A Business Plan Will Not Make You More Successful

Palo Alto Software, which makes business planning software, just did a survey to their own users to show that those who completed business plans that they started with Palo Alto were nearly twice as likely to successfully grow their businesses or obtain capital as those who didn’t finish.

This research is a classic example of “there are lies, damnable lies, and statistics” (stolen from Twain who got it from someone else). An even more reasonable conclusion – people who DO SOMETHING and follow through on it are twice as likely to successfully grow their business.

My second book (to be published in December 2010) is titled “Bad Plans Carried Out Violently” and promotes the idea that DOING SOMETHING trumps pre-planning almost without exception. I’ve talked with hundreds of successful business owners and asked them two questions:

  1. Did you do a business plan before you started your business?
  2. If you did, how well did it project what actually happened over 1 yr, 3 yrs and 5 yrs?

The number of successful business owners who do a business plan before starting their business is statistically insignificant – well less than 1%. The only reason the small minority gave for doing one is because they had to in order to get money from a bank or investor (almost no one does one just for themselves). That should tell you something about the classic “pre-planning” Business Plan we’re all taught is so important.

Of those very few that did do a Business Plan before starting, virtually none of them say their Business Plan projected accurately what actually happened in the next 12 months, or 3yrs or 5 yrs. To the contrary most said their Business Plan was wildly off from what actually happened in the real world.

The conclusion is that successful business owners don’t do a classic Business Plan unless banks or investors are involved, and that they never look at it after that. So it has real value for getting a loan, but not for running a business.

Stop planning and get moving! Do a simple 2-page Strategic Plan and revise it every month with the input your business gives you – you’ll be better off.

“Committed Movement in a Purposeful Direction” and “Implement Now. Perfect as You Go.” – two concepts from my next book – are much more instructive to success than pre-planning. Knowing the end goal is extremely important – knowing beforehand the path for how you will get there is fortune-telling.

See the new book from 37Signals called Rework for others affirming this as well.

Why We’re Leaving Our Giant Bank

And why we didn’t do it earlier. UPDATED Jan 2013

Wells Fargo is likely the “great bank” among the big ones, with the highest integrity and the lowest tolerance for bad banking practices among the bigs. But if my experience is typical as I believe it is, that should scare us all.

In early 2009 Wells Fargo took away our business credit line without so much as a letter to tell us why – it just vanished from our online banking screen one night. They did this to every single small business account in America without regard to the viability of the business. The $25 billion in 2008 Federal bailouts to WF never trickled down from Wells to their clients. I personally know of many very healthy businesses that were destroyed by this single act, and tens of thousands were damaged for years after because of it.

IT’S ALL ABOUT THE BANK
When it happened, we showed our local Wells Fargo branch manager our perfect credit and they said, “Frankly, we took away everyone’s business lines with no regard for their credit. We just had to make our own balance sheets look better.” That honest Wells Fargo manager said their credit requirements had tightened to the point of being “ridiculous.” She’s no longer there.

Many business owners switched to using their personal credit lines and had their interest rates jacked up right AFTER using them, not before. We did this to see what would happen and sure enough, within a week our rate was jacked, too. All while Wells Fargo was receiving the lowest interest rates from the Feds in history and had lined their pockets with $25 billion in free bailout money that had no strings attached to it.

This is the great bank, the good one amongst all the bad ones. If this lack of integrity is how good one acts, what are the bad ones like?

OUTTA HERE
In 2010 after more incidences of bad customer service, we told our Branch Manager we were leaving and were looking for a small local bank that wouldn’t make macro-decisions that ignored their customers. We also told them we would wait until our revenue was significant enough to make Wells Fargo stand up and take notice.

UPDATEJANUARY 2013
We set up our one international business with a local bank in early 2012, not Wells Fargo. But our main focus is Crankset Group, which grew 392% from 2008 to Dec 2012, which has been with Wells for six years. They requested a meeting in December to introduce us to four business bankers they now want us to work with, and told us we didn’t have to interact with the regular branch folks anymore. We’re special now that we’re big enough.

Our growth and the complex merchant account changover required is making it hard to invest time in changing banks. But we’re committed to doing it before the end of 2013. We are thinking of hiring a marching band when we do. And when we meet with Wells Fargo to close out, we hope they’ll learn from our experience, but based on their disregard for us as a client until we were “big”, we’re not holding our breath.

