Business Planning

We all know the business is changing-and that includes the business for those in the supply business, service business, and equipment business. How do we know? For one, you can probably just look at your income statement to see that growth isn't coming easily, if at all. If you want a more macro view, you need only participate in one of the free webinars put on by the big three research firms in the MPS / hard copy space: InfoTrends, IDC, and Gartner. Equipment placements are down, unit population is down, and prints are down.

So if you continue to do things the way you have, you will be chasing an ever-decreasing revenue stream with shrinking margins. You cannot change that fact-the revenue stream is shrinking because technology has changed dramatically.

How do you combat the macro issues and grow your revenue and operating income? Finding a genie to magically transform your business probably isn't going to happen. I don't believe in genies, but if I found one I can think of some faster ways to crazy wealth than spending a wish on transforming my business. It is going to take planning, and once you have a plan it will take execution. Not having a plan is similar to waiting for a genie in that you are leaving your future to chance.

At this point you might be saying that you have never had a plan and that you have had many accomplishments in your business career. Unfortunately, business plans can be taken for granted because bad behavior pays off for a short period of time. I'll illustrate with a recent event that happened to me in a cash game at the poker table-I was not in the hand.

A no-limit hand was raised pre-flop (the players only had their two hold cards on which to make a decision) to three times the blind (the blind is the minimum amount to bet) and then re-raised to twelve times the blind. The original raiser called as did one other player who was in her first hand (she had just sat down). The flop (first three community cards) was 7,5,3 and three different suits: No flush and no apparent good straights (no three cards in sequence and they were all low cards to a three bet pre-flop pot). The first player to act bet about 60% of the pot (chips already bet) and the second player, the original raiser, went all in (bet all of the money she had on the table) for about 120% of the raised pot. The third player, who had simply called the two raisers' bets pre-flop and was in her first hand, had not put another dollar in the pot at this point (the other two players were into the hundreds of dollars) so she could have just folded her two cards and got out of the way. Instead, she called the raiser's bet and went all in, and was called by the original better. Two players were all in at this point (no chips left).

The two raisers turned over pocket aces and pocket kings. With no flush and no apparent straight on the board, about the only thing these two were worried about was that the third player hit a set (three of a kind) and had pocket sevens, fives, or threes. Much to everybody at the table's surprise, she turned over 8 - 4 offsuit. This player called two raises pre-flop with an absolutely horrible hand and then called two raises after the flop with an inside straight draw (where she needed a middle card as opposed to a card at either end of the cards in sequence). Only a six could help her hand-there were four in the deck, so she had about a 9% chance of winning, which she did when a six hit on the river.

The player flew up from her chair pumping her fist in the air. She then-through her sunglasses (how can you see in a dark room with sunglasses) proceeded to tell the entire table how great of a player she was. All I was hoping was that she stuck around long enough for me to take all of those chips away (she left 20 minutes later…I couldn't take her chatter any longer anyway)!

This player thinking she was a brilliant poker player is the perfect example of bad behavior being reinforced. She had to pay 50% into a pot, all of her chips, with at best a call from the first player (the other two were all in so no more chips were going in) giving her 33% of the chips with a 9% chance of winning. She won, and therefore will continue to play inside straight draws with horrible odds looking to repeat this event; she is going to lose a lot of money and make some other players very happy. How frequently does a good month or quarter lull you into believing things are okay?

The moral of the story is that anybody can get lucky even against the greatest odds and many of those that get lucky attribute that luck to skill. In the poker example, you can guarantee that the player was not thinking about the odds of winning with 8 - 4 offsuit versus the ratio of money she was putting in the pot. Are you staying educated on the industry and what is happening with unit placements, prints, and average unit selling price or are you trying to repeat results that happened when the macro industry trends were far different than today? If that poker player read a good book on odds and strategy, she definitely would have changed her playing style and made more money (or lost less… she has a lot to learn) in the long term. Are you looking to leverage sound strategy and tactics to profitably grow your business? Are you spending money in areas that have little chance of paying a return or have you done enough homework to make investments that have a payback?

You won't know without a business plan. The business plan makes you think through your actions-like not betting a higher ratio into the pot than your odds of winning that pot-so it provides you with a roadmap. But it also provides you retrospective analysis and the ability to adjust. You will detail out your assumptions, your company's strengths and weaknesses so you know how to take advantage of the opportunities presented and minimize the risks, and most importantly the plans you need to put in place to achieve your goals. You will be able to go back each month and analyze the plans to see if you are executing. Are you calculating pot odds before you make the decision to put in your chips?

You may also need to make an investment. There are probably some good books out there on developing business plans. Your company is not a hobby like poker, so you may want to get some professional help. The BTA ( www.bta.org ) offers a business planning workshop and the next session is this April in Phoenix. There are worse places to be in April and the workshop will provide all of the information you need on building a real business plan that you can execute against. Make the investment and stop depending on luck.

Tom Callinan is the founding principal of Strategy Development, a management consulting firm for the technology and outsourcing space and the leader in managed print services (MPS) specializing in business planning, sales effectiveness, advanced sales training, and operational and service improvement (www.strategydevelopment.org). From 1998 - 2005, Callinan was an executive with IKON Office Solutions, most recently vice president and general manager of IKON's largest business unit with revenue of $1.4 billion. Prior to IKON, Callinan was the founder and CEO of Copifax, Inc. Copifax was acquired by IKON in 1997. Callinan graduated with high honors from The Wharton School, University of Pennsylvania. Tom can be reached at callinan@strategydevelopment.org  or 610.527.3317.