We’ve all heard the cliché, “those who fail to plan should plan to fail,” but in the crush of daily activities, business planning tends to take a back seat. But, mid-year is a great time to dust off the business plan and re-evaluate your company’s strategic direction for the rest of the year in light of this year’s performance so far.
The Business Plan
Many new entrepreneurs and those who advise them set the business plan on a pedestal as if it is the answer to all entrepreneurial questions relating to a business idea. But, there are also those on the other end of the spectrum who think business plans are a complete waste of time.
I tend to emerge somewhere in the middle. I know many entrepreneurs who never wrote a formal business plan for their businesses but went on to make a lot of money. But, all of those successful entrepreneurs understood the importance of business planning. While a formal, MBA-approved business plan itself may not always be absolutely necessary for success, effective business planning always is.
Your business plan is just a map. The actual path you take may look very different from the original plan, but the plan will make you think about the details and how they fit together in your business.
It is intuitively obvious, but, in order to eventually arrive where you want to go with your business, you need to know two things: 1) Where you are now, and 2) Where you want to go.
Where Are You Now?
The three general areas you should consider in determining your current position are finances, marketing and operations.
Finances
Prepare and examine your “Big Three” financial documents:
- The balance sheet shows all of your business assets, liabilities and equity and provides a summary of how your business is doing financially at a particular time;
- The income statement lets you see at a glace whether or not your business is profitable by itemizing your revenue and expenses;
- The cash flow statement shows the net increase or decrease in your cash flow over a period of time and will show you where the money went.
As you review your financial documents, what issues become apparent? Are there leaks in your financial infrastructure that should be addressed? Do you have enough cash and credit to maintain operations into the foreseeable future?
Marketing
Your business should have marketing plan in place to address:
- Who is your target customer group?
- What is your positioning in the market or unique selling proposition?
- Where will you approach your target customers?
- When will you approach your target customers?
- How will you approach them and how much in sales do you expect to achieve?
Have you answered each of these questions? How is your business executing in these areas? If you need some assistance, a great resource for small businesses to use in implementing a realistic marketing plan is The Duct Tape Marketing System by Jon Jantsch.
Operations
Operations are where the rubber meets the road. Without efficient and effective operating procedures, your business will waste time, money and effort. Sam Carpenter, in his book Work the System states that every business should have three types of operational documents:
- The Strategic objective defines the primary goal of your business and how your business is structurally organized to achieve that goal.
- Operating principles are the fundamental guidelines for decision-making within the organization.
- Working procedures are documented and systemized methods for addressing daily or periodic business processes.
What operational documentation do you have in place? Do you have strategic, operational and tactical documentation for your business? What processes are not working as smoothly as they should, and how can those processes be modified to produce regular and frictionless results?
The Tip
Over the past six months, your business has likely changed in ways you don’t recognize. Take the time now to analyze your financial, marketing and operations plans to determine where your business is now.
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