Do the small banks do better? Our experience with our other business is that they are much more better at paying attention and meeting our needs. And much less expensive.

2013 – MORE FEESCHARGING FOR THE LOLLIPOP?
Pert of the 2013 update – we got a form letter from Wells Fargo yesterday, January 3, stating that they will now be charging their clients for cash deposits. They are now charging you to put cash deposits in their bank so they can make interest off of it. Mind-boggling, but not surprising.

In the same letter they outlined three other new fees, including charging their clients for transfers from Wells Fargo savings to Wells Fargo checking – $15 a pop to do that. My community bank will transfer to another unrelated bank anywhere in America for $7.50 and sometimes nothing. Watch closely – Wells is taking their cues from the airline industry. Next they’ll be charging to use their pen, and then for the lollipop.

GO LOCAL
Our lesson? Go local whenever possible. It’s not a panacea, but it can never be worse and more than likely a local bank, as with any local business owner, is more likely to pay attention because they live there, not in some skyscraper 1,000 miles away.

What’s been your experience with big banks/big business vs. small banks/businesses?

 

 

Sorry, but failure is NOT the road to success.

Practice instead.

The books are all wrong. The standard claptrap in the shelf-help books is that we fail our way to success. Nobody fails their way to success and you need to stop listening when experts tell you that you will.

The whole Failure-Success model needs to be revisited anyway. As the old tome goes – “treat both failure and success as the impostors that they are.”

Failure enters the picture when we think we have to do things “right” the first time. We’ve been taught all our lives not to make fools of ourselves in public by doing something stupid, and that the cool kids with perfect clothing and big houses whose lives look perfect on the surface are our example of how to make it in this world. Just pretend you and your business don’t have any problems and make sure nobody ever finds out you’re not perfect and you’ll be fine.

The problem is that the solution we’ve been given to this by the gurus is to embrace “failure as the road to success”.

Failure is NOT the road to success! There is plenty of research that shows people who chronically fail will continue to do so. I believe many of them have actually drunk the kool-aid that all they need to do is keep running into brick walls until they find their way out of the maze. They’ve been sold a bill of goods.

Failure is not the road to success – PRACTICE is the road to success. People who succeed do not fail over and over again. Instead they commit to practicing their craft every day, learning from what they did every day, then taking that daily feedback and using it to practice better the next day. The only way to succeed is to be totally and fundamentally sold out to practicing every day until you get good.

Failing is not practicing. Failing is just failing. Practicing is the art of understanding that you will not be good at something the first few times you do it, and the only way to become good is to constantly take the daily feedback from your practice sessions, learn from it, incorporate it into the next day’s practice, and take the long view that diligent practice will make you the best.

A classical musician doesn’t fail their way to a solo career and a recital at Carnegie Hall. They practice 4-6 hours a day for years and build on every day of practice by improving the next day. A world class runner doesn’t get to a 4 minute mile by failing to run well, but by diligent and disciplined daily practice, and getting better at running every single day. A great business owner doesn’t magically find success by mucking around at dozens of bad ideas and failed attempts, but by fundamental ongoing commitment and focus on their craft and to getting better at it every day.

You won’t be successful by fishing around for magic products and “moving on” every time you hit a roadblock, or by changing out your marketing for the next “secret” process. And you won’t become successful by failing over and over at different things, or by attending all the varying get-rich quick schemes until you “hit it big”.

You will be successful by putting your hand to something, committing to it, practicing it every day and knowing that you will be lousy at it to begin with (that’s not failure, that’s how you start). The only way to get better is to stick to one thing, take the daily feedback, and use it to get better tomorrow. You will become successful by stacking one great day of practice on top of another and building a lifestyle of getting better all the time.

Stop trying to fail your way to success, put your hand to one thing, practice it daily and become great over time. Failure is not the road to success – focused and committed PRACTICE of the same thing over and over is the road to success.

Business Owners Should Always Be Normal, But Never Average

I think businesses should grow up. I don’t mean “it would be nice if it happened.” I mean we should all, every one of us, expect our businesses to grow up and start giving back to us and to the world around us. We should assume that at some point in the first few years our business would move from survival right through success to significance.

There are many artificial constructs in life that mark various stages of maturity, but the only artificial event we’ve been given in business that tells us we’ve arrived is “selling the business”. The problem is almost no one actually wants to grow a business just to sell it anymore than we want to raise children with the express purpose of never seeing them again.

