Introducing Lean Planning: How to Plan Less and Grow Faster
Starting your own business can be a very challenging task because it requires that every piece of the puzzle fit perfectly with each other.
And even if that is the case, there is still the question of maintaining the business after it is successfully started, which is no easy task.
One of the crucial puzzle parts is, of course, your personal business plan.
But, since the business environment nowadays is very dynamic, businesses grow and fall fast and even the slightest change can cause an avalanche if you, as a company, don’t adapt in an adequate way.
And changing the business plan to adapt to those changes can be very tiring and sometimes hard.
That’s why we are here today, to introduce you to one very simple, but also very effective way that could allow your business adapt to the ever-changing environment and help you grow it in a fast and stable fashion.
So, today we are going to teach you what ‘Lean Planning’ is, explain why it is so popular and walk you through the entire lean planning process.
Without any further due, let’s start!
WHAT IS LEAN PLANNING?
Before we dive into explaining the process itself, let’s define what lean planning actually is, so you would have a general idea of what are we talking about here.
As the name itself suggests, lean planning is a planning process used in business to help you build, maintain and adjust a stable business strategy.
It is not one very large document, like a business plan is and that is why it is a bit easier to adjust it to fit other changes in your business surrounding.
WHY PEOPLE LIKE LEAN PLANNING?
Lean planning is very popular amongst both new and already established businesses.
You may ask why is that?
Well, let’s find out!
- First of all, the lean planning process is much faster than its traditional rival, business planning. You can basically have the first initial sketch of a lean plan in less than a half an hour, while it would take you much more time to develop the basics for a business plan.
- Lean plans are much easier to update and adjust them to the changing conditions in your surrounding business environment, which helps your company adapt to those changes much faster.
- Lean planning is very compendious and precise because it requires you to be very precise about your ideas. That leads to the situation where there are only the cores of every idea present on the paper, which makes it much easier to elaborate.
LEAN PLANNING PROCESS
Now that we defined the basics of lean planning and explained why it is so popular method of planning and how it can be used to help you start and maintain your current business, let us get into the core of everything and explain lean planning process step by step.
Basically, there are 4 main steps to consider when talking about lean planning process:
- Building a Lean Plan
- Test Phase
- Checking the Results
- Revising the Plan
All of these steps are very important, so we will explain each and every one of them in detail, so you would get the whole picture of the entire lean planning process.
This webinar about Lean Business Planning is very detailed, so make sure to check it out if you are interested.
1. Creating a Lean Plan
As with everything you do, the first logical step is to create a plan. Lean planning is not different. Before you get on with your plan, first you need to make one.
One of the things that makes lean planning much easier than making a business plan is the fact that you don’t need to make dozens of pages filled with numbers and predictions, but instead you can keep it short and simple, much like writing some useful idea you got or overheard on a piece of paper that is available to you or even a napkin in a bar or restaurant.
So, the first step is to basically write your ideas and group them together, in order for you to be able to imagine every piece of information interacting with others, which would help you imagine the whole situation and that would give you some idea whether the thing you had in mind would actually work or not.
When you do this, you will cover four respected fields and answer some questions about them.
Those areas are:
- Strategy – which depicts what exactly you are going to do with your ideas;
- Tactics – which would answer the question of how you are going to do what you intended;
- Schedule – helps you divide responsibilities if there are many, by stating who will do what and when they will do it;
- Business model – which would tell you how you are going to make the money to do what you had intended to do.
What you are trying to do here is, basically, apply “the pitch”, which is a summary of the entire business idea you have put on one page.
That would give you the ability to look at the basic concept of all the ideas you have and is also very easily shared with other people in case you want to find some partners.
Now, let us get into an even more detailed analysis of this first step.
Every business needs a good business strategy in order to become successful.
By defining a strategy, you would define who you are as a company, what would be your mission and vision or, in other words, what are you going to do.
Wise men say that every business strategy needs to contain five key ingredients:
- Identity – one of the most important things every successful company has is its own business identity, which defines what your company intends to do and what kind of company you want to be. For example, IKEA is known as the company that was founded so everyone, even not so wealthy people, could afford quality furniture.
