follow it and all will be happy with the world.

0:37Ryan Deiss:What we found through hundreds of businesses that we have owned and advised is that business plans don't really last that long. So when you go to plan for a business

0:49Roland Frasier:and you're trying to create some plan that's going to be even a three-year plan, it's just too long. It's just not going to probably work out that way and your financial projections are going to be, you know, of course, they're always up and to the right. They're, well, we're going to start here and then we're going to have crazy high growth.

1:05Ryan Deiss:But how many businesses actually do that? Well, I can tell you that the 90 % of businesses that start and fail did not have failure in their business plan. So that's like stuff happens. Entrepreneurship is hard. Business is challenging. Things are going to get thrown at you all the time. And it never stops. Good news, right?

1:23Roland Frasier:But the rewards obviously are, we entrepreneurs have decided that those rewards are significantly better than the challenges and the headaches and the hassles that come with it, which is one reason it's really good to go into a business that you like.

1:38Ryan Deiss:So the first thing is that business plan can be used as a tool to help you understand your business better.

1:47Roland Frasier:So rather than saying we're really going to focus on this is stuff that we're going to do for the next 10 years, I think that having a time horizon that is much more reasonable, which would be one year and three years, and then breaking that down quarter by quarter. In our scalable operating system, we break this down into quarters and we say, what are the big three things? Like we first will say, what's the theme for this quarter? So the theme for this quarter might be increased customer satisfaction or serve the customer better. That's a great one, right? So if that's our theme for the quarter, then we're going to say, OK, let's brainstorm in our quarterly strategic meeting.

2:24Roland Frasier:We hold a meeting once a quarter to do this ahead of the next quarter. We just held three of ours recently, and I've got one more this week that we'll be holding. And in that, we pick our theme, the executive team meets. We pick our theme that's going to be for this quarter. And so let's say that it's serve our customer better. Then we'll say, okay, well, then what are the three big pillars that we're going to pick to help us achieve this goal, this overarching goal for the quarter of serving our customer better? One pillar might be, in that case, let's increase customer satisfaction. Let's implement customer satisfaction monitoring.

3:06Roland Frasier:So how would we do that? There's several tools for doing that. There's a CSAT score, which is CSAT stands for customer satisfaction. You can Google that and check it out. Basically on a one to 10, how happy are you with our business? That's the question that's asked. And then we see how many people are happy and how many aren't. And that gives us an idea of what percentage of customers are satisfied. If eight out of 10 people rank us an eight, then we're kind of like at an 80 % satisfaction.

3:29Ryan Deiss:If eight out of 10 people rank us as a two, then we're not doing a good job, right? Now, the more sophisticated approach to that is something called NPS.

3:41Roland Frasier:So that's Net Promoter Score. And the Net Promoter Score is something that we manage. And it was something that was created by Bain, which is a big fancy consulting group. And they said, well, really, the question we should be asking isn't how happy are you?

3:57Ryan Deiss:It's how likely would you be to recommend our business to a friend? And that's really smart because it tells us how likely is our business to grow? Is the customer so happy that they would actually recommend this to a friend?

4:13Roland Frasier:This is why I call it net promoter score. Are they going to become a promoter for us? And the way that it scores is if on a scale of 1 to 10, with 10 being I'm most likely to recommend and 1 being I'm least likely, then what it does is it says the 9s and 10s, the people that say I'm 9 out of 10 likely to recommend or 10 out of 10, those are considered promoters. the people who are anywhere between one and six one and six they're considered detractors they're actually going to tell people hey i mean i don't think i'd go there you know what do you think of that restaurant it's not that good somebody said that today right they're like oh the food's really not that good that's a detractor so they're actually going to be negatively promoting your business and the people who are at seven and eight are considered neutral and so you divide one by the other, and that gives us a net promoter score.

4:58Roland Frasier:That's a pretty good way of managing things. And so in our ability to think about creating this business plan and thinking with the specificity of what do we want to have it happen in three years and what do we want to have happen in one year and what do we want to have happen each quarter to get us to that one year and each year to get us to that three year, you're really learning a lot about your business and where

5:24Ryan Deiss:the weaknesses are because to set a good business plan, you have to have this meeting with your executives, with your top team. And you have to have discussions about hard questions like, what is our goal? Where do we want to get? And how are we going to get there? And then you start saying like, in our meeting that we just had, we picked a financial target for the quarter. And then the next question is, okay, how do we get there? And it's not, well, let's just hope that it works out. It's actually, let's sit here and talk about what are the campaigns that we're going to launch to make this happen.

6:01Ryan Deiss:And what we found was that we, with the campaigns that we were

6:04Roland Frasier:planning on launching during Q1, which is the planning meeting that we were in for quarter one, there was a gap of a few hundred thousand dollars between the goal that we had all set together and where our promotions and calendar of things we were going to do to get there were likely to

6:24Ryan Deiss:result in. So then we knew in advance through this planning, we knew about our business that we did not have a promotional schedule that was likely to help us hit the goal we all agreed that we wanted to hit. So then we had to go back and say, okay, what can we do to fill the gap? And I think a lot of the benefit of business planning is that it shows you where those gaps are.

6:51Roland Frasier:Now, the business plan that you're going to write, if you just write it one time, is not going to do that because it's not considered interactive. Modern day business plans typically come as part of some sort of operating system. So ours is called the Scalable Operating System or SOS. There's another one called Entrepreneurial Operating System called EOS, which is Gino Wickman. And Vern Harnish has his. There's a few of them. But having one that is dynamic, that has the interaction and the ability to expand or contract or change based on customer feedback, executive feedback, employees situation, and the market conditions generally is

7:32Ryan Deiss:really important. And those things are changing all the time. Imagine if you did a business plan in 2019 that was your three-year plan and you had no idea and you were, let's say, a hotel.

