Lean Business Planning and the Operations
Published February 3, 2012 | 
Dynamic Lean Business Planning means, if it isn’t broken, think of it as if it’s broken, and then redefine the processes for optimization. You have to address tomorrow’s problems with lean edge solutions.
Just like its name, the operational plan addresses internal business operations and equipment that are needed to provide products and services. Let’s examine some things commonly dealt with in this component.
Location obviously begins with where your business will be located? Location specific data also includes information that may look at square footage, as well as the number of locations? Will the space be used for office, manufacturing, warehouse, or any combination thereof? Are there any advantages related to your location? And, at what point will the goals of the business exceed the capacity of the location facilities? It is also a good thing to provide a layout of your facility in the appendix section of your lean business plan.
Equipment discussions will commonly outline and describe any major or noteworthy equipment needed, and don’t forget to include cost. In addition, explain what the equipment will do, how do any of the pieces function together (if they do), and really important is how much is the production capacity? A highly-significant decision directly affecting the amount capital needed is will you purchase or lease your equipment, the reasons for your decision and from whom? Be absolutely sure you include all manufacturing equipment, vehicles, computers, and office equipment.
Labor issues and questions include how many employees you will need? Will they be full-time, part-time and how many of each category? You should always break them out by job function, with the number of hours they will average, and don’t forget what the hourly pay will be. A description of the skill sets required for each job function, along with the salaries of those in management, production, distribution, sales and administration? Don’t forget to include multiple shifts you may run, the hours of operation, and finally, what criteria you will use to locate and hire quality employees?
Manufacturing & Service Process is a basic walkthrough for the reader of your manufacturing and service processes, from raw material through production and your finished product. Questions you need to answer may include where you plan to obtain and store raw materials? Provide a summary of your key suppliers, the purchasing process, and any unique purchasing requirements that need to be addressed. Where you plan to store finished goods, what are any associated space and cost? Explain how finished goods (or services) be distributed, along with channels of distribution, and the lead time for the entire process? Quality control is critical as to how quality will be measured, controlled, and improved? Of course, it is important to include an explanation of the technology requirements for your entire manufacturing process.
Let’s Look at Other Issues for Consideration
You should provide specific procedures and equipment needed for order processing and any inventory management (i.e. tracking etc.) requirements.
Provide quality control plans and procedures to ensure that you are providing superior quality product or service.
Include the type of insurance your business needs, and clearly discuss any known legal liability issues of your business.
Let’s examine some common mistakes when writing the Operational Plan.
Failing to provide a clear outline of the processes involved with the manufacture, distribution and sales of your products or services. Remember, you want to show you have a comprehensive understand of the lean processes you developed to have the greatest impact on the bottom line or net profit.
Failing to account for all costs (direct and indirect) associated with production. Be sure you don’t leave any indirect costs out, which is the type of cost most misunderstood.
Failure to assess the manufacturing process in terms of manufacturing costs, taxes, shipping, installation, maintenance, serviceability, etc. You have to do the work to develop the most comprehensive or detail understanding of the process components. The lean processes are where much of your success exists.
Failure to develop necessary guidelines you need to ensure optimum inventory control and quality assurance. Once again, it’s about the processes and the success buried there you need the best guidelines to bring it to the surface.
Failure to identify all machinery and equipment needed. When you have to go back to investors or lenders for additional capital because you overlooked equipment needs, sends a message that you may be too risky an investment. Be sure your equipment list is complete.
Fail to use correct methodology to layout the plant facilities, the workflow process, and the material handling procedures. Failure at this stage can doom the project to serious problems and unnecessary costs.
Fail to properly outline personnel management, scheduling, and hiring practices. This is a critical area that needs to be clearly defined for the best conditions for optimized teamwork.
Fail to properly plan for contingencies to meet production and staffing challenges. Contingencies are most often overlooked or ignored until it is too late to develop the most effective solutions to meet issues and challenges without tremendous costs.
Fail to appropriately plan for the long term facility and equipment needs. Long term needs to increase production and service capacity is often overlooked to the detriment of long term success. You should always keep an eye on the horizon.
Lean Business Planning and the Management Team
Published February 2, 2012 | For every action that results in failure, there’s a different course of action that once determined, leads to success. Quickly find it, adapt, and roadblocks become simple detours.
It’s a well-known fact that many investors base their investment decisions based completely on the management team responsible for the execution of a company’s plan. Consider it an absolute that investors expect a well-formed team of professionals with experience in every process and function that’s essential to the successful business operations. So it should be obvious that the management component of your lean planning should explain very clearly who each person is, exactly why they have been selected to be part of your team, and a clear and succinct description of what each person will do.