- Problem – closely related to identity, problem means something that you are trying to solve, the reason you decided to do what you did. Like in the previous example, the problem was that not everyone was able to afford furniture at some normal price.
- Solution – every problem needs a solution, right? So, this means something you intend to do in order to solve the problem at hand. IKEA’s founder Ingvar Kamprad had asked himself what could he do to solve the problem about too expensive furniture? And the solution was simple, just build a company that would produce cheaper furniture!
- Market – of course, creating new products is useless if you don’t have a customer to who you would sell them to. That’s why it is important to analyze the market and select your targeted market area, so you could define what kinds of customers you want to have and whether there are enough customers of that type out there on the market, so you could maintain a successful business.
- Competition – now, if you got this idea, you might ask yourself whether someone else had the same thing in mind. The market analysis could help you with checking the market and seeing who are your competitors and what can you do to make yourself be different and better than them, or whether it is actually a good idea to target that market if the competition is too fierce.
When you get your business strategy set, you will have to think about how to make it happen, what tools, resources, and channels to use.
All that is part of creating good tactical plans.
Some of the main tactics you want to include here are:
- Sales channels – you need to think about how you are going to sell your products. Whether you want to do it on the internet or perhaps use traditional means, like renting your own place for a store, or even both. Are you going to need the distributors or not? All these questions should be answered while deciding about tactics.
- Marketing – in order for you to get some customers, you will have to do some activities related to marketing. So, you will have to decide what those activities would be. Whether you want to use traditional marketing means, such as flyers and prospects or modern ones, like social media, all that needs to be discussed and worked on as a part of tactics.
- Resources – every business needs a good amount of capital in order for it to function properly. Here, you will have to decide how to acquire some resources that you may need, whether you want to partner up with some companies or buy a license which would allow you to use certain intellectual property.
- Teams – one of the key features of any successful business is a very well-crafted team. It is very important to have a group of people that could work together in order to achieve mutual goals and help the company grow faster. When you think about the team, try creating a list of people that could potentially be of great help in certain key areas of your business.
One very important thing in every business is good organization and commitment.
When thinking about creating a good lean plan, it is crucial to set some personal goals and create a list of everything that needs to be done and the means you would need to do those things.
It is much easier to function as a company if you have things like milestones, available budget and some tasks and dates set.
Some of the most important factors to consider here are:
- Plan and test – before you get on with your idea, you should try creating a simple plan and test the idea you had on some potential customers. That would help you check if your idea could actually be turned into a profitable business.
- Tasking – it would be a very good idea to create a list of tasks that you need to achieve in order for you to set up your business. That could include things like getting a certain license, dates or even renting some place for your shop.
- Checking the plan – one of the most important things to consider here is revising your previously set plans. Like we had said before, the modern business environment is very dynamic, so things change fast and you need to update your plans according to those changes. Plan revision could help you check what has been done, what is working perfectly and what’s not, what things you could change etc.
You should note one thing here, which is that your schedule might be subjected to changes over time, so you shouldn’t try to spend too much time on creating that first schedule and making it too detailed.
The better thing to do is just plan a few steps ahead and adapt to the changes.
d. Business Model
It is easy to plan ahead and think of new ideas when money factor is not included in the equation, but when you do that, then things become much harder to organize and plan.
The business model is there to show you and others how would you make money. It is very simple for most companies, you either sell your products or offer your services to a targeted group of customers, which would grant you revenue to cover the expenses.
Since this is not about the business plan, but about lean planning, you shouldn’t focus to make each and every one of the financial forecast.
Instead, you should just try to list and set up what would be your primary source of revenue and what would be your most important expenses.
For example, if your business were a coffee shop, you would probably have a source of revenues, such as:
- Coffee beans
- Milled coffee etc.
And expenses such as:
- Resources etc.
So, you don’t have to make a very detailed list of financial income and expenses, but just a simple list, which would give you the basic idea of how your business would actually work.
2. Testing a Lean Plan
Now that you have successfully created a lean plan, it is time to put it to test.
