Planning – Why do you need to do it?

Business Plan

By: Heidi Pozzo

How do you know where you are going if you don’t have a plan to get there?  It’s a question that gets asked over and over – sometimes in business, and sometimes in life.  In many circles, it is assumed that businesses have a plan.  So why is it that many business people will admit in a one on one conversation that they don’t have one.  The reasons range from “there isn’t time to put one together” to “I don’t see the value in doing it.”

So, why then should one plan?  Put simply, it gives focus to the organization and allows you to hold yourself accountable for making progress.  For those of you still not convinced – there is one commonality in all the companies that I have worked with that haven’t achieved the success they desired – none of them had a plan.

A business plan doesn’t need to be a novel, bureaucratic or glossy.  It should have a few key components with enough meat on the bone to enable you to focus on achieving the results you desire.  The key components of a business plan are:

Define the business you are in

Being clear on what business you are in is the first step in putting together a strong plan.  It seems like a silly or obvious point, but many times businesses drift into other products or services.  Many times profits start eroding because there are too many activities going on and the company isn’t really good at any one of them, but is ok or passing at all of them.

Once you figure it out, don’t meander into other stuff – that’s where companies get into trouble.  If you see changes in the market and make a deliberate shift, ok.  But whatever you do, make sure it is intentional.

Develop a sales and marketing plan

Understanding the market you sell into is critical.  It allows you to match the product or service you sell to your potential customers.  The sales and marketing plan should focus you on where to sell, how much to sell and at what price.  It should also help you convey the value of your products or services to your customers perceive.  A few key questions that should be addressed are:

  • What is your market?
  • Do you know who your customers are and why they buy from you?
  • Have you maximized your market penetration?
  • How much margin do you make on your products or services?

Understand the capabilities of the organization

Whether you have a manufacturing operation or a services operation, you have a finite capacity to manufacture products or provide services with existing assets.  Many times, this capacity can be increased by becoming more efficient.  Maximizing your capacity will help maximize your profitability.

At some point, more people or equipment will be needed to produce more.  Understanding the right time to add more capacity and how that new capacity will get to full utilization is important.  Having key metrics and understanding best practices can help you get there.

Make sure you have the right people on the bus

Businesses are about people.  Having the right team will make the difference in the success of your company.  Are all of the key functions covered or are you trying to limp by?  There is a balance in having the right skillsets and not overstaffing for your company size.  For each area, the people should be focusing their efforts on the highest and best use of their time.  Non-value added activities should be challenged constantly and driven out of the organization.

Your people plan for the year should line up with the goals you have set out.  If there is a need to hire a new sales person to increase sales, make sure that person is hired at the right time to meet the sales expectations.

All of your efforts turn into financial results

Everything you do in business turns into dollars at some point as either a sale or a cost.  The financial plan is the measuring stick to tell if what you plan to do is what you actually do.  The financial plan should include sales – how many at what price, and costs – people, materials, rent, travel expenses, etc.

If you don’t have a budget, the easiest way to start is looking at what you actually did last year as a baseline.  That can be adjust to reflect what the coming year will look like.  Changes in prices, more or less products sold, salary increases, changes in costs, etc. should be thought through and reflected in a summary of the assumptions made.

Throughout the year, it is important to hold yourself accountable for your plans by checking in on a regular basis to see how you are doing against your plans.  Things will change at some point, so factor it into your plan when it does.  But be clear on why you are making the change – that it is deliberate and is a reflection of managing the business.  At the end of the day, you are only limited by your own constraints.  If you aim high, you just might be surprised at the results you are able to achieve.

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Copyright © Heidi Pozzo.

Permission is granted to reprint this article in your newsletter or magazine with the following byline and click-able link:

Heidi Pozzo is a strategy and performance improvement consultant. She has helped transform businesses by connecting the people in the company to the strategy, resulting in significant increases in earnings and business value. To find out more about her services,

visit www.heidipozzo.com

or call 360-355-7862.

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