So we spend decades changing the diapers in our business and continue spending as much time, emotion, and money on our business as we did the day it was born. Why would we so eagerly anticipate the maturity of our children and never expect the same for our business?

If you want a mature business you can enjoy for decades and that makes money while you’re on vacation you might need a new view of business to get there. For years your business has trained you to focus on making money (and other unproductive distractions), and unfortunately when you look at other businesses you see that most of them are focused on making money, too. But these “average” businesses all set a bad example for us.

The point? It’s not normal to have a business that never grows up. It’s clearly average; everybody’s doing it, but it is definitely not normal. I intend for my business to have the minimum basics of maturity (run and make money without me while I’m on vacation and not be a mess when I get back) on February 18, 2011, at 10am, which is four years after I started the business. I believe that’s normal and that any business can get to this minimum level of maturity in 3to5Years from the printing of a business card.

Are you building a business that will depend on you for decades, or give back to you and the world around you for years to come? We get what we intend, not what we hope for. Don’t intend to work hard and just hope your business will grow up. It doesn’t work that way. Intend for your business to grow up so you won’t have to work so hard the rest of your life. Intend to move your business from survival right through success to significance.

Intentionality is everything.

Successful business owners respond quite differently.

He who makes the rules wins.

On the way from the Charleston airport to speak at a conference last Thursday evening. I engaged our cabbie in conversation, which of course always gets around to food. I asked what seafood he liked since he lived on the coast, and his first response was “I don’t eat shrimp.”

I found his response in the negative to be interesting so I pursued it. He told me his cousin worked on a shrimp boat in the early 60’s and had drowned, and that he had never been able to get over it. So now he doesn’t eat shrimp because it reminds him of his cousin drowning over 40 years ago.

I empathize with his loss but I don’t understand letting that circumstance rule his entire life even in one small aspect like eating shrimp. I lost a cousin at the age of 41 from a massive heart attack as he went out the door for a run, but I would never think to stop running or exercising because of my loss.

The moral of this story?

Circumstances don’t make me who I am. How I respond to them does.

I met a woman once who was a quadriplegic from birth who always introduces herself by saying, “I have the gift of cerebral palsy.” As someone who has every right to claim true victim status, she is a bright light in a world full of self-made victims.

How are you responding to the circumstances in your business? If you decide you’re not a victim and respond accordingly you’ll enjoy life and business a whole lot more.

Wealth vs. Riches – Which one defines business success?

There is a significant difference between Wealth and Riches, and which one you choose will likely define whether your business is successful or not.

I was at a friend’s house in Maryland who lives on the water. We were sitting on his deck looking out over the water and I noticed that his neighbor had a nice 30’ sloop docked at his house. I mentioned it to my friend and without pausing he said, “Yeah, it’s a nice one, but I never see it go out.” I asked him to explain and he said, “Every spring he pulls it out of the water to knock the shellfish off and paint it, but I don’t remember the last time I actually saw him take it out. If it’s out, it’s certainly never out enough for anyone around here to notice.”

This guy was rich, but he definitely wasn’t wealthy. Riches equals money, but Wealth equals “the ability to choose what to do with my time.” Riches just accumulates money and stuff, but Wealth creates freedom. Too often business owners don’t make this distinction and buy off on the notion that piling up the money is the definition of success. This is leftover thinking from the 1980s and 90s that was expressed in the bumper sticker “He who dies with the most toys wins.” We got a chance to try it during the 1990s and 2000s, and it came up short.

Too often we intend that our business should throw off money, so at best, that’s all it does. But business should give us three things; two resources and a benefit.

Resource One: Money

You can do a lot of things with money, but getting money by itself is not a good goal. Ask anyone who has made a lot of it – Making money is not an empowering vision. Do you have an empowering vision that is bigger than making money? If not, you will likely never make a lot of it. The blue flame coming out your backside will come from having a vision for something that grips you, and money will just be a way to get there.

Resource Two: Time

Most business owners never ask their business for time, just money. So they get what they ask for – some money (usually not a lot). I expect my business to throw off both time and money, and relentlessly work to get the business to the point where it creates both assets for me. Without time, money is meaningless – it’s just a boat that never goes out.