Give it your best effort to limit the number of people on your management team to 3 to 5, and to only individuals directly involved in the day to day operations, and that have the greatest impact on the future success (or failure) of your business. You should view and consider everyone else as either an employee, or if they’re not involved in any of the day to day operations, as a member of your Board of Advisors, Board of Directors or consultants. Don’t forget to include a narrative about employees in the operations component of your Dynamic Lean Business Plan.
The Basic Components of the Management Team Segment
For each specific team member you should create a clear and concise narrative description of his or her experience and background and specifically calculated contribution. The narrative normally includes, position title, duties and responsibilities (what will they be doing), which specific operational functions they will be responsible for, personnel under their supervision, and of course, who they will report to.
If you include any previous experience, limit it to only experience directly related to the position, including who they worked for, their responsibilities, length of time, etc. Previous successes should include what they were able to accomplish, successful teams and or projects they may have organized and lead (did they save a business or create company’s new product division, responsible for some new breakthrough idea etc.). And, be sure to keep any education background descriptions brief.
Boards should
be briefly described as to who is on your Board of Directors and Board of Advisors including roles they may play as part of the business. Briefly list the names, along with backgrounds and contributions by each board member. Solid and experienced board of members and advisors can have a real positive impact on the credibility as seen through the eyes of investors.
Consultants are mentioned in the last part of your management segment including a very brief description of any outside consultants you may work with as part of your company’s plans for growth. Be sure to include professionals like accountants, attorneys, bankers, insurance agents, along with experts such as technology advisors, web developers, and payroll specialists, to name a few.
The founder background information should be included at a length not to exceed 1/2 a page. The bottom line is to stay with the facts on the bios of your management team, make it abundantly clear why each team member is experienced, which relates to both why they hold their position and the specific benefits they bring to your company.
You need to always r
emember that when faced with the choice between brilliant business concepts with mediocre below standard managers, and a mediocre business concept, but with top-notch managers, investors will always prefer to choose the latter. And, you should too!
Let’s discuss some of the common mistakes found when discussing the management team.
Place the business dependence on “unqualified” friends or family in key management positions. The key word here is “unqualified,” which unfortunately for many companies, occurs all too often. Make a rule for yourself to follow without exception that every team member will be highly-qualified, no matter whom they are, and you can avoid many sleepless nights.
Assuming that “previous success” in other industries will apply to where you are in your current situation. You may have certain skills that can contribute to creating a culture of success wherever you are, but don’t expect success to just happen. You have to do all the right things that are specific to the immediate challenges in front of you. It takes work to determine the optimal path to build and follow to the greatest success.
Thinking you can do everything and exhibiting a “team-of-one” philosophy for management. Understand that investors are very smart and they know the level of difficulty that exists with attempting to do-it-all, operating and growing a business.
Thinking you can attract the very best top managers without consideration of sharing ownership. To properly incentivize the very best management talent to agree to work for you, a share of ownership is quite common to offer, and is many times the deciding factor.
Lacking non-compete agreements for critical management staff. I can’t tell how many times I’ve heard the horror stories about highly-valued employees leaving, only to start the exact same type of business, and taking many of the best customer accounts with them. It is better to be safe with a “non-compete agreement” right from the beginning, and it’s a major component of successful business to require them.
Lean Business Planning and Analyzing the Competition
Published February 1, 2012 | Dynamic Lean Business Planning for the future is the greatest indication we have prepared ourselves to continue maximizing of our efforts to stay on the optimum path we have set for success, and keep our focus on the mission and vision, on and over the economic horizon.
Many entrepreneurs know from experience how important knowing everything about your competition really is. The competitive analysis component should be a completely unbiased and objective overview and analysis comparing your company to your competitors. You should start with the identification of your most direct and indirect competitors, exactly what products and services they offer, along with their revenues are (in units and sales dollars), and the number of years they have been operating the business, and of course, their identifiable target market niche. Be sure that you create an outline of the strengths and weaknesses of each one of your competitors, all the while maintaining an unbiased perspective.
Since pictures are worth a thousand words, it would be a good thing to build and include a chart or depicting the quantitative share of the market each one of your competitor’s influences and controls. Keep a timely and accurate track of the trends and any identifiable changes in the market with time. You should justify and give reasons for the percentage of the market you strongly anticipate capturing, and how your targeted market penetration and resulting market share will be achieved.
