What Good Is A Business Plan?

Part 1 of 3

Editor's note: This article is the first in a series of three articles on Business Plans for co-ops.

W hat good is a business plan?
  • Has your co-op ever produced a business plan and then not known what to do with it?
  • Have you seen your co-op's business plan sit on the bookshelf and collect dust?
  • Have you ever wondered exactly what a business plan is for?

The traditional business planning process leaves many people feeling this way. People find themselves wondering what purpose a business plan serves if nobody reads it after it is finished. This often leads to a complete lack of motivation for doing it at all. Why bother if it doesn't really help your co-op?

A different approach

A more constructive approach uses business planning to improve a cooperative. The business planning process itself then becomes a means of continuous improvement for the organization. This kind of business plan doesn't spend much time on the shelf because it is frequently being used, tested, and adapted.

This approach seeks to improve the quality of the co-op's goods and services. It teaches that if you improve how the work gets done, you will improve what gets done. In other words, it tries to improve the systems that produce the goods and services, rather thanjust improving the output.

But what is a system? A system can be defined as a series of interrelated processes or an established method of doing something. An example might be your co-op's method for receiving and stocking goods -- this is a system, even if you don't call it that. Think about this for a moment, and you will see that practically everything you do is part of a system. We have identified eight "key systems" that most retail co-ops use: operations, finance, personnel, organization, planning, purchasing, management, and marketing.

What the customer ultimately gets is primarily determined by the effectiveness of the systems that deliver the goods or services to them. Much of your business planning process will be focused on identifying customer needs and improving the systems that are used to satisfy those needs and make your customers happy.

Our business planning approach suggests that you analyze your coop's key systems, then determine how to improve them. Analysis of these systems is conducted by teams formed specifically for this purpose. After using several techniques and exercises to analyze its assigned key system, a team develops objectives and action plans designed to carry out the needed improvements. Writing a business plan consists of analyzing your co-op's key systems and developing plans to improve them.

"Our business planning approach consists of analyzing your co-op's key systems and developing plans to improve them."

Planning should be centered around defining your customers and what they want. The groundwork that should be done prior to analyzing your co-op's systems includes writing your mission and strategy statements. Articulating your coop's mission and strategy will help you define your customers, while other exercises will help you find out what they want. This work is vital to being successful in your business.

A how-to manual, Business Planning Guide for Cooperatives, published by Cooperative Development Services, outlines this process. It provides step-by-step instructions for analyzing and improving systems in retail co-ops (each key system is dealt with in a separate chapter). It is designed as a workbook, with the necessary forms provided for the suggested exercises.

Living document

This kind of business plan is a "living document" that is meant to be updated and modified as circumstances change. If certain projections turn out to be inaccurate, for example, you can modify your objectives and action plans to reflect the new developments. In fact, next year's business plan should use this year's as a database and starting point. The manual suggests you keep your business plan in a threering binder to facilitate easy access.

This document is for internal use only, however. This business plan is for you to use to improve your co-op. It will not conform with most financial institutions' definitions of a business plan. Most banks, for example, want the traditional kind of business plan. If you plan to approach a bank for financing, you must conform to the bank's requirements for financing applications.

Business planning teams

As noted above, each of the key systems is analyzed by what is called a "business planning team." A business planning team is a group of coop employees (usually no more than five) who work together to analyze one particular key system.

These teams should be composed of the workers who are closely involved with a system, and the people affected by their work. For example, the team assigned to the purchasing system should include the buyers (those who place orders with vendors), as well as the workers who receive and put away those orders and pay the invoices for the purchased goods. Because these workers also use the purchasing system, their input into improving it can be very valuable.

Some people believe that only management should be involved in planning. We have found, however,that involving other staff in this process has important advantages. One of the most significant is that the team approach gets people at the lower levels of the organizational hierarchy more involved in the business. The opportunity to participate in planning and decision-making can significantly improve an individual's morale and co-op commitment.

In addition, we suggest you use the business planning process as a way for everyone on your staff to learn more about your co-op, your industry, your competitors, and your customers. The process of developing a business plan can bring a lot of important knowledge to a co-op!

Roles and responsibilities

The store manager acts as the coordinator of the business planning process. It is the manager's responsibility to effectively oversee the process. S/he should organize the business planning teams, periodically review their work, and make sure the process is moving forward and is completed on time.

The board of directors is responsible for reviewing drafts of the business plan and formally adopting the final version. A few months before the final draft is completed, the board should review the progress and offer feedback. The board also has a role in the beginning of the business planning process, when it should meet with management and staff to review the basic mission and strategy of the cooperative. Future Cooperative Grocer articles will explain this process in greater detail.

Five useful exercises

Some of the exercises outlined in the key systems chapters of the manual are individualized for that particular system. Certain exercises are only useful, for example, when examining the operations system.

There are five exercises, however, that are recommended as part of the analysis of all key systems. Future articles will explain how these exercises should be conducted. For now, here are short definitions:

1. The first one is flowcharting. A flow chart is simply a graphic representation of the system being analyzed. It should be the first exercise conducted by the team in their analysis. As a simple way to visualize how a system works, it helps identify trouble spots in a system.

2. A cause and effect chart is a good technique to use after you have flowcharted a system. It will help identify possible root causes or problems in a system by illustrating causal relationships between factors.

3. An Internal customer analysis solicits input from people who use the system and provides ideas for improving the system. An "internal customer" is someone who is part of the system you are studying (for example, in the purchasing system, the bookkeeper is an internal customer ofthe receiving clerk, because she receives the receiving clerk's paperwork, and must use it to do her job).

4. The SWOT analysis identifies the strengths, weaknesses, opportunities, and threats your co-op faces. This is a good way to bring together all you have learned in your previous analyses.

5. The last exercise develops objectives and action plans to respond to the issues you have identified in the analysis of your system. It focuses the team on constructive ways to respond to these issues, and provides concrete steps for improvement of the system.

Future articles will explain how to conduct these exercises while analyzing your key systems. In addition, we will discuss case studies in which these exercises (and others) were used successfully.

This article is the first in a series based on the workbook, Business Planning Guide for Cooperatives, published in 1991 by Cooperative Development Services and written by Mary Myers and Walden Swanson.

See other articles from this issue: #038 January - February - 1992