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Business planning is sort of like exercise; you should
do it regularly but it's easy to put off because the benefits are
not immediate.
Business planning helps you focus and grow your business.
A clear, well thought-out business plan is mandatory if you are looking
for a loan or investor. Use the 1-2-3 approach to business planning:
- Take a critical look at your current situation;
- Write down your goals for one year from today; and
- Map out your action plan to achieve your goals on a timeline.
Planning is cheap. Writing a plan:
- Gets your ideas on paper;
- Allows you to examine alternatives;
- Surfaces your assumptions; and
- Enables you to get feedback from others.
Using a timeline helps you prioritize and focus. With a timeline,
- You have a visual framework in which to work;
- You can map out & compare alternative scenarios;
- You can see connections and sequencing of actions; and
- Deliverables and milestones become clear.
Try to put a little fun in the planning process. I suggest thinking of
business planning like planning a vacation. (Your plan should, of course,
include a vacation.) When you plan a vacation, you are constrained by many
factors such as time, money and balancing the competing interests of your
fellow travelers. It's the same with your business plan.
In business, you are constrained by many factors, such as existing customer
commitments, limited time and money. You also have to balance a number
of competing interests and possible routes. Planning lets you map out different
paths on paper and examine the alternatives before making a commitment to
action.
The first step is to take stock of your current situation.
If
you have been in business more than a year, you have some financial results
to examine. Draw a calendar timeline and map out the highlights of each
month for the last twelve months. Include your $ sales for each month
as well as key events. It is a good idea to try and connect your actions
with the results achieved. So, if you ran an ad in January and February,
you may be able to directly relate increased sales in those months to
the ad.
With the calendar timeline, you have a summary picture of your business
operations over a 12-month period on one page. If you add your $ Expenses/month
to this picture, you'll have a rough cut cash flow which will give you
a richer picture with which to work.
CALENDAR TIMELINE - PRIOR YEAR
Jan...Feb...Mar...Apr...May...Jun...Jul...Aug...Sep...Oct...Nov...Dec
Key Events (e.g., ads, promotions, new customers, big projects, good news,
bad news ...)
$ Sales/month
$ Expenses/month
Now, you can stand back and take a critical look at your business to determine
what works and what does not work. This analysis is the foundation for
your plan for next year.
The summary may be sufficient to give you insight into what was effective
and is worth continuing. Or, it may prompt you to ask more detailed financial
questions about your business, such as: costs, overhead, sales per category
or location; how much of your sales was from new customers; how did you
reach your new and repeat customers most effectively?
Another very important piece of information is the profitability of different
parts of your business. There's an old adage that 80% of the profits comes
from 20% of the business. Is this true for your business?
The next step is to determine where you want to go.
This is easier
said than done. Objectives need to be realistic and achievable. Objectives
need to be concrete and measurable. For example, if the objective is to
increase sales 50%, it needs to be stated how that will be achieved. Is
it realistic? It depends. If this year's sales are $240K and the plan
is to achieve $360K next year, this means sales/month on average need
to increase from $20K/month to $30/K month. What would you need to do
to achieve this?
There are a number of possible scenarios that we can plan out and assess.
For instance, we could consider dropping low-end products/services and
concentrating on high $/sale transactions. What are the implications of
this approach? Or, we could go toward a higher volume business and sell
through other channels.
Try mapping out your alternatives on a timeline for the coming
year and see what picture emerges.
It's usually not good for businesses
to shift gears too dramatically without some test marketing and quantification
of the costs and benefits.
CALENDAR TIMELINE - NEXT YEAR
Jan...Feb...Mar...Apr...May...Jun...Jul...Aug...Sep...Oct...Nov...Dec
Key Objectives & Action Plan (e.g., targeted action steps month by
month..)
$ Estimated cost/month
Projected results
Making choices and determining your route.
With your timeline summary of the prior year and your projected timeline(s)
for the coming year, you can make some choices about how you will use
your time and resources. Planning helps you get your ideas out on paper,
surface your assumptions, invite other people to review your ideas
and assumptions and provide feedback. Planning enables you to make
informed choices and, using the timeline, enables you to express your
plan as an action roadmap.
To realize the benefits of planning, like exercise, you must do it
regularly. I recommend at least quarterly reviews as a relatively painless
means of updating your plan to reflect actual experience and changes
in the competitive environment.
Jean D. Sifleet
Attorney & CPA
P.S. Remember -- plan the work -- work the plan -- it's your roadmap. |