This phase is one of the most ignored ones, but it shouldn’t be the case since it is also one of the most important steps to take.
People usually just skip this step and go on with starting their business without proper testing.
That is not a good thing. Does the pilot fly the plane straight after it comes out of the factory?
No, it still needs to be tested properly before putting people’s lives in danger.
It is the same in business. You should always try to test your ideas before fully committing to them because a lot of companies that ignore this tend to fail shortly after they started working.
That is why we had said that this step is critical!
‘And how to test my ideas’ – you may ask?
Well, there is no easy way to do this, but the best way is to get out there and just talk to potential customers.
Offer them your products and services and see if they are interested. Some could be, some not.
Try to include questions about how you could improve your products or what would satisfy their wishes.
That way you will get the idea of what your customers prefer, so you would know what kind of products and services to offer.
Apart from that, try testing your tactics, see what works and what doesn’t work.
Which marketing activities are good for you and which are not.
After you have done the testing, you should have the answers to the following questions:
- Do the customers have the same problem you want to solve?
- What is the customers’ opinion of the solution you are ready to offer?
- What would be the best sales channel?
- What marketing activities you should use to attract more customers?
3. Check the Results
After the testing phase, you should check the results, because some things may not be the same as you wanted them to be, so there could be a need to change your plan a bit.
For instance, let’s use the coffee shop example we had mentioned before.
During your testing phase and all the talking you had done with potential customers, you found out that most of the people you interviewed dislike espresso, cappuccino and all similar types of coffee.
Since you had previously included all those things in your initial plan, you will need to adjust it a bit, change the problem and the solution.
Perhaps start a coffee shop where customers can only get black coffee, that could be milled on a place in front of them.
Perhaps even have the whole process of making coffee shown to the public, as it is the case in one cafeteria in Hamburg.
And since this is not a full business plan, it would be much easier to change certain things, include some new ones and adapt your plan to current market conditions.
One thing to note here is that this process is continuous.
You should always try to review things you do, check if they fit well together and change things that don’t work as well as it was intended.
4. Revise the Plan if Needed
And the last step in this process is, of course, the revision of your plan. As we had said, it is important to check the results all the time in case you need to make adjustments, which is usual practice.
When you have all the information about everything that interests you, you should make some adjustments in your initial plan.
Don’t worry, since this is still not a full-fetched business plan, you won’t need to be too detailed about it.
There are several key things to focus here, which are:
- Creating a forecast for sales
- Cash flow
a. Sales Forecast
Creating a forecast for sales – when doing this, try to think and count how many of your products and services you could be able to sell per day, month or year, for instance.
And then include the production costs, so you could decide about the average price range.
For example, how many coffee beans you would need per month, how much milk, for the people who like milk in their coffee, etc.
That would give you a pretty good idea on what kind of budget you would need in order for your business to function without too many issues.
b. Expense Budget
When you create a sales forecast, you will get a rough image of what your initial revenue could be. Therefore, you need to think about all the expenses you might have.
This includes costs like rent, marketing activities, salaries, insurance and other expenses related to your business.
This way you should get the rough sketch of what kind of budget you would need to run your business, which would help you to decide which finance sources you want to use, amongst other things.
c. Cash Flow Forecast
After you have done everything else, it is time to do a financial forecast of your potential cash flow.
That could help you with deciding how much money you would need to start your business and eventually grow it, what kind of financial sources you would want to use for that and what kind of sales you want to have pay-to-get or payment on credit, or even both.
THE NEXT STEP
Now that you have completed your lean planning, there is only one thing to do, which is starting your own business!
Of course, some businesses require you to create your own business plan. In that case, you could just expand what you have already planned by using lean planning.
It would be much easier to do that than to completely do a brand new business plan from scratch. So, we can say that a lean plan can be considered as business plan sketch.
But sometimes, a business plan is not required, in which case, you could just try out your idea and start your own business.
We hope that you enjoyed this detailed guide on lean planning.
We taught you what lean planning is, what kind of activities it requires and how to apply it in order to start your own business or maintain an existing one.
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