The game of business, when you’re first starting, always looks positive. You throw the die, you advance some squares, sometimes you find a shortcut and manage to climb a ladder to a new level. And that’s how you think it’s going to be until you reach whatever pinnacle of success you have in mind. And that’s how it’s portrayed in all the business courses, and training and business books. Follow these guidelines, learn this technique, and you will succeed.
Snakes and ladders
But it’s not like that. As well as ladders, there are snakes. And sometimes you land on the head of a snake and slither all the way down umpteen levels. It feels like you’re starting all over again.
Why are there snakes? Snakes are the unexpected. They can be large snakes like the recent pandemic, global downturns, huge interest rate rises and so on. And they can be smaller things such as a key employee leaving, suppliers putting up their prices unexpectedly high, the loss of a major customer. They all put you down a level or two, some more than others. It’s a struggle to pick yourself up and get back in the game. Yet we know we must.
Planning is a model, not a prediction of reality
We need to plan to avoid as many snakes as possible. But in our planning, we have to acknowledge that we don’t know everything. Unexpected things will happen. That doesn’t mean that planning is unnecessary or a waste of time. In constructing a business plan, we’re creating a model of what we think will happen. If we create it carefully, we can tell when things start to go wrong and where. What if there is a snake at this point in my plan? What would happen if I slipped down it, how can I avoid it? We use the model to predict what will happen if we introduce something unexpected, and we can then take avoiding action early.
Modelling to see what might happen – what if analysis – is a simple technique that exposes the fragility of our assumptions. What if sales were 10% lower, and/or costs were 10% higher? What if customers didn’t pay us after 30 days but 60?
Reality intrudes
After the model comes reality. What is actually happening, as it won’t be the same as the model. Helmuth von Moltke said, paraphrasing, “No plan survives first contact with the enemy.” Churchill: “He who fails to plan, plans to fail.” Mike Tyson: “Everyone has plan until they get punched in the face.”
Expect a punch in the face. It’s real data, there is information you need here, amend your model, see what works, get back in the ring.
Similarly, if our model turns out to be overly pessimistic in one area, we have an opportunity that we can exploit. We can jump onto a ladder early. Knowledge is power. Knowledge means you can change your environment to some extent and adapt, survive, and thrive.
Linear thinkers slither into problems!
Most thinking regarding planning is along the lines of IFTTT (if this then that). In other words, you do A, then you do B, C, D and so on. The later steps are predicated on the earlier ones. But if A, or B or C doesn’t happen or not in the way you expect, then the rest of the plan tends to fail.
It’s the same type of thinking that we often have about risk. We may think that we’re fairly certain that something will happen, but that doesn’t mean that the following events will have complete certainty even if the first one does. These are all probabilities, not certainties. Assigning percentages to events is a useful way of describing what you think might happen.
It’s also useful to remember that probabilities, if they are stacked, change their meaning. Simply do the maths – if you are 80% certain that you will sell 100 new items but it is dependent upon same-day delivery, a price point of £5, and 50 new customers, all of which are also 80% certain, then the overall chance of success is not 80% but just over 40% (0.8 x 0.8 x 0.8 x 0.8).
You have to multiply all the probabilities together. It tends to change your thinking when you do this!
You are building some snakes into your planning. Smaller snakes make for better plans. And you know where they are.
Rushed planning breeds snakes
If you are running a business, you have to get good at running a business. You are no longer a technician good at engineering, or carpentry or web design. It’s an abrupt change, and so much to learn. Good, detailed planning reveals your knowledge gaps and, to some extent, shows you how to fill them. Don’t rush your planning.
Better questions lead to better answers
What do we mean by better? Have you used ChatGPT or something similar? Have you noticed when you do that the better the question you ask, the better the answer you get. The better questions are complete. In other words, you will ask your whole thought and not the short version that we would tend to ask someone who knew quite a lot about the environment we’re already in.
TIP: When using AI Tools, thorough questions produce better answers. It’s worth practising.
So, from our perspective, if we were to ask ChatGPT about tax allowances on plant and equipment, we will get one answer. And that is the sort of question that we would be asked because there is a presumption that we mean in the UK, and the current plant and equipment regime. But that is not the whole question that you have to ask ChatGPT to get a good answer. The whole question (tax allowances in the UK etc) teases out the assumptions and biases you are making in constructing your planning.
Using this method of asking AI friendly questions lead you to the realisation of what is and isn’t working when you compare that to reality. These are some of the hidden snakes, that can emerge when reality bites. Obviously, we would expect your reality to be accurate and timely, otherwise you’re guessing again. If you have timely and accurate information, you can start to make small adjustments to your business which are much easier to implement and take far less time and effort, cutting down those little risk and pressure points. You can improve it 1% at a time.
Agile, flexible and resilient
Your plan needs to be agile, flexible and resilient. If it is, you will have strategies in place that will overcome the unexpected, or mitigate their effect, or avoid them. It’s standard risk management. That’s the type of plan we develop with our clients. Small non-venomous snakes and strong ladders reaching to the stars.
How we can help you
We are all about helping you achieve the best life-work (not work-life) balance for you. We do what you need to keep you on the right side of the taxman, answer all your questions, and make helpful suggestions. Always recognising that your business is a tool for you, not an end. We help you plan to live your best life for longer. Freedom and independence are the keys to success, so book a free Business Energizer session with us to find out how to achieve it.