We have all done the 50-page plus business plan, but was it ever used? And did it really help your business grow?
One important thing to remember with any type of plan is planning something doesn’t always make it happen. Significant effort is required in the implementation phase and a plan needs to be reviewed to be successful.
Sadly, many businesses who do plan, don’t update their strategy which results in an out-of-date and redundant plan full of irrelevant targets.
It’s easy to think that spending time working on your business means less income because you’re not working in your business, when in fact the opposite is true.
Why businesses fail or fail to thrive
According to Dun and Bradstreet (2009), businesses fail for the following reasons (in order of impact):
- no business plan
- under-funded
- lack of operating goals
- failure to measure against goals and objectives
- failure to monitor cash flow
- failure to understand industry and target customer
- lacking differentiation
- ineffective marketing
- underestimating competition
- not cost competitive.
Why plan?
As with anything in life, you need to know where you’re going if you want to get there in the shortest possible time and with the least amount of effort.
Unfortunately, it’s almost guaranteed that you will waste precious time and energy and/or money doing things that won’t help you get closer to your goals, if you don’t take the time to plan first.
You have a plan if you can answer these questions in detail:
- Where are you now?
- Where do you want to be?
- How do you get there?
The importance of values
Is your business projecting the culture and shared values that you want it to? If someone asked your customers today what your values are, could they answer? If so, would they get them right?
Take the time to define your commercial values. They might be competence, efficiency, integrity, innovation, fun, competitiveness, responsiveness, creativity, loyalty, tradition, simplicity, stability, progress — the list is endless, but the challenge is to communicate them.
Your values form part of the way your customers see you and the way that you interact with them. They’re one of the foundations of your business brand and help to set you apart from your competitors.
For example, a coffee bar might have quality and efficiency as key values, but how would they communicate this to their customers? They could use a respected brand of coffee beans, train their staff in the correct pouring techniques for different drink types and never leave customers waiting in lines to order or collect their coffee.
Our coffee bar wouldn’t need to have the biggest range, the lowest prices, stay open the longest or use environmentally friendly cups — these would be the domain of competitors communicating values such as variety, competitiveness, availability and responsibility.
It starts to become clear that your business values help to define the specific benefits that customers get from you that they won’t get from your competitors and vice versa.
This narrows the focus for your marketing and communication campaign, meaning that you save time while strengthening your niche.
What sort of things should a business plan?
The list of factors businesses should plan for is endless, including turnover, gross margin (and the difference), type of client, number of hours a week (service), number of orders, number of referrals from advertising/marketing, minimum dollar value for each job, amount of revenue per staff member or percentage of repeat clients.
Your plan will only consist of things that you want to aim for.
In addition, a plan can include big picture goals such as a specified timeline or dollars in the bank before expansion, a takeover or merger and the consideration of the best business model and changes that may be needed to allow for growth.
Setting goals and targets
What made you take that leap away from a 9-5 job and go out on your own? Was it simply to be your own boss, to have a better lifestyle, to make big money, to become famous or well known, to provide competition or to capitalise on a niche?
There are so many reasons why people take the risk to go into business. Now that you are in business, what are you aiming for? When you’re thinking about this question, be realistic, but outrageous.
Don’t be scared to go your own path — don’t get sucked into the rat race of business if it’s not what you personally want.
Growth, expansion and taking on staff are all possible, but you might just want to keep it small and develop a high-margin niche.
What does success look like to you? Take the time to really think about this – not everyone wants to be a millionaire.
You might want more time off, not more money. You might want opportunities to travel with your work or be able to work from home more often.
Remember back to why you went into business in the first place, then look at whether things have turned out the way you anticipated.
Have you lost sight of that original desire in the ‘busy-ness’ of business? Has that original desire been superseded by something else? Don’t forget that it’s your business and make sure it’s delivering, or able to deliver what you really want.
Key indicators
Key indicators are simply measures of performance.
If you want to achieve your goals in business it’s vital to measure your actual performance against planned performance. This allows you to see how you’re tracking and what actions you might need to undertake, or systems to implement to get to your goal(s).
Your key indicators are whatever you (your business) have to measure in order to check whether you’re achieving your specific stated goals.
If it was profit margin you’ll monitor your gross margin, if it was the number of referrals from your website you’ll monitor business acquired from the site by listing a website-specific email for people to use.
Learn to know what the different indicators mean and which ones you need to track to measure your own progress.
There is no point increasing turnover unless you’re also improving your profitability at the same time (measure gross margin percentage).
There’s no point getting great numbers of hits if they don’t drive sales (measure number of referrals) and there’s no point planning to grow in the short-term if you’re low on cash because your accounts receivable average time is too high.
Did you know that inadequate debtor control is one of the most common causes of cash flow problems in small and medium enterprises? To avoid this trap you must set the terms that suit you and teach your clients to live by them.
Monitoring key indicators
Depending on what your key indicators are you’ll need to develop systems that allow you to easily track progress and change.
If it was accounts receivable days then in your accounting package you could create an accounts receivable report quick link.
If it was staff hours spent on specific tasks you’ll need to implement a time-tracking program or clock-on/clock-off system.
You need to monitor your indicators as often as possible. You probably wouldn’t monitor staff hours every hour for instance, but monitor in timeframes that will produce meaningful data.
The benefits of planning
Once you’ve completed your plan you will:
- Have an idea of your business opportunities, threats, strengths and weaknesses.
- Have an inspiring goal that sets the scene for the next 10-30 years of your business.
- Know the area of the market that you want to dominate.
- Have a list of specific one year and three to five year targets to aim for.
- Have identified what actions you need to do to achieve those goals.
- Have identified who needs to undertake those actions.
- Know which numbers you need to keep track of to measure your progress.
- Know that you’re working consistently with your brand and delivering on your brand promises, which will continue to automatically drive customers to your business.
In summary, you will be well on your way to creating a highly profitable and successful business.
Remember to be goal directed in the things you do and don’t spend a lot of time on the things that won’t help you get to your goal(s).
Be brave and bold — you took the biggest risk when you started the business. Now, with simple but thorough planning it’s time to really make it sing.