Always keep in mind the importance of remaining objective and impartial, and upfront and honest when discussing your competitors and their observed strengths and weaknesses. Many entrepreneurs that are new at lean business planning don’t realize or fully understand that it is important for investors to verify that other businesses in your specific target market and industry are both profitable and successful. You should be absolutely sure to present your competition, and never make the claim that you have no competition. Your goal is to eliminate unsubstantiated assumptions about the market and your competition. And, present comprehensive information specific to strategies and tactics, that when combined with your unique strengths and tight market niche will contribute significantly to your maximized business success.
Let’s discuss some common mistakes that can negatively impact your competitive analysis effectiveness.
Failing to recognize that you have competition! Whatever you do, don’t do this! By claiming you have no competition or even indirect competition, is a large flashing sign of inexperience that readers will see through immediately.
Failing to identify both direct and indirect competitors. Not only should you provide the understanding that you recognize competitive forces in the market, but you should identify them as well (i.e. name, address, website etc.).
Failing to accurately estimate the power and strength of competitors. Never take your competition lightly, and knowing the details of their strengths and weaknesses will serve you and your bottom line well in the long-run.
Failing to include specific competitive advantages you hold over your competition. Knowing your own strengths and weaknesses allows you to both take advantage of your strengths, while taking the steps necessary to address and eliminate weaknesses.
Failing to demonstrate a knowledge or strategic tactics to dynamically adapt to rapidly changing competitive conditions. Markets and technologies can cause changes and new trends to manifest themselves almost overnight. Be sure you are prepared to make rapid changes as part of your dynamic lean business planning.
Failing to define and clarify your position, strength, and market niche focus. To know your market niche focus, you have to be able to clearly and succinctly define it with clarity. Then you will be able to successfully implement and maintain dynamic lean business planning.
Lean Business Planning and Marketing and Sales
Published January 31, 2012 | Painstakingly precise and dynamic lean planning will allow everything you do to appear natural, impulsive and unplanned.
Let’s start with the fact that every marketing plan, if it’s good, should consist of two major components including the definition of your target market along with a precise strategic outline to market, promote and sell your company’s products or services. If you find the target market isn’t large enough to support your marketing and sales strategies, don’t hesitate to dynamically re-think your plan as part of your lean planning process.
The target market as we discussed earlier is where it becomes critical to define your target market clearly and concisely, always keeping in mind what investors expect to see. Be sure and explain to your lean business plan reader details about your customers describing their identifiable characteristics including information like age, gender, geographic location, income level, and identifiable buying trends, pattern similarities and other pertinent defining information.
With a well-developed demographic profile of your representative customer, the more clearly you can identify any significant traits and qualities of your customer, and the easier constructing an effective marketing plan becomes.
The market information you research should originally be from both primary and secondary sources. Primary sources include information from your personal observation and research from personal studies, any questionnaire results, along with discussions you have with industry experts. Your secondary sources always include sources like journals, books, published reports, government statistics, or data and information you find on the Web.
The marketing plan is where after you define your target market, you need to determine specifically how you will reach them. The details and steps you identify as necessary to reach potential customers and convert them to paying customers are included. It is important for you to remember to demonstrate that you have identified certain precise marketing paths and procedures to most effectively sell your products or services.
You need to provide answers to questions that include:
What specific marketing channels will do you plan to use to reach your customer base?
The frequency of use you plan for each channel, the cost for each, and your selection criteria for determining which marketing channels?
The identification of marketing materials you need? (i.e., brochures, website, etc)
Will you design your marketing materials or outsource (if so, then who?), and the associated costs?
Do you plan to issue press releases and attract public relation stories?
Let’s examine common mistakes found when addressing marketing and sales issues.
Using too wide of a definition for the target market, and the assumption that success results from securing a “small segment” of this huge market. Remember to stay within your capacity and start with your target market niche before attempting to target larger targets, which requires greater more substantial resources production capacity.
Poorly defining target markets. Be sure to continue to dial in on your target markets until detailed specifics are well-supported and clearly defined.
Thinking you can go after the entire market instead of a narrow niche. It is natural to think you can master the huge market although niche specific attributes are ignored. You should always be target market niche focused, with the thought of growing beyond the niche as markets are identified and clearly defined.
You develop poor assumptions about your target market without research or solid information. Do the work to develop well-supported assumptions backed by reliable information and research.
Just a general discussion of the channels you will use advertisement and promotions. Your discussion should indicate strong ideas and understanding of the advertising and promotion tools available, and exactly how they will be utilized.
