Wednesday 25 May 2011

Start building your Ark before it rains - a practical view of business planning

Business success is all about preparation.

If a business plan is so important, why do so few people actually do it?

I see many small business owners and ask them about their business plans. 9 out of 10 admit that either they haven’t got one, or they had one somewhere, but it’s in a cupboard and they haven’t seen it since it was written a few years ago. But would you set off on a journey without at least thinking where am I going and how am I going to get there?

They usually come out with a standard range of reasons why they don’t use this essential business tool.

“I’m too busy.”
“I don’t need to borrow any money so I’ve never thought about it.”
“My business changes too quickly to plan ahead.”
“I don’t want to grow my business; everything’s fine the way it is.”
 “I can’t imagine where we’ll be in six months time, never mind 5 years!”
“I’ll be lucky to be in business in six months time, never mind 5 years!”

These business owners are usually talking to me because they need help in some part of their business. I meet a fair few ‘busy fools’ who, although working over 80 hours a week, don’t see that this isn’t helping their business grow. The usual problems involve cash flow, expanding the business but retaining control, finding a work/life balance, managing performance or production issues, wondering how to retire, wondering how to get started, falling revenues and reducing numbers of customers, or rapid growth and too many customers. Or it may be a combination of all of these things! 

Well, with a bit of forward thinking, a lot of these problems could have been anticipated, planned for, acted upon and wouldn’t be problems at all.

In ‘Business Plans for Dummies’, by Paul Tiffany, a study states that companies with just the strategic section of a business plan have 50% more profits and revenue than non-planning businesses. And another survey found that those companies who build their business plan into their everyday working lives enjoy 63% higher revenue growth and 100% more profit.

6 important functions of a business plan:

  1. It’s a route plan, or blueprint, to a realistic idea of where you want your business to go. For start up businesses, this is more than just deciding on the name and the colour of your logo!
  2. To clarify your ideas and ask questions about your business, market and customers. Really think about your vision, your values and your mission. Identify your customers, analyse their needs and purchasing or decision making processes. What is happening in your area, industry and the marketplace.
  3. An operational tool to help you manage your work, your team and your business. Put it into action – don’t put it in a drawer.
  4. A financial essential – not just for lenders or banks, but to determine how much money you need to start up, pay yourself and your team, invest for the future, and remain in business during hard times. Anticipating cash flow and capital requirements allow ensure you’re ready for that big tax bill in time, or for that great opportunity that comes your way.
  5. A benchmark to measure your success against, and organise future activities to move the business forward. Objectively consider your company’s strengths and weaknesses, and look at your competitors and the overall economy.
  6. For future growth and success you need a detailed guide of what you’re going to do. Break down objectives into annual milestones, look at your product or service life cycle, and investigate new products or new markets. And, yes, allowing for flexibility, a five year plan really is a good idea.

And, as the story below illustrates, a business plan can ensure your success and profitability for the future. After all, it wasn’t raining when Noah started building his ark…

An unusual business plan for future sales growth…
A new shift manager was being shown around the Latex factor where he had just started work. The plant manufactures various latex products, and has a reputation for using cutting edge technology in their manufacturing process.
On one side of the building, the factory makes baby bottle nipples. The machine makes a loud "hiss-pop" noise, and the shift manager asks his tour guide what it's doing. "As the rubber is being injected into the mould, it makes a hiss noise." he says "The popping sound is from needle poking a hole in the end of the nipple."
On the other side of the building, the two men look at the condom making machine. This machine makes a "hiss.. hiss... hiss-pop" sound during the manufacturing process. "Wait a second," the future shift manager says, "I know what the hiss, hiss is... but what's with the 'pop' noise every once in a while?"
"Oh, that, ha ha... It's the same as the baby bottle nipple process." says the guide... "It pokes a hole in every third condom."
"But that can't be good for the condoms!" the observant shift manager replied.
"Nah, but it's really good for the baby bottle nipple business!"
If you would like help in writing or reviewing a business plan, contact Blue Box Management Consultants for a free face to face appointment to discuss your needs.

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