3 - How much of a Plan do you need to be successful in business?
Author Gavin Tonks
I am a small business mentor and have workshopped over 2000 entrepreneurs in how to take the steps to owning your own business.
Much is said about business plans and planning, and many business studiously avoid using or even defining these tools, only to burn up and close without reaching their true potential.
Planning and achieving business goals - If you are really serious about your business you must have a plan. You would not think of climbing a mountain without a plan so why make the biggest decision to own and run your own business without a plan?
No business is really successful without a plan. It may not be written down, but it is the discipline for which you achieve the business of success, wealth and sustainability. In business this is called a “strategic plan.”
What is a Strategic Plan?
A strategic plan is the research and the map, you would make, if say you were looking for an address in a strange city and country. I sincerely hope you would not fly, into the country and try and find the place without some sort of plan and budget. So then why do so many people think they are able to run a business this way when they go into business for themselves?
The strategic plan is the map you draw, so everyone knows what page the business is on. It is a guide and the instructions that allow each member of the business to function in a framework, from serving customers to sustained profitability.
The plan is a tried and tested management tool that assists in problem solving and market planning. The guide sets out clearly who you should be targeting for business and how to achieve these targets. Some key focus areas would be for instance,
• How much stock should I have?
• Who is my client and how do I reach them?
• What is the language the business needs to develop to speak to suppliers and customers alike?
These strategies must be backed up by facts, like:-
• How many people can the business sell to?
• Is their sufficient interest in the market for my products, and how do I know this?
This Plan would be supported by answering a number of questions like:-
What is my business vision, and how does the business vision relate to say finance, employees, stock and customer relations?
The business vision must be realistic, with examples like if we can achieve a turnover of R1, 2 million in five years, we will need R800 000.00, unencumbered working capital, where then is this money coming from and how will the business accumulate it?
Then we have many mundane questions which some are-
1 - What do we do best, or better than any one of our competitors, and where do we excel, within the business at what we do?
2 - What is our real, or core business? Do we sell products or services that bring in the profit the business exists on?
3 - Where is our value proposition, why customers support this business and not another business?
4 - What kind of image does the business need to trade and reflect the standards it has adopted, to be relevant to our customers? What is the message we give our clients once they have done business with us?
5 - Who should our customers be, and why?
6 - How big can we get, and where should this business be in 5 years’ time? How much can we realistically get of the current market of our business in Rands / dollars and units?
7 - How many products must we have, in stock and able to sell and deliver / invoice to be profitable and sustainable?
8 - What value do we give in return for the business we get from our customers, suppliers and distributors?
These questions help us to formulate a plan in order to allocate the resources of the company.
The allocation of resources could be staff for instance so questions we would ask are - How many people do we need, and when do we employ them? What skills are required of these people? Or how do we spend the money the business generates?
Other resources in marketing would define how we would beat and avoid competition – Every business has competition, and you need to be the best at your game, to hold and grow your slice of the business pie.
How do you achieve this? Can you put into words what it is you are doing that achieves this business?
In order to determine the business path, the business needs to know a lot about itself, and this self-analysis is encapsulated in the "strategic plan." This plan requires thought and innovation to survive difficult times and the demands of puberty [yes puberty especially in new business that are experiencing growing pains] on the business.
• Evaluating the business must determine information like how positive is the company’s cash flow now, what it was like before and how it will growth and impact on future cash flows for instance. The Situation the business is in now - previously and the future potential – evaluating this information helps us to understand the dynamics of the business and what “makes it tick” in order to succeed or fail.
• The Target – You really do need to define the goals or targets in terms of turnover and resources. I saw this as a furniture store manager, it is amazing how you can achieve something you set out to do and especially if you know your business life depends on it.
• The Path – the big picture, and the steps and paths required to achieve what you are setting out to do. You may wish to work for the president, but if you do not know with whom to speak to? Or what work is available, then this is an unrealistic goal. Planning will put you in touch with the correct person and be able to have a pitch ready for them as part of a sale strategy to achieve your goal of selling to the president.
• The Plan - what resources do you need to meet with the person, you need business cards a proposal, and you may need to buy a tender document. It costs money to tender as you need, paper, ink, printing maybe a graphic designer. What happens if you do not achieve this goal where has the money come from, to cover the costs, could the business afford it? What are the risks involved of not getting the business, are these risks acceptable and can you ultimately have available resources to afford them?