Failure to include important details specific to connecting with the target customer, along with associated costs. Always include clear details about not only how successful connections with customers will occur, but the costs involved with the process.
Operating with the assumption that simply offering a lower price will lead to an increase in sales. Having just lower prices is of little value in the minds of consumers, even for Wal-Mart. You have to create perceived value that leads to increases in sales. Be sure you address the “value” of your products or services.
Targeting with the assumption that lucrative but unrelated markets will be successful. Always stay within the target market niche you clearly understand for the highest-level of success. Many have quickly failed going after unrelated markets.
Lacking clear supported assumptions about how future changes will affect your market. An important principle of lean business planning is to always keep an eye on future changes will affect the market and evolving with the changes by adapting your business to them.
Lean Business Planning and the Target Market
Published January 30, 2012 | Remember, the target we aim at must be clearly known, before successful planning can be made.
The target market is critical because this is where in your lean business planning you must clearly identify both the current and prospective buyers of products and/or services provided by your business. Your primary goal is to demonstrate to readers your clear and focused understanding of who your customers really are, along with how your products/services directly meet the identifiable problems and needs of the marketplace. The proper identification of your specific potential customer base is driver of your overall marketing and sales strategies also outlined and included your lean business plan.
You must understand completely that while your products or services may indirectly meet the needs of a large community of potential customers, the primary goal is to clearly define your specific customer base both in concise numbers and characteristic attributes. So let’s consider the different types of characteristics and attributes to address in the target market component of your lean business planning.
Target Market Size. What’s the quantitative size of your target market? How many business (commercial) buyers are there? Exactly how many (1 million?) potential consumers are ready to purchase your product on a regular basis? If so, how many (a few?) make up incredibly significant target customers?
Target Specific Demographics. The demographic characteristics of potential customers vary quite frequently, especially if the focus is on serving either the consumer or business markets:
Consumer Market Demographic Components
Income,
Occupation,
Gender,
Age
Single/Married,
Ethnic Group,
Education
Commercial/Business Market Demographic Components
Industry,
Product/Service,
Years in Business,
Revenue,
Employee Size,
Private/Public
Target Specific Geographic Distinctiveness. We’ve all heard the importance of location, location, location. Location has become less of an issue for many companies that are technology based. But, you most certainly shouldn’t ignore the significance of the geographic definition for the location of your customers, no matter consumer or business target market. Clearly illuminate these issues to make certain that your marketing and sales strategies/budget allocations properly tie in with your goals to capture market share.
Other Identified Target Specific Distinctiveness. Look for any more subjective traits that help concisely define your customers? These traits may include motivating factors for current buying trends, consumer-perceived weaknesses of other competitive solutions in the market, and any new trends or measurable purchasing swings expected to take place within your target market.
Obviously, higher levels of your customer understanding, the more enhanced are your chances of success. The best method for answering the target market question, “Just who exactly is my company’s customer?” is to invest both time and resources in primary (most valuable) market research. Primary is often accomplished by conducting simple surveys or focus groups.
If you don’t do anything else, use the Web and industry groups to find applicable market research studies and statistics specific to your dynamic lean business planning. These kind resources often vary from free information you locate accessible on websites to exclusive and costly professional market research studies and surveys prepared by experts in the industry or field of your business.
Performing primary research enables you to gather and document the quantitative and qualitative information needed to prepare a solid target market section for your business plan.
Let’s examine some mistakes and “don’ts” to avoid when preparing Target Market information.
If you assume that everyone is going to purchase of your product/service, eliminate the thought from your assumptive considerations. If you can’t quantify your market, then keep drilling down in the available target market data until you can.
If you aren’t clear about the exact characteristic definition of whom your target market customers are, then you haven’t completed the definition process. Remember to ask, “Who in the market has the biggest problem and therefore benefits the most from your product or service?” You should continue to ask until you have a clear definition.
Never ever assume your target market is huge (i.e. everyone wants what you offer etc.). Make it a rule for yourself that a well-defined target market is one that your company can provide considerably superior products or services.
Jumping to conclusions about how much and why your target market needs you is a formula for failure. Rather carefully explain the exact details of how you answer their problems and needs.
The value of focus should never be underestimated. Remain clearly and steadfastly focused on providing your specific product or service to a very specific target market group.
Don’t be tempted to tackle too many markets at the same time. Remember, stay focused, especially if your business is in a startup or early-stage, and carefully grow the capacity to meet demands of additional markets with superior products or services.