The components of your operating plan can vary greatly based on the overall sophistication of your business. Obviously, if you are a startup, you are not going to have reams and reams of operating data in order to base your plan. But, this is not an excuse for not having a thoughtful operating plan.Here are some high-level tips:
1) Documents versus slides - I am really a big fan of writing down your operating plan versus being constrained to slides. I believe that its too easy to hide key operating areas in your plan if you are constrained to slides.
What should you cover? There are several areas that you should cover (whether its in slide or document format), including:
2) Performance review - a breakdown of the first half and the second half of your years performance.
3) Executive summary - provide an overview of momentum opportunities, your strategy for growth, organic initiatives (aka things that you do yourself), operating initiatives, diversification, inorganic, and key risks.
4) Market opportunity assessment - you should be able to show empirically show your growth in three ways: comparing your overall category growth, your addressable category growth (more on identifying your TAM here), as well as your individual company's performance in relation to your category. Net is that you should be able to answer the question whether your company is growing faster than the competition.
5) Competitive landscape - it is always ideal to explain in a summary manner what is the relative performance of the competition from a reach, revenue, and EBTIDA perspective. In addition, it is important to flag how your business is advantaged (and disadvantaged against each competitor).6) Consumer value proposition - you should be able to quantitatively and qualitatively be able to explain why consumers will be buying your service or product versus the competition.
7) Supplier value proposition - one of the key misses that I see in operating plans is that lack of clear thinking around the supply chain math of your service. Especially, if you are an intermediary, you need to be able to clearly and distinctly identify areas in the stack between your service (between the consumer and the core supplier) where you add value or shrink margin. Otherwise, you will inevitably be driven out of the market by your supplier or a better advantaged competitor.
8) Key initiatives for achieving your plan - detail them out in terms of operating initiative that are filtered thru financial, strategic trade-off, option value, and strategic posture. An example is here. Its great to have lots of ideas but its hard to pick big initiatives to focus on that extract the most enterprise value for your company. Most companies absolutely fail at this step.9) Long-term P&L - show your next year's plan with specific key critical success factors that need to happen in order for you to achieve your plans.
10) Address the need to get big - it may not apply to all startups but you may also want to head off discussion with your investors around how you should be making yourself attractive to potential acquirers and partnership roll-up opportunities.
Tis the season for operating planning. Please take this time to think the big thoughts about your business. It will payoff for you and your company.
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