Business Planning The first duty of a business is to show a healthy and consistent profit. Without profit there is no business. Without business and economic activity there is no community. It is important for any business, however small, to know what it is doing, why it is doing it and where it is going. Business planning is essential for this. Failing to plan means planning to fail. What is a business plan? Why write a business plan in the first place? A good, well-run business will be fully-costed and risk-based, with objectives and milestones supporting the strategic vision of the owners and investors. As each year goes by, the results are checked against the plan and the plan adjusted to changing circumstances and results. Contact us for a complimentary no-obligation review meeting.
A good business plan has the following ingredients: 1. Strategic Vision What is a strategic vision? It is a simple statement of intent. It's where you see yourself and the business in the future. A good example might be: "Acme Corporation will become the supplier of choice and achieve at least 65% share of the regional market within 5 years, with minimum pre-tax profits of 15%". From this vision, this statement of intent, a business plan can be developed to achieve it. One of the features of this vision is that it can be measured and monitored.
Many small businesses do not have a business plan of any kind. Any vision that may once have fired the owner with enthusiasm at the startup has been lost or radically altered by the daily grind. The disappointments, frustrations and setbacks of driving the business take their toll and any long term ambition is lost. The vision becomes blurred and there is nothing against which to measure progress. Write down your vision and the business plan will follow. The operational objectives and milestones in the business plan will soon tell you if the vision is being achieved and show you the successes and those areas that might need some attention. 2. Realistic Finances Realistic finances throw the cold light of day on all business plans. Realistic finances means ensuring the correct level of investment to achieve consistent growth and profits. Is the market going to allow you to grow your sales, and hence revenues, quickly enough to fund your activities and the growth you desire? Are the profit margins acceptable? Are your overheads under control and is your cash-flow sufficient to cover your outgoings?
It is quite often necessary to carry out a risk analysis of what you plan to do. Under-capitalisation is frequently a problem in a small business. Other problems can eat up the cash faster than you can earn it. The financial risks and threats to the plan need to be weighed and balanced against the expected gains. This is why a good, well-run business will have a fully-costed, risk-based, three-year rolling business plan. 3. Operational Efficiency & Flexibility The Operations side of the plan includes every conceivable activity that takes place within the business, from Sales and Marketing to Manufacturing, from Engineering to Administration, and so on... that's why we need efficiency and flexibility.
All business is dependent on teamwork for success, take the case of the donkey and the driver. The donkey can't do effective work unless the driver/loader is trained and knowledgeable about his part in the overall business. Unless the overall business is written down, and the individual actions and responsibilities described, no-one can be effective in a consistent way. Someone should have told the driver about how to balance a load, not to mention the capabilities of the average donkey! Sometimes it is necesary to invest in the business and buy a second donkey. At other times it can be enough to redistribute the load. A good business plan should be specific about what is expected of everyone in the normal circumstances of their job. Milestones and achievement levels need to be written into the plan. In this way it can be used as both a measure of company performance and as a source of corporate direction and discipline, to keep everyone's mind on the outcome and redirect efforts appropriately. A good business plan is also a good source document in establishing the training requirements of the organisation. A good operations manual will contain all this and a common set of procedures and standards, based on legislation, industry and professional requirements and best practice within the industry. Training is often neglected, but this is a false economy and can carry its own penalties. People need training. The donkey agrees! 4. Effective Communications What does "effective communications" mean? Quite simply, it means that instructions and information are heard, understood and acted upon consistently by all concerned in the project or business. As you may well imagine, this requires discipline within the workforce. It is also a matter of culture and ethics. Effective communications in any group of more than five or so employees will usually need a set of rules to standardise the transmission of business information—so that misunderstandings are kept to a minium. Employees need to know what they are doing for operational efficiency, and follow the maxim: do it right, do it once. Every time something has to be done twice or three times, it eats up any potential profits. Poor communications will guarantee poor profit margins. Effective Communications are both internal and external. Customers and suppliers need to be kept in the loop to ensure smooth relationships and keep up the quality and reputation of the business, its goods and services. Any good business plan will have a Communications Strategy to ensure that Operational Efficiency and Flexibility are possible. |