7:43Roland Frasier:Well, you had no idea that COVID was going to come along and cause no one to be able to travel for a period of time and extremely limit the ability of international travelers to come, including entire countries that might be shut down like Australia.

7:56Ryan Deiss:Maybe you catered to Australian clients and you've got a hotel that's in the United States. you're kind of screwed because they let nobody leave or at least if they leave they're on this ridiculous quarantine to get back that is not the way that you want to do business planning so thinking about an interactive business plan is really important now in terms of how does it really help you understand how your company's put together well some of the components of the business plan include who is going to occupy what positions so that means that we kind of need to

8:29Roland Frasier:understand what is the organizational structure of our company and who's going to be reporting to whom in that structure. That's generally done through something called an organizational chart or org chart. That's a little diagram and the CEO sits at the top and then we've got our key executive team and then people under them.

8:47Ryan Deiss:It's important to have that though, because now by seeing that the people in the company know who they report to and who has the right to tell them what they should do in their job. And they also have their job title and they also have their job description laid out there. The next thing is that the business plan typically has an overview of the current market conditions. And so it's going to tell us this is the size of the market.

9:12Roland Frasier:This is our TAM or our total addressable market. We have Airbnb would say we have, I think it started out there were 30 million was their total addressable market. And then after they met with their VCs and started thinking about it, it became 30 billion.

9:26Ryan Deiss:And that's important because that process helped them see that the market was much bigger than they thought it was. And the service offering that they had and the structure of setting things up needed to be different than they initially conceived because in thinking about this business plan, they realized that to get the funding they wanted and actually get to where they wanted to go, they had to do much, much bigger things. And so that's really helpful. Also, typically a business plan will say, here's our vision and here's where we're going. That makes you think about that. You have to articulate it after you've thought about it, right?

10:02Ryan Deiss:So thinking through that, thinking about what your financial goals are as well is going to help you make adjustments. And thinking about what your budget is, is going to help you figure out how much money do we need to have to move forward to accomplish our goals? And when will the money run out? and when do we have to have revenue and profits from the business surpass expenses so that we actually won't run out of money and stop being able to do this. So the business plan helps with all of those things. It's definitely a good thing to have. Just be sure that you understand it's dynamic and it requires quarterly analysis and feedback and modification to actually be effective.

10:41Ryan Deiss:The next thing would be a business plan allows you to monitor progress and to hold yourself and the company accountable. Now, in this case, your business plan has laid out what your financial projections are and what some of your other goals,

10:58Roland Frasier:which might be soft goals. Like you may say, we wanna impact 1 ,000 businesses by helping them double their sales, or we want to improve the conditions for animals in shelters across the United States or whatever. When you have committed to documenting your goals in a business plan, financially and service-wise, growth-wise, all of those things, you now have baselines that are benchmarks you can measure your actual performance against. So you've got financial projections that say you're going to hit$10 million, right?

11:41Ryan Deiss:Well, if you don't hit the$10 million, then you get to be held accountable to yourself, if it's you, to your team who's helping you have this vision of where we're going to go with this business, to your CEO, to the people that are running the company, also to the board of directors who are responsible for electing the CEO and the other people who are in the company. and to the shareholders and owners of the company, as well as the world at large. So accountability becomes possible because the business plan forces you to articulate what you're going to do and when you're going to do it by. And now with that articulated, it becomes the measurement focus where we can see how close did we come to what we had as our targets.

12:28Ryan Deiss:It also helps you in terms of, are we advancing towards our overall mission?

12:33Roland Frasier:Because we say what our overarching mission is in the business plan as well. And so you can say, you know, gosh, we failed. Our, you know, Google's initial one was do no evil. And a lot of people are like, well, that didn't last very long. Right.

12:45Ryan Deiss:And so the people at Google can look at that and say, are we bad? Like, are we actually doing no evil? Because there's an awful lot of people out there that say that are saying we are. Are we being true to this thing that we stated in our initial business plan as our mission? We're darn sure hitting our financial projections and exceeding them, but are we sacrificing our underlying desire to be good while we're doing that?

13:12Roland Frasier:And if we find that we are straying a bit from that underlying mission, are we going to hold ourselves accountable to say, you know what, maybe we don't need to make quite so much profit and maybe we can be more good or less evil? So that's really kind of a good thing about business plans, being able to hold yourself accountable. And that's a very big trending topic right now. I talked about ESG in another video that people are more and more wanting companies to be responsible for the ESNG components of environment, social impact, and governance. And so your business plan can help you see, are you really focused on things in addition to just profit that are important out in the world right now?

14:02Roland Frasier:So that's a really cool thing about how you can use that to monitor your progress and hold yourself accountable.

14:08Ryan Deiss:The next is how can a business plan be used as a sales and recruiting tool and a retention tool? So here's what's cool about having a business plan. When you are talking to potential employees, particularly now because we're going through this thing called this great resignation and there's millions of people that are just walking away from their jobs.

14:28Roland Frasier:Many of them are walking away from their jobs to go to jobs that pay more because a lot of there's a lot more competition for good employees right now. And so a lot of that great resignation is they're resigning to go and up level someplace else.

14:40Ryan Deiss:But a lot of those people are also going into business and they're going to need people to help them.

14:48Roland Frasier:So what happens when you are trying to get employees in a market that is favorable to employees because there's not enough of them and there's a lot of competition for them is that the businesses that have articulated something about their mission, something about where they're going, what their goals are, how they're going to get there. Who are the people in the company?