Why you’re setting yourself up to fail if you don’t plan
This week features a guest post by the author of The Lizards Tale, a blog about the future and about change covering risk and opportunity management, innovation and business continuity (in no particular order at any given time).
As a freelancer you’ve probably read plenty of advice telling you to get a plan to get ahead. You may be one of the few business owners who actually created a business plan before you started. Or you may be more like everyone else, relegating a business plan to something you’ll get to later.
Even if you’re in the first category, I bet you’ve never updated your business plan to take into account changing circumstances.
And that’s the point.
Fortune favours the prepared mind
A plan is about focus, about being prepared, not for each and every outcome, but being prepared to turn change into opportunity. Opportunities that are realised because your planning activity set your mind to the right context as the opportunity presented.
As a freelancer you run the show, and it’s easy to fall into the mindset that you know your business. As long as you’re pumping the clients in at one end and delivering at the other then life is sweet. Well, that strategy only holds if everything you do tomorrow is the same as everything you did yesterday, and that the environment that constrained your business yesterday is unchanged tomorrow. But if this were true then we could all extrapolate ourselves to a fortune on the stock market!
Accepting that circumstances change (that the risks associated with those changes are often predictable, or at least change within a known context) is the first step to creating something approaching a plan that will ensure your business is robust enough to weather fluctuating circumstances.
Take a risk approach
At a fundamental level, the business of business is risk.
A business plan is an attempt to ‘de-risk’ the primary objectives of your business through lenses of marketing, finance, production and operations. But by taking a risk perspective you can apply the same approach to just about every challenge your business will face. That is, it’s equally applicable for analysing day-to-day activities, from the risks associated with factory operations to the risks associated with taking on new clients.
We can write out a risk approach as a simple process with about half a dozen steps. Here is one I baked earlier below.
Yes, it is simple, and many would say the devil is in the detail. Maybe. Maybe, the devil is in the experience of the practitioner.
Use the process steps as guide, a set of checkpoints, but remember – you will improve over time.
1. Set the context: This part is about clearly articulating the big issue that you face and deciding on the way in which you will analyse the problem and any data that comes out of the process. In this way, the decisions you make later will be slightly more rigorous than say, dropping a penny in a wishing well and hoping for the best.
2. Identification: List all the potential risks that you can think of, and then brainstorm and brain dump. Get as much down as possible, experiment with techniques; get other people involved including suppliers and employees. Break the major processes or product lines of your business down. There are taxonomies of risks that will help direct your search.
3. Assessment and Evaluation: Assess each risk for dollar impact to your organisation should the risk trigger. Again, you could take a taxonomic approach to quantifying impact. You must also consider the probability that the risk event will occur. Evaluate risks against each other by combining the impact and probability to provide a priority. Only sweat the important stuff!
4. Treatment: You can accept the risk (live with the impact), transfer the risk to someone better placed (insurance), avoid the risk altogether by withdrawing from its influence, or mitigate the risk by applying an activity that will reduce the likelihood of occurrence or the impact when it hits (or both). Cost your treatment plan – if the treatment is more than the expected loss on impact, you may decide to live with the risk.
5. Monitor and Close: Stay in charge! Ensure that treatment plans are progressing to schedule, and check the schedule. Does it need to be adjusted? What about the triggers for the risk event? Have the circumstances changed? Do the changes warrant a new analysis of the risk schedule or treatment plan? You have two outcomes: The risk event has happened and you can now close off that risk (good); or risks have become irrelevant and Overtaken By Events (bad).
6. Improve: Continually look at how you can improve this effort; are you getting blind-sided by new risks? Are seemingly low-priority activities taking too many of your resources? Review how each area was analysed for risk, how each risk was assessed and treated and whether the desired outcome matched the real outcome.
When you apply a risk management approach to planning you will develop a register of prioritised, forward-looking decisions that you will take should certain conditions arise. Importantly, the decisions you plan to make are measured for the type and size of their impact, allowing you to focus on the important stuff. In short, you will have created a plan that fits the strategic and operational mix you need to get the job done.
Over at The Lizards Tale, I’ll be stepping through each part of this approach in more detail, using examples and scenarios, and giving insights on the tools and techniques to apply to get great results without draining your time, focus and other resources.
Why don’t you come and join me? But first, I’d love to know if you already use this kind of framework in your business planning and how it helps your business. If you don’t, can you see its use? Go on. Share your thoughts.
Simon Weaver is a business consultant who specialises in risk management and business continuity with a keen as mustard interest in how this stuff should be a driver for product innovation and opportunity in any organisation. He has a blog where he craps on about such matters called, ‘The Lizards Tale’.