The Benefit: Significance

The most important, least asked question in business is “Why?”. Most business owners have no idea why they are in business, so it’s no surprise they don’t know where their business is taking them. What is it that you could do with your business to create significance for you, your family, your employees, and in the world around you? The bigger that vision is, the more likely you are to succeed in your business. Significance, or creating meaning should be the reason you are in business. If you have a Big Why, you will be much more motivated to design your business in a way that it throws off both a lot of money and a lot of time. When you have both, you are Wealthy and can now choose how you will create significance in the world around you.

There are a lot of rich people in the world who don’t have freedom and haven’t done what they could have to create significance in the world around them. There are a lot more struggling business owners who just focused on making money and never made much of it because they never got a Big Why for being in business.

Go for “Wealth” – time, money and significance. We get what we intend, not what we hope for. Stop hoping your business will get there – random hope is a terrible business strategy. Instead, intend to build a business around your Big Why, and intend for it to throw off time and money so you can create significance. It’s not “He who dies with most toys wins”, but “He who lives with the best Lifetime Goals wins.”

Wouldn’t you rather leave a legacy than a pile of cash and a boat that never goes out?

The Business Success Train – Get On It.

If you were trying to get an old steam engine going to move the train, would you put the coal in the caboose or in the engine’s firebox? Does it make any sense at all to put the coal in the caboose instead? It’s not the way a train works and it’s not how business works, yet in business we do it all the time and all it does is weigh us down.

The Business Train of Success looks like this:

And it’s really simple to run it. Stop putting your faith in your feelings and make a habit out of putting your faith in the facts. It’s amazing how much better your business will run, and how much more likely you are to make good decisions.

When we put our faith in our feelings we either make fear-based decisions or hope-based decisions.

FEARBASED DECISIONS

Fear-based decisions are rooted in how things have gone in the past and maybe how things “are”, but don’t take into account anything to do with how things could be if I decided to make a change. If you tend to make fear-based decisions you are saying two things:

  1. The pain I know is better than the pain I have yet to experience. I’ll just live with it. (A big reason why most small businesses never grow to maturity).
  2. I am committed to making decisions based on where I am, rather than on where I want to be.

Stand in front of a mirror and ask yourself, “What would I be doing right now if I wasn’t afraid?” Make decisions based on where you want to be, not where you are. Otherwise you will never get where you want to go, you’ll only just wish you could have…

HOPEBASED DECISIONS

Hope-based decisions ignore the past, the present and even the future facts that should be informing your decisions. Hope here really means, “I wish” and, “Wouldn’t it be nice if..” People who are hope-based ignore the facts as well and go full steam ahead without any idea where they are going or how they will get there. They are always “excited” about the future but have no factual reason to be – “it will just work out” if we keep going. If you make hope-based decisions, you are really saying two things:

  1. I will ignore the facts at all costs because reality always gets in the way of my dreams. Or – the pain I have yet to experience has to be better than my present pain – I’ll just keep running headlong into the abyss.
  2. I’m am committed to making decisions based on where want to be with no regard for where I am or the facts on how I can actually get there.

Both the naively optimistic (hope-based) and stiflingly pessimistic (fear-based) view of the world will keep us from being successful. Instead put your faith in the facts, stoke the engine of success, and get moving on a clear track to growing a mature business.

FACTBASED DECISIONS

The more faith you put in the facts and not your feelings, the faster you will get there!

We Don’t Find the Sandbars With An Anchor in the Water

Our desire for safety is paralyzing. We’re so afraid of hitting a sandbar that we’re willing to just sit in the harbor for years on end. Then we have the audacity to wonder why our business never grows up.

Think of the Steering Wheel on a boat as “Purposeful Direction”, and the Engine as “Commitment”. I’m a big fan of both commitment and purpose. One without the other is of no value. Nothing is more important to how quickly you will get where you’re going than the size and fitness of your engine combined with ongoing attention to the helm. Most of us don’t pay attention to either. We’re just sitting at anchor most of the time.

The single biggest factor in getting somewhere is the steering wheel of your life and business – a purposeful direction (see last week’s post). But if you know where you want to go and you aren’t committed to getting there, I mean fundamentally sold out to that end game, the journey will take a very long time and you will likely lose steam before you ever get there. If your engine of commitment isn’t big enough it’s likely you really don’t have a clear understanding of where you want to go – the steering wheel has no direction.

The only way to find the sandbars in life and in business is to get the ship moving and then start taking soundings. And if you’re commitment is big, you’ll get where you want to go a lot faster and easier than those who are puttering around with little outboard engines.

