Business planning helps you focus and grow your business. But, 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.
To develop a clear, well thought-out business plan, use the 1-2-3 approach:
(1) Take a critical look at your current situation;
(2) Write down your goals for one year from today; and,
(3) 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 . . . )
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
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 Sifleet is a practical and experienced business attorney whose career spans many years in large multi-national corporations and includes three successful entrepreneurial ventures. Jean has extensive experience in dealing with intellectual property matters in the large and small companies and as a small business owner. She has authored numerous books and publications on avoiding legal pitfalls in doing business. This article is excerpted from her new book, Advantage IP – Profit from Your Great Ideas (Infinity 2005). For more information, Jean's website is http://www.smartfast.com