PODCASTS / E10
NOV 01, 2019
00:18 Welcome to Episode 10- The Seven Reasons You Need a Strategic Plan. Look, would you climb a 14,000 foot mountain without vetting your optimal route given current weather conditions, or without making sure you have the right supplies and physical training? Would you go on a 200 mile bike ride without planning your route, bringing spare tubes, and knowing how much food and water to bring? These are easy examples of activities where the need for advanced planning is blindingly obvious even to novices precisely because the activity is intuitively beyond our current capabilities. Even those of us who don’t know what these plans should contain know some kind of plan is a must. But look, it’s easy to understand the need for planning, training, and preparing for something we aren’t good at and don’t even fucking care about because there’s not much at stake in confessing we suck at it. But when there’s a lot at stake, such as when we are running an early stage CPG venture, the can-do scrappy, hustling attitude of the entrepreneur easily blinds us from seeing the value of professional strategic planning.
01:32 And there are two reasons for this blindness as far as my experience working with founders shows. New founders, in premium food and beverage especially, are generally not business people, they’re idea and product people. They’re innovators. And they tend to overestimate their ability to manage through any problem on the fly. And they tend to underestimate the risks to the business early on in doing so. The innovator’s confidence continues to be prevalent even though most premium food and beverage brands fail before they even get to $500,000 in trailing revenue.
02:05 The second reason why founders are blind to the need for planning is that there’s just simply a challenge in being totally objective when you’re an innovator. Because there’s almost no separation between three things: the I, the company, and the idea, product, service that binds them all together. This makes professional planning a potentially threatening source of self-critique. What if I fail to meet the plan’s goals? What if writing the plan makes me realize things I’ve overlooked? What if my product isn’t actually that fucking good and this is all a bloody house of cards? Am I really the imposter my resentful ex-colleagues think I am? You see where it goes. And so many founders avoid the process of planning, or they do it half-heartedly in the midst of day-to-day operations. Here’s the seven reasons why you can’t rely simply on intuition and hard work to keep you growing, why they absolutely positively need some kind of strategic business plan.
03:08 The first reason you need a plan is that without a plan, you have no accountability. The foundation of any professional strategic plan is a revenue target based on current market conditions and your ability to finance increased production within a defined timeframe to meet that target. Without such a concrete target, it’s very easy to finish the year and find some way to declare it a success, even if major avoidable mistakes caused needless underperformance. In my experience, the more the founder is focused solely on touting their product versus growing the successful CBG business, the more likely they are to fall into this trap.
03:47 The second reason you need a strategic plan is that plans empower you to say no. One of the lesser discussed benefits of a strategic plan is that when the external environment catches wind of you and your thing after a trade show, magazine article, LinkedIn post, whatever, you will start to get emails. And more and more of them as you do better. Serial entrepreneurs will tell you that the most dangerous emails are the ones that get you the most excited. The ones from national retail chains. Is this the right retailer for your brand and offering at all? Is now the right time for this retailer? Can you even service them? Do you understand the retailer’s corporate strategy and where you really fit in? Do you have a team and resources to support a national rollout in at least a few markets?
04:33 With a strategic plan, every retailer is already included and excluded along an optimal timeline for development of a healthy business. Optimal for you, not for the retailer who just emailed you and has oh, so many reasons for wanting to bring you in that don’t involve a thoughtful consideration of you. The plan reminds you of why and how you want to enter that specific retailer, or better yet class of trade, and when this allows you to quickly respond and move on. If it’s perfect timing, that’s awesome. But often in the early years, it just isn’t. The plan has already said no, you just need to adhere to it. And then you don’t get caught up in flattery or temptation, which is very, very easy at a trade show.
05:20 The third reason you need a strategic plan is that plans depersonalize decision-making and make it more objective. I can’t tell you how many times I catch clients narrating internal debates to me as if they were interpersonal ones. I had a client call me out of the blue once and tell me he had just left a heated meeting in which he and his CFO were arguing the merits of switching the entire line from glass to plastic. These kinds of tactical debates are the most rancorous because the team is very close to making executional decision with real financial consequences. I get it, but this is precisely where a good strategic plan can swoop in and force everybody in the room to get beyond their egos, to transcend any unacknowledged and personal issues. And most of them, my friends, are unacknowledged.