It’s all about committed movement in a purposeful direction. Lack of committed movement is failure.

Are you fully committed to moving in order to find out what works, or are you sitting around wondering where the sandbars are?

Committed Movement in a Purposeful Direction

Conation

We’ve all heard that extraordinary people are just ordinary people who have made extraordinary decisions. It think it’s even more simple than that. Extraordinary people are those who understand that Movement is the Master, and planning is just its humble servant with a small “s”.

While the rest of us are building a perfect plan in an ivory tower, the successful person has already pulled up anchor, hoisted the sails and left the harbor for their rendezvous with destiny. They understand it isn’t about the plan, but about the destination, and that the plan will unfold as they go. They just need to know two things: where they are and where they want to go, and their plan is to do whatever they need to do in the middle to get there.

The rest of us just get nervous at this whole approach. In fact we’re much more comfortable with knowing exactly what the dayto-day activity is and what each day holds going forward. We’re so committed to safety, stability and a perfect map for daily life that we really don’t care what the destination is as long the journey along the way to nowhere holds no surprises.

“I don’t know where I’m going, but I know exactly how I’m going to get there.”

We need to stop worshiping the planning servant and start focusing on the Master – movement.

Committed Movement in a Purposeful Direction

Just because you’re going flat out doesn’t mean you’re going the right direction.

If you don’t have your hand constantly on the steering wheel to control the helm and make ongoing corrections, all the movement in the world isn’t going to help you. It will likely just create chaos as you crash into things and bounce off of them. We need Purposeful Direction – a clear understanding of the end game (not the plan, but the end game – there is a big difference!).

Successful people get moving fast but have a very strong understanding of where they are going. They aren’t just committed to movement, but to movement in a purposeful direction. They have a clear view of the destination. But successful people focus on the end game, not on planning. They didn’t become successful by planning the whole journey out, but by simply having clarity about where they are, where they want to end up, and a complete commitment to get there at any cost.

Do you have Committed Movement in a Purposeful Direction?

We Burn a Lot of Fuel On Takeoff

Business owners are always wondering how the next guy seems to get things off the ground so well and why they themselves are always struggling to just keep what they have afloat. It’s because we don’t understand momentum.

Ideas don’t happen because we thought them up, and they aren’t sustained because we kick started them. I have a lot of business owners right now saying to me, “Doesn’t if feel great to have your book totally done and out there?” (see my book). Some of them know it’s only the start, but a lot of them are saying this to mean, “Won’t it be fun to sit back and watch the sales roll in?”.

Birthing a book, a project, a new product, a business, hiring an employee or any other new initiative is a lot like having a baby. If you brought a newborn home would you show it the house, lay it beside the refrigerator and say “Well, you’ve gotten the tour and there’s the fridge. We’ll be playing golf if you have any questions!”

Too often we start new things to solve a problem, but end up creating one because we pull out of the process way too soon.

A jet on a 3,000 mile transatlantic flight burns at least 50% of it’s fuel just getting to cruise altitude in the first few miles. The next nearly 3,000 miles takes only half as much effort. Everything in business is a lot like this.

“Finishing” a book, hiring an employee, training on a procedure, bringing on a new client, or rolling out a new product all require outside help because initially these have no momentum of their own. The inertia is overwhelming and the only way to overcome it is to push hard yourself. When you do this, you feel like the airplane at the beginning of the runway – a lot of fussing and fuming, roaring of engines and blinking of lights…and the wheels haven’t even moved yet.

We don’t get it because we put out a huge amount of effort getting that project started and since there is no movement, we assume things are going wrong. The only thing going wrong is that we don’t understand momentum.

You burn a lot of fuel before the wheels even move, and a lot more just rolling down the runway, and still the wheels aren’t even off the ground. The only way to break through all the inertia is to push even harder. But just before the wheels are about to leave the ground is about where most business owners start slowing down. The project never quite does what they wanted to accomplish and they chalk it up to outside forces.

The joy is if you push through the initial inertia, the project, employee, book, etc., will begin to get momentum of its own, requiring less and less outside momentum from you. Just know that your commitment, excitement, vision, clarity, direction, purpose, and in-the-trenches hard work are required to get it there.

Don’t stop pushing until you’re at cruise altitude. And when you get there, make sure you have someone else pushing and someone else at the controls. You’ll make more money in less time and enjoy the ride a lot more if everything is in place to keep it all in the air for you.