I write a regular column “agony aunt” column for Fairfax business media that appears in the business section of a number of their papers around the country.
In response to numerous requests, here is the first of a series of blog posts with back issue Q&A’s that have appeared in the “Two Wise Men” column.
Q: I want to go into business with a close friend of mine but other people tell me this could be a recipe for disaster.
What are the pitfalls and what can I do to overcome them?
Many commentators say working with Friends and family are a recipe for disaster I have seen both great successes and failures using friends and family. My tips:
- Try before you buy: Make sure you can spend a decent amount of time planning the venture, this way you will get to see how they operate as a colleague rather than a friend. Plan a early review point so you both have an option of bailing out before it’s too late. Some people make great friends but are not great employees or business partners.
- Get clarity: Define your roles clearly and separate out your roles as employee, director and shareholder. Be clear on expectations and commitment. Set up regular review points.
- Only one boss: As hard as it is – one of you need to be CEO. Write up a short form job descriptions for both of you.
- Prepare for the worst: Spend the time and money and establish a shareholders agreement (SHAG). In particular include in the SHAG how you will handle the situation when one of you wants to leave the business and how you will value the share holding if one person wants to buy out the other. Or worst how you will handle the ex-wife from hell as a shareholder when a marriage ends.
- Appoint referee’s before you need them: Establish an advisory group as soon as possible. This will enable you to manage any issues along the way.
- This is a marathon: If they are not going to be shareholders, do not abuse the relationship. Make sure the partners and family are on board – instant success is going to be about 5+ years away – check every one is on board for the complete ride.
Q: I made a business plan when I started up my business but I would like to know how often I should update it and whether I have covered off everything I should have in it?
There are different reasons and types of business plans; each have there use and life span.
1) Full Business Plan: – Justify strategic change or major investment.
This full Monty business plan should only be undertaken at key milestones during the life of your company, for example before you commence the business (i.e give up your day job), or before you seek significant investment from any party or undertake any major risk – liability.
These 60 – 100+ page beasts only have the life span of one major decision, beyond that they are too cumbersome for most SME’s. They present the danger of holding the business ransom to a plan that is no longer appropriate or accurate. They form great reference documents but have down sides.
2) Plan for Execution and Leadership – daily use, reviewed monthly, challenged six monthly.
I am a fan of short business plans max 10 pages, always summarised in a single page diagram or short bullet list (5 points max). These plans can easily be communicated and acted on, allowing the complete team to gain clarity about the task at hand and what they can do to achieve a common goal.
Execution business plans should be referenced frequently and challenged 6 monthly for a growing company. The great thing about a ten page plan is people are OK about tossing it out. Allocate at least half a day for your key staff to review the plan every six months, preferably with someone from outside the business to bring new ideas and challenge.
I generally use a variant of the Balanced Score Card model making sure the business in focused on the four core areas: Finance, Customers, Process and Staff. The less objectives the higher chance you will achieve them. Be warned if you have more than 10 strategic initiatives you will never achieve any of them. When you review your business plan also review your customer value proposition or pitch, making sure that your business is focused on something that adds value to your clients.
You should review progress against your business plan formerly on a monthly basis. If you are focused on activities outside the business plan then either change the plan or change your behaviour. Good business plans are simple and help speed up daily decisions for all of your staff. I am also a fan of customer focused mantra’s eg “ We make the car go faster”.
Want more on business plans – attend a GMC Business Plan Workshop