06:10 Does the decision at hand undermine the competitive strategy in our plan or aspects of the four-piece strategic mix that we’ve chosen to pursue? If neither, then the decision at hand can be made purely on a bottom line basis as a low conflict decision. Sometimes I really do wonder why some teams fight over fairly inconsequential things. You know what causes that? Not having a plan. Because not having a plan makes it impossible to prioritize the relative stakes of executional moves, so everything could potentially generate conflict if someone had a bad morning.
06:47 The fourth reason that you need a strategic plan is that plans keep you focused on the long game. Look, you can’t necessarily predict your market results. I cannot be paid to do it for you either, but you can plan a business like an experiment tied to KPIs, accustomed to strategic iterations, and pursuing reasonable growth. A plan anchored to reasonable year over year growth targets will keep you on the path to long-term healthy growth, not just chasing accounts and getting caught up in unicorn fantasies that the media continue to force feed us.
07:26 The fifth reason you need a strategic plan is that without a plan, stakeholders you need to do business will treat you differently. You may be surprised to learn that the people who get professional sources of funding generally get it because they convince somebody that they have a plan. Look, the plan may not be a crystal ball, but it indicates that the owner is at least serious about certain revenue targets and believes they know how to get there. Retailers and distributors are more likely to believe a company’s promise to generate accelerated profits for them if they can see the plan to get there. Nobody invests very much in hope alone, or they charge very large fees to do so. Brokers and distributors are volume-based third parties. If someone can replace your unplanned volume and add even more in the same category, but they do have a plan, why continue to pay much attention to you?
08:22 Which leads me to my sixth reason for a strategic plan. They make you stand out with buyers who rarely see them from small companies. Look, if you were a retail buyer flooded with inquiries by premium entrepreneurs, to whom would you give preference after a meeting? The company who came in and talked a lot about their product, chest beat, chest beat, woop, woop, woop, their SRP and unit margins, but didn’t seem to have a clear vision of where they were going, what they were facing, let alone what they could offer you the retailer in terms of supporting services to drive the sales, or you’d be more interested in the company who had a three-year strategic plan, which featured you at the core of a careful natural expansion with carefully thought out banners and locations in a smart [inaudible 00:09:08] consumer marketing plan. The organized, visionary, and ambitious generally win out, folks, over the passionate well-intentioned wheel spinners. The former will have more negotiating leverage, even the same level of gross sales.
09:24 The seventh reason you need a strategic plan is that it allows you to validate the potential of your business. And validation requires KPIs and disciplined analysis. A strategic plan is a formal process that forces you to define what product validation really means. It’s no longer an ego activity. Once this is done, you become immune to both negative and positive feedback that randomly comes your way. And you will get a lot of that as you grow. Instead, you focus on what the KPIs are telling you, including what your most valuable consumers are telling you, because you actually know how to define who the most valuable consumers are for your business. And it’s not just anybody with a pulse and a wallet. A plan forces you to set a goal, measure your KPIs, and do a structured diagnosis of what the hell is working and not working.
10:21 So, folks, I’ve just give you seven reasons to draft a professional strategic plan at least once a year while you’re in business. It will adapt as the competitive situation and your funding situation warrant. I guarantee you that an activity that’ll take you four or five days will boost your odds and calm your nerves. Please put one together at the end of the year or early next year, once your accountant has all the numbers figured out for you. If you’d like to know if you’re ready to plan accelerated growth, which is my specialty, please send me an email to email@example.com and I’ll send you my special brand spankery new founders quiz, which also doubles as a party game. This quiz will enlighten you and make you more self-aware of what it will take to grow exponentially as a CPG business. And it will help you understand if you’re ready to grow that fast and ride the skate ramp of exponential growth, or whether you need to still work on some of the fundamentals. Thanks for listening, folks, and be safe out there.