EDITOR'S FOCUS: Got a Plan?

Conventional wisdom has it that most companies do not have a business plan. I disagree. No owner marches into the coming year without a clue about what he or she expects to accomplish in the coming year. But not all plans are created equally.

This fact was reinforced to me earlier this year in a contractor roundtable I facilitated. I asked the group of about a dozen contractors how many had a business plan. Everyone raised a hand. I asked how many had plans in writing. Again, all the hands went up. Surprised by this group response, I asked more specific questions about their plans. The answers showed that some plans were incomplete.

Some owners have built successful businesses with plans that were in their heads. If an owner decides that next year he or she wants to expand into the west side of town, increase profits and buy two new mowers, that’s a business plan of sorts. But if that’s the extent of planning then it won't be useful for most owners. What makes a plan valuable are specific and measurable goals. You need at least 100 new customers on the west side of town next year, you need to increase profits by 3 percent and you need to add one new mower unit in April and another in June (with all necessary details on pricing and paying for the mowers, of course).

So, while it’s OK to have a very basic business plan. It’s not OK to have a plan that you can change at whim or one that you never use to measure your performance against. This point is a problem for any owner who wants to get into business so that no one could tell him or her what to do. The problem is you as the owner now work for (1) your company, (2) your customers, (3) your bank and suppliers, (4) your family and (5) yourself. You are still accountable, maybe even more so than when you were an employee. Since you are accountable you need a plan to keep you on track.

So, how do you create a business plan? One way is to go to the library or bookstore and buy a good book to help you with the process. However, don’t buy one based on the title or the author’s credentials. It’s most important to check out the table of contents and look at some of the practical exercises and examples used. To appeal to a broad base of readers, many business-planning books include information for companies in the manufacturing or retail sectors. Companies in the service sector need more specialized advice for planning.

If you don’t want to buy a book, then here is a simple suggestion. I once took part in a business seminar in which the leader asked the group, "What is the purpose of a business?" The immediate replies were that businesses exist to make money and serve customers. But as he probed, the group added more – to provide employees with work and income, to serve the needs of society and to serve the owner’s needs. You too can add other purposes your business serves, but since those five points provide a good basis for why your business exists, they can be useful in creating a useful business plan.

Begin by writing down your goals relating to each of the reasons your business exists. For customers this could include what do you want to do for them next year that you did not do this year, new services you might offer, the equipment and products needed, and new customer groups you might want to target. Write down your goals relating to your employees. Write down goals for yourself and other company owners. Finally, consider things your company can do that serve people other than customers or employees – your community, neighbors of customers or groups you want to support.

With this template in place you can now put together the necessary budget projection to make your goals possible. If the budget is insufficient to accomplish all of your goals, then re-work the goals and/or budget until the budget and goals are in alignment.

You will also need a timeline for all of your goals so you can review them regularly to see how you are doing. Of course, if you wrote a plan that challenges you, then not everything will get done and some changes will be needed. What’s far more important is that you can focus on the goals and accomplish more of them than would be possible without a solid plan.

The best business plan does not have to be a big, impressive document. It just needs to be a tool that helps you establish and accomplish your goals.

December 2004
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