Enormous % of businesses are operating without a plan, which is an incredibly risky exercise, especially so in today's fast changing environment of disruption and technology.
For many years, we've been benchmarking business owners on the challenges that keep them awake at night. There is a common finding from survey to survey.
And many of the top issues can be solved by planning your work and working your plan.
In this short article, I'm going to share 5 things you must document in your business plan for your business. Don't risk operating without one. After all, you couldn't build a house without a plan, so why would someone think they can build a business without a plan?
It is easy to get dispersed in business today. You are hit with thousands of messages – do this, do that, market globally but focus on your niche, set up social media, make sure you are selling online, pay your staff better etc.
To lift your business above the noise, you have to be able to ignore the unimportant and select out the critical must do things in your business. So here are the five things:
- Know your goals and aspirations – where would you like your business to be in an ideal scene. Having a goal in mind, and preferably written down somewhere you can see it all the time is a very important guide post to operating your business. Do you want your business to be the same size but more profitable? do you want to grow it ten times in size? Do you want to expand it overseas? Or do you just want to be the biggest in your suburb? A client of ours decided many years ago that he wanted to grow, but not at the expense of profit, so he never chases the price sensitive end of the market, nor does he headline 'discounts' all the time like a lot of retailers. He focuses on providing high quality, high value and great service and charges a premium for this.
- Know your customers – with less than 20% of businesses in our benchmark surveying their customers in the last 12 months, we are left wondering how they decide what their customers need. It is critical in your business plan to have a detailed and careful study of your target audience, niche or customer group that shows what they need and want, and how you are orienting your business operations to match and or exceed these needs. Otherwise you are operating on assumptions. In a new business, you need to do two things, first survey a range of potential customer groups to find out which one most needs your product or service, and second, detailed surveys with the chosen target audience to get a real sense of the value they place on their needs and wants so you know what to focus on. No point having the most beautiful packaging in the world if your client case prefers a zero packaging, environmentally friendly offering.
- Know your numbers – cashflow is probably the biggest issue that business owners face in Australia. But cashflow is a symptom of other problems in a business like a product or service that isn't priced with enough profit/margin, or late invoicing or poor debt collection or a company that doesn't have a quality management process. In a new business, you must be certain that you have priced a product/service at a point that your target will value, and that you can make money from. Also, you'll need to know how much money you need to run the business and have setaside reserves to pay yourself until the business starts making a profit.
- Have a Plan B – “The plans of mice and men oft go astray” – wise words indeed from Robert Burns – the famous Scottish poet – who could have been a business advisor!! In a fast-changing world, new competitors can pop up quickly and change the way a market segment operates. So make sure in your business plan you have options detailed out in case certain events arise. What would happen if interest rates went up? What if a new competitor launched in your suburb? What if your supplier went out of business? Examine the risks and opportunities and have multiple ways of responding proactively to these.
- Systems – even in a new business you are going to need systems. So make sure you make your life easy and put in place good systems and procedures right up front – have a good book keeping software, have a work in progress document, have policies on your payment terms etc etc. Much of business is about repeatable systems. You don't want to have to keep doing things differently every time you start or not having consistency in how your staff service clients. Get systems in place
We've examined five things today that you can put in a business plan. Above these areas, of course it is critical to have a business plan. If you don't have one, and you're about to start a business do this first. Stop everything else until you've documented your goals, plans, strategies, customer research and plan B. There are many good business plan templates for small business available.
Articles In This Series
1: Before you ask How to start a business ask Why
2: Five tips on starting a business
3: How to set and reach your business goals
4: Plan your work, work your plan
5: Customers aren’t always right (but they are always there)
6: Climb a tree and holler (always be promoting your business, no matter what)