BARRIERS TO BUSINESS GROWTH 2 – Planning, The Key to Success

The essential guide to Starting Up & Growing your Business

Barrier 2 – Planning – The Key to Success

 “Companies don’t fail because they grow.

They fail because they don’t plan their growth.” 

Philip Orsini

Can you, hand on heart, produce your WRITTEN business plan or forecast for your next financial or calendar year?  Your route map of how your business will develop and grow over the next 12 months?  If current statistics are anything to go by, 25% of start-up entrepreneurs don’t think through and document their business plan and strategy.  Little wonder then, that so many small businesses don’t make it through their first year or two.

The Journey

Lets expand on the opportunity you may be missing out on through lack of planning.  Using the example of making the journey from London to John O’Groats – a distant point on the map – you probably want to take the fastest, most economical route and mode of transport possible.  To do this, most of us consult our Sat Nav’s for distances and driving times (approximately 12 hours and 685 miles) and start reviewing the options of best strategy to get from A to B.

You ponder and consider the convenience of driving, or the less stressful idea of taking the train or plane.  You compare the costs of a couple of tanks of fuel versus public transport fares.  You’d factor in having to stop at the motorway service stations along the way to feed and water everyone over 12 hours (or the cost of a hotel stop over to break the journey up) versus sad looking Train sandwiches or the cold bench in a deserted airport.  And after much deliberation you’d take an informed decision.

The Opportunity

What you probably wouldn’t do is just set off in your car, with no previous research, drive in a zig-zag motion hoping the North Star will appear on the horizon, in the hope of finally hitting your destination through random guesswork, having travelled triple the distance and in double the time needed.

Yes, you reach your destination, but at what price – time, energy, stress, fuel, wear and tear on your vehicle, as well as your frazzled nerves.  The opportunity was there to do the journey in 12 hours, via 685 miles, and a lot less cost had you just planned the route.

And so it is for business.  Strategic plans are your road map to growth, containing measurable objectives, which can be broken down into small manageable chunks of annual or even monthly strategies and a detailed action plan.  If you start to deviate, if you’re keeping tabs on where you are against the plan, you can make regular small adjustments to stay on track.

The Detail 

So what should a good business plan look like.  You only have to google “business plan template” to access a myriad of free forms, tips and guidelines so you don’t have to reinvent the wheel.  If your business plan doesn’t answer the key question of “why will your business succeed when so many others fail?” then you need to look more closely at detail.  Here are the key elements to get you started.

1. Executive Summary & Your Pitch

Think Dragons Den here.  All those times you’ve sat screaming at the TV screen because the prospects don’t know how to pitch their business. Work on your summary, business aims, and a high level financial summary.

2. Expertise and Training

Why do you want to run your own business, what’s your experience and skills you bring to the business.  What training would you (or your employees) need to fulfill the business needs.

3. Your Product or Service

What are you going to sell, the variety and mix of your offerings, how you will introduce them to the market, production costs, legal requirements (food industry for example is highly regulated).

4. Your Customers

Can you describe a typical customer or define your target market.  Outline where they’re based, what prompts them to buy your products, do you  have existing customers you can further promote to.

5. Market Research

Market research can be done from your desk (internet), but don’t forget your existing clients for field research, or even gathering groups of people in your target market for focus group.  Plan these in and remember the cost implications.

6. Marketing Strategy

Define what you are going to do, why you choose the marketing method you decide on (eg. advertising in magazines, online websites, awareness campaigns) and how much this will cost.  Marketing can be the biggest cost when starting up and growing a small business.

7. Your Competitors

Have you looked at what your competitors do, where they are, how big they are. Draw up a SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) comparing their products and service offerings, pricing, quality etc with your own.  How could you attract their clients to choose you over them?

8. Operating Model

Your business plan needs to detail your production methods or service delivery modus operandi.  Map out the steps in your process from first point of sale to receiving your clients payments – suppliers, equipment, premises, phones, internet, vehicles – are all operational and logistical considerations.  Don’t forget to cost for management and staff – you can’t do it all on your own.

9. Cost & Pricing Strategy

This is where many start up and small businesses make fundamental errors. You have to calculate the unit cost of your product, or service provision.  Then factor in the overheads – those other costs you can’t run the business without (like the roof over your head, and your salary) to ensure your planned profit margin adds in sufficient mark up on the unit cost to ensure a viable business.

10. Financial Forecast

This is where you bring all your plans together to show the financial reality of your proposals.  The Sales and Cost Forecast is the most obvious, but also plan your own personal survival budget.  A cashflow forecast determines at what point you can afford to invest in certain areas, maybe new equipment, better packaging, more staff etc, and a cost table of each of your products will clarify how you arrived at the cost per unit, what was included and how you worked it out.

11. Plan B (for Back-up)

Not many businesses think of this, but spend some time considering your short and long term plans, and what your Plan B is if things don’t work out exactly how you hoped they would.  Build in some contingencies, and think through the potential risks and ways to mitigate against them.

This may appear an onerous task but remember it’s short term pain for long term gain.  Going back to the statistics, rest assured that owner-managed businesses with business plans perform much better than those that don’t, and show superior growth in both sales and profit.  Good luck!!

Next Week

Barrier 3 – how the Wrong Objectives can rapidly cause a business to decline

Further reading

If you’d like to read more about this topic I recommend the following article.

Poor Planning Could cost UK businesses dearly this year – Small Business News