Planning Your Business
Planning is a key element to running a successful business, yet you’d be surprised how many businesses don’t have a plan in place!
To reach your goals, you really need to have a business plan. Now, I appreciate for some that might sound like a daunting task, but honestly an effective business plan doesn’t need to be complicated.
A simple business plan structure
Start with a simple business plan that pinpoints what you want to achieve.
Here’s an example of what this might look like:
- In 5-years’ time, I want the business to be worth £5 million
- To achieve this, it must make annual profits of at least £1.5 million
- To achieve this, it must have sales of £10 million
- I need to increase my sales by, on average, £1 million a year
- To do this, I will need to:
- Increase my customer base by 15%
- Increase the number of times my customers buy from me by 20%
- Raise prices by 10%
Now you have a basic plan outlined, it’s time to identify any constraints that might get in the way of you successfully implementing it.
To do this consider the following two questions:
1. Inside your business, what are the main constraints on your growth? Some possibilities might be:
- Lack of capital (financing)
- Too many customers owing you money
- Internal conflicts
- Lack of direction
- Outdated technology
- Lack of marketing
- Missing skills
- High occupancy costs
2. Outside your business, what are the main constraints on your growth? Again, some possibilities might include:
- The economy
- Regulations
- Competition
- Demographics
- Seasonal buying patterns
- Energy prices
- Shipping costs
Once you have your answers to these questions, what you should see is that you can do a lot about the internal ones. And, while unfortunately you can’t do much to change outside constraints, you can put contingencies in place to reduce the impact they have.
Look through your internals list and start making plans for how you’ll get around any limitations, so your business can grow. And then list ways that the external factors can be managed or reduced.
Develop targets, forecasts and budgets
Once you have a business plan, your next step is to move on to setting targets for the short and medium term.
It’s a great idea to do this together with your team. This will ensure everyone understands the targets and how they’ll be achieved, and you can make sure everyone agrees that they’re achievable. If your team isn’t willing to agree on this, you’ll need to go back to the drawing board.
Next, it’s time to draft financial forecasts for the same periods. These numbers are one of your key management tools and will help you to take corrective action more quickly if you notice any deviations from them. Forecasts are dependent on assumptions and estimates, so it’s important to be conservative.
The last step in the process is to put together your near-term budgets, and team input is critical here.
When you’re building your budgets ensure you do it from the ground up. By this I mean “here are our objectives, how much do you think we need to budget to achieve them?” rather than “here’s your budget!”
If you’d like some more guidance with putting a budget together, my earlier series of blogs: “Budgeting in an uncertain time – part 1”, “Part 2” and “Part 3” will be a great resource for you.
For more tips and ideas about growing your business, click here and download your free copy of our new eBook – we hope you’ll find it really useful.