The company or business Vision – The business must define the vision and set a mission statement with hierarchy of goals and objectives. The vision means what are you looking to do? Think of eyes and seeing and craft the words around – What do you see the business doing and why?
The defining and writing down of actions and processes to be taken to attain these goals. I need to get a loan of Ten thousand rand; I need a company registration number. The Rize mnanzi contestant, front runner lost their rung because they had no plan and had not formulated the strategies in order to match the competition requirements of being registered. Understanding the need to write things down and do them is core to running a successful business.
Implementation of the processes – Once you have formulated what you want to do then you need to have a plan on the “How” Take the train to Pretoria and go directly to the companies registration office. Take a book keeping course, buy filing cabinets.
Finally feedback and control, monitoring and evaluate. I sent Sipho to Pretoria he could not sign as he is not a director, I should have gone myself. The day is wasted and it cost the company money, which it can ill afford.
When developing strategies, you must analysis the business organization and the environment in which it trades. You need to know what state the company is now and where it could possibly be in the future.
The issues that will affect the company when it grows in the future require planning how you will invoice the clients, delivering invoices collecting cheques, may be issues that require resolution.
The analysis of the business must look at as many factors both within the company and without, and will included the dreaded strengths, weakness, opportunity and threats.
There are areas you need to drill down and ask questions about in order to assess the business situation analysis, like:
1. Markets and your customers
2. The business Competition
3. Technologies you need or must interact with, some customers insist you work with their software for instance can you do this?
4. The Suppliers to your business and the services they may provide
5. Human resources and the people you need
6. The economy, yearly trading and feast and famine business cycles
7. Any compliance issues from registrations, training or certification your business may require
What do you focus on in your business? As the focus relates to customers, marketing and sales plans? Did you ask your client for business? How much business can your clients realistically give you? Goals, objectives and targets must be planned and achieved for success and sustainability.
One of the core goals when drafting a strategic plan is to develop it in a way that is easily translatable into action plans.
Entrepreneurs and business managers are often so preoccupied with immediate issues that they lose sight of their ultimate objectives. That's why a business review or preparation of a strategic plan is a virtual necessity.
This may not be a recipe for success, but without it a business is much more likely to fail, so a sound plan should include;-
• A framework for decision making
• Keep everyone on the same page
• Help you to achieve targets and monitor the performance of the business
A strategic plan is a process that covers the vision, mission, objectives, values, strategies and goals of the business.
The vision must be realistic, and encompass where the business will be in three to five years time. This is not something to please investors or bankers it is a serious determination of how serious you are in business.
The nature of a business is expressed as the mission. In other words what are the activities of the business, like design and develop products, clean floors. Only say we are in business to make money if you have a contract to print money. Again you need to be realistic as it is your business and will feed you and give you retirement and a valuable assist of properly looked after.
The values of that govern your business operations, and how you will treat customers if if it is with disdain and you attempt to treat them as badly as possible like many South African companies. Although service is improving as companies realize there is a choice and walk out with your feet and spend somewhere else.
Objectives are related to the results you wish to have in your business. The objectives relate to profit margins, targets, and expectations of shareholders, growth potential offerings and markets.
The strategies cover things like diversification, acquisitions and issues like
o How will the company fund future growth?
o New products life spans and when do you introduce new ones?
o Outsourcing as a policy in manufacture
The goal is how much business do you and can you realistically achieve. The factors governing goals encompass market size, products, finances, profitability, utilization of resources and efficiency.
The boring and tedious Strengths & Weaknesses
• Sales, marketing and distribution, promotions and product support;
• Management systems , expertise and resources;
• Operations their efficiency, capacity and the processes;
• Products and services, quality, pricing, features and benefits, range and competitiveness;
• Finances, financial resources and business performance;
• Research and Development, invested effort, business direction and business resources;
• The costs, from basic running, productivity and purchasing;
• The business systems, organization, structures and staff
Business Strategies would traditionally revolve around the following concepts
• Build on strengths
• Resolve weaknesses
• Exploit opportunities
• Avoid threats
Finally some rounding questions for your business, in order to achieve credibility in the market place:-
How do you maintain your product quality and product standards?
Where do you find resources, and do you re asses their price competitiveness in the market place?
Listening to customers, and creating standards they require.
Ensuring your internal communications and data capture is up to scratch.
Empowering your staff to be effective contributors to the business
So if you are serious about being succesful know this the most succesful always have a plan.