PODCASTS / E95
June 1, 2023
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 as 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 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, we suddenly believe we can survive on scrappy hustling. We’re avoiding the painful reality of confronting what we don’t know about something we do care about – our business. We really avoid it, if suspect what we’ll find will scare the bejeezus out of us. The impatient attitude of the entrepreneur easily blinds them from seeing the value of professional strategic planning. And there are two reasons for this.
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.
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. You, the company and the idea/product/service that binds them all together.
This makes professional planning a really a potentially threatening source of self-critique. What if I fail to meet the plan’s goals? What if I 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? Do 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 are the seven reasons why you can’t rely simply on intuition and hard work to keep you growing, and why you absolutely positively need some kind of strategic business plan.
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 cause needless underperformance. In my experience, the more the founder is focused solely on touting their product versus growing the successful CPG business, the more likely they are to fall into this trap.
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’ll 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? 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.
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 outta 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. Things get the most emotional right before spending a ton of money. 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 interpersonal issues. If you can’t find a connection to the strategic plan at all for whatever you’re arguing about, just stop. It’s not relevant. Someone has randomly inserted an ‘itch’ and they want the company to scratch. CFOs are notorious for doing this out of sheer accounting nervosity.Does the decision at hand undermine the competitive strategy in our plan or aspects of the four P 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 level and low conflict decision. Or punted to the future. Sometimes I really do wonder why some teams fight over fairly inconsequential things. You know what causes it?
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.
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 that are getting caught up in unicorn fantasies that the media continue to force-feed us.
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 slotting 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, then why continue to pay much attention to you?
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? 1)The company who came in and talked a lot about their product, chest beating, chest beating, woo, here are my SRPs 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, or 2) would you be more interested in the company that had a three-year strategic plan, which featured you at the core of a careful and natural expansion with carefully thought out banners and locations and a smarts trade, consumer marketing plan, the organized, visionary, and ambitious generally win out folks over the passionate, well-intentioned wheel spinners.
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’ve 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 every 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.
So folks, I’ve just given 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.
And don’t forget to take my online Founder’s Quiz on my website. It’ll tell you if your team is set up for exponential growth AND give you access to my VIP e-mail list with special content and a special discount code on my paid courses and webinars.