Existing Companies Need Planning Too
Does your company have an annual strategic plan? Does your company develop an annual plan to polish its strategy, focus on main priorities, and manage its cash?
Every business needs to plan
Unfortunately, there is a myth that associates planning with start-ups. That’s particularly common in the United States. Because of that myth, inertia, putting out fires, and related reasons, a lot of businesses miss out on the opportunity to manage themselves a bit better.
Unfortunately, there is a myth that associates planning with start-ups. That’s particularly common in the United States. Because of that myth, inertia, putting out fires, and related reasons, a lot of businesses miss out on the opportunity to manage themselves a bit better.
As an owner or manager of a small or medium business, can you afford not to plan? Do you leave the annual plan for the large businesses, and let your business depend on reacting to events? Or do you want to plan for priorities, and manage your growth proactively. That’s a leading question, of course, the answer is obvious.
You could call it strategic plan, annual plan, operational plan; the name doesn’t matter as much as the management of it. While these kinds of plans are common in larger enterprises, they are surprisingly rare in small and medium business.
Benefits
- Guide your growth: Your business will grow or not depending on a lot of different factors, including overall economic trends, location, specific market needs, hard work, and other elements. Businesses that plan do it to guide and influence their growth, so that they move proactively towards defined objectives rather than just reacting to business events.
- Manage priorities: Strategy is focus. Allocate resources where they will do the most good. Work towards your strengths and away from your weaknesses. Develop the company by doing the most important things, according to your long-term objectives.
- Assign responsibilities: A plan gives you a place to develop organizational responsibilities.
- Track progress: Think of a plan as a business positioning device. With a plan, you can track your progress towards goals, measure results, and manage the business. Without a plan, how do you tell whether or not you are moving in the right direction. What do you measure against?
- Plan for cash: Profits are not cash, and cash is not intuitive. You spend cash, you don’t spend profits. However, businesses don’t plan well for cash, and they need to. That may not sound strategic, but it is. It is also the core of an operations plan, and an annual plan. Whatever else, you have to plan for cash.
Main elements
Regardless of the name you use, strategic plan or annual plan or operational plan, the vast majority of these plans include some or all of the following main points:
Regardless of the name you use, strategic plan or annual plan or operational plan, the vast majority of these plans include some or all of the following main points:
- High-level strategy: Strategy is focus. It guides your growth. Strategy assigns priorities. Of the whole range of possible market segments, and the whole range of services and possible sales and marketing activities, which are your main priorities? Strategy is often a matter of understanding when and how to say no, selecting opportunities.
- Specific responsibilities, activities, deadlines, and budgets: We call these milestones. They are the bricks and mortar of business planning, critical to business success.
- Financial plan: One of the most important gains from an annual plan is the financial plan, which of course hinges on cash flow. A business needs to stress its priorities by making sure they get the right amount of money. Growth costs cash.
Business Startup Strategy
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I strongly suggest that would-be entrepreneurs do a business plan. As a result of completing the plan you will be much better prepared and know whether or not your business idea is feasible. Try the following article for a short-cut. However, I caution you on following a short-cut unless you have substantial experience or knowledge about your area. Proceed with caution without a business plan!
How is your business unique, and why will your goods or services appeal to customers? What are the primary differences between your company and your competitors? What are the driving factors to choose your business over another?
In other words, what is the underlying reason a customer would do business with your company?
1) Define Your Business and Vision
Defining your vision is important. It will become the driving force of your business. Here are questions that will help you clarify your vision:
Who is the customer?What business are you in?What do you sell (product/service)?What is your plan for growth?What is your primary competitive advantage?
2) Write Down Your Goals
Create a list of goals with a brief description of action items. If your business is a start up, you will want to put more effort into your short-term goals. Often a new business concept must go through a period of research and development before the outcome can be accurately predicted for longer time frames.
Create two sets of goals:
- Short term: range from six to 12 months.
- Long term: can be two to five years.
Explain, as specifically as possible, what you want to achieve. Start with your personal goals. Then list your business goals. Answer these questions:
- As the owner of this business, what do you want to achieve?
- How large or small do you want this business to be?
- Do you want to include family in your business?
- Staff: do you desire to provide employment, or perhaps, you have a strong opinion on not wanting to manage people.
- Is there some cause that you want the business to address?
- Describe the quality, quantity and/or service and customer satisfaction levels.
- How would you describe your primary competitive advantage?
- How do you see the business making a difference in the lives of your customers?
3) Understand Your Customer
It is not realistic to expect you can meet the needs of everyone, no business can. Choose your target market carefully. Overlook this area, and I guarantee you will be disappointed with the performance of your business. Get this right and you will be more than pleased with the results.
- Needs: what unmet needs do your prospective customers have? How does your business meet those needs? It is usually something the customer does not have or a need that is not currently being met. Identify those unmet needs.
- Wants: think of this as your customer’s desire or wish. It can also be a deficiency.
- Problems: remember people buy things to solve a specific problem. What problems does your product or service solve?
- Perceptions: what are the negative and positive perceptions that customers have about you, your profession and its products or services? Identify both the negative and positive consequences. You will be able to use what you learn when you start marketing and promoting your business.
4) Learn From Your Competition
You can learn a lot about your business and customers by looking at how your competitors do business. Here are some questions to help you learn from your competition and focus on your customer:
- What do you know about your target market?
- What competitors do you have?
- How are competitors approaching the market?
- What are the competitor’s weaknesses and strengths?
- How can you improve upon the competition’s approach?
- What are the lifestyles, demographics and psychographics of your ideal customer?
5) Financial Matters
How will you make money? What is your break-even point? How much profit potential does your business have? Take the time to invest in preparing financial projections.
These projections should take into account the collection period for your accounts receivables (outstanding customer accounts) as well as the payment terms for your suppliers. For example, you may pay your bills in 30 days, but have to wait 45-60 days to get paid from your customers.
A cash flow projection will show you how much working capital you will need during those “gaps” in your cash position.
I recommend thinking about these six key areas:
- Start up Investment
- Assumptions
- Running Monthly Overhead
- Streamlined Sales Forecast
- Cumulative Cash
- Break-even
6) Identify Your Marketing Strategy
There are four steps to creating a marketing strategy for your business:
- Identify All Target Markets: define WHO is your ideal customer or target market. Most companies experience 80% of their business from 20% of their customers. It makes sense then to direct your time and energy toward those customers who are most important.
- Qualify the Best Target Markets: the purpose of this step is to further qualify and determine which customer profile meets the best odds of success. The strategy is to position your business at the same level as the majority of the buyers you are targeting. It is critical to figure out who your best customers are and how to best position your company in the marketplace.
- Identify Tools, Strategies and Methods: a market you cannot access is a market you cannot serve. Marketing is the process of finding, communicating and educating your primary market about your products and services. Choose a combination of tools and strategies, that when combined, increase your odds of success.
- Test Marketing Strategy and Tools: the assumptions we do not verify are typically the ones that have the potential to create business problems. Take the time to test all business assumptions, especially when you are making major expenditures.
