Who Needs a Business Plan?

Do you create a business plan each year?  When I ask this question of clients, I will regularly get a chuckle or roll of eyes before I get that reluctant, “yeah, I do.”  The reason for the response is universally that the client DID it, and then promptly put it into a drawer.  A few will proudly admit that they pull it out once a quarter (or sometimes more frequently) and review it, but very few can say they live their business plan (or their goals).

 It’s that time of the year (beginning of the 4^th Quarter) to work on your business plan for next year. Your business plan is probably the most important part of your business, but it has to be living and breathing, monitored and adjusted.  And in its most basic format, it is easy to do.

 Let’s say you told me you are going on vacation.  The first question I would ask is “where?”  I doubt you would say “well, I’m just going to get in the car and start driving.” What are the chances of you getting anywhere? You would not only be able to tell me where you’re going, but how you’ll get there, how long you’ll be gone, how much it will cost, how long it will take you to get there, what you’ll be taking along, who you are going with, etc., etc.  In other words, you carefully plan your vacation.

 So why is it you don’t just as carefully plan your business?  A well crafted business plan designed to make you successful will also keep you on track, be your roadmap (or GPS), and relieve stress.  But even a simple business plan will give you direction, and when used correctly provide so much more for your business.

 The three basic rules to creating a business plan are:

• Start with the end in mind
• Work backwards
• Break it down into smaller pieces

 Start with the end in mind – How much do you want to sell this year? I am not talking net profit at the moment, but gross sales.  Make that decision (See Smart Goals blog article), and don’t be shy.  Be realistic, but it’s no fun unless the number is high!

 Work backwards – Small children go through a learning phase where they constantly ask “why?”  You need to keep asking “How?” Starting with the end, that question will set the steps before.  Each step should also have a “how” attached, and keep going until you get to the most basic “how.”  This identifies your SWOT (strengths, weaknesses, opportunities, threats or challenges.) You may look at a “how” and think to yourself “but I don’t know how.” More on that in a paragraph…

 Break it down into smaller chunks – Time plays a big part in a business plan.  If everything has a deadline of December 31, you will not even look at it until December 1, then shake your head and say “no way!”  So break the steps into shorter or smaller increments, with interim dates.  $1 million in sales for the year is $250,000 per quarter, or $83,333 per month, or $3,846 per day (five day week). Less than $4,000 per day sounds a lot easier to achieve than $1,000,000!  Working with each “how” above, set dates for accomplishment.

 As you go through this exercise, you will discover what extra tools, knowledge, personnel, equipment, or whatever you need to achieve the goals in your business plan.  Excellent!  How are you going to make that happen? Is it something you can do or does it make sense to hire some one to do it? Something you can learn, or delegate for some one else to learn.  These answers become part of your business plan as they are an integral step in staying on target.

 A more robust business plan will certainly improve your business skills and bottom line, but if you at least get this far, you will see a difference.

 The most important step in this exercise is to take this finished plan and place it somewhere to look at everyday.  One of the best places to put the plan (besides hanging on the wall of your office) is to purchase a desk calendar, and transfer the “small chunks” to the calendar.  You will be much more likely to accomplish something on your calendar than on a list somewhere.

 For a free business plan template or goals worksheet, please email me at jbyron@dmbgroupinc.com and I will be happy to send one to you.  Don’t let another year go by without a thorough plan!

Clouds in the Sky are not Smoke in your Eyes

by Sherry Matteson, M.A.

Smoke in your eyes is disorienting and debilitating, to say the least. Whatever you were doing comes to a halt. With diminished vision comes uncertainty and the reaction to uncertainty is generally to stop action. A cloudy sky can have a similar effect in that we don’t know if a storm is coming or simply a quiet rain. The uncertainty of our economy is like clouds in the sky. Unclear, yes, but it is not smoke in your eyes.

Without knowing the decisions our government will make, which if known, might give us a sense of security in our own decision-making, our waiting and inaction becomes paralyzing. Motivating ourselves to try something new, or to get on with innovation seems tough when the rules of the game are up in the air. Uncertainty is one of the primary reasons that people resist change, and this resistance often leads to failure. However, the certainty we are looking for is not really all that certain, anyway. We must  move to adapt and create our own version of certainty. Part of its creation is designing our businesses to be flexible , constantly monitored and adjustable as we go. Have you created all that is necessary to do this in an impeccable way in every aspect of your company?

Its true that perfect clarity is not always possible, and leaders are not always in control of events and outcomes. However, this does not mean that all the action should stop. As a leader in business you can provide Certainty of Process. When the world at large is seemingly in chaos, you do not have to follow suit.

Excellent leaders will continue to:                                                                              

•  communicate                                   
•  invest in relationships                                                                                                  
•  improve                                                                                                                   
• remain true to principles                                                                                               
• forge new alliances

These actions can make the difference between getting stuck and emerging triumphantly. Providence steps in to help those who do not stray from their goal.

Clouds will eventually give way to clarity.

As a cloudy sky gives way to the sun once more and the wheels of commerce begin to turn more rapidly, how would you like to be positioned in your industry? What aspects of your company require development now?

• prof it performance and financial controls
• productivity and employee incentives
• customer loyalty and quality assurance
• leadership development and succession planning
• sales and marketing implementation
• technology systems

Now is the time to shore up your systems, policies and procedures for the future, regardless of what it holds. The only thing we can rely upon 100%, is Change.

How we weather change determines our success.

 

Sustainability in 2011–Do you Improvise?

By Sherry Matteson, MA

Economies always cycle – throughout the year, from year to year and from decade to decade.  A solid approach to business as well as to life, is to be your best during the worst!  This is rarely the case, however.
Inherent problems tend to be overlooked under the best financial conditions and shine sharply when profits are slim.  If we are the best when profits are down, it stands to reason that the best times will be phenomenal.

So what are the keys to being the best?

1. Plan-The football team knows the whole play ahead of time. The ballet company dances to a complex series of pre-planned movement. Obviously, communication of the plan is critical in both scenarios. If the ballet company doesn’t know the Prima Dona’s next move they will look foolish and finally leave the stage. There will be no dance, except maybe a solo, which is a common scenario in small business with incredible burden on the owner. The same is true in music- the analogy is obvious. All the players need the score in advance. The results of improvisation can end up at either end of the spectrum- lovely or disastrous. Improvisation is not a good idea in business.

2. Trust– Trusting that the football players want to be their best, the dancers want to perform fabulously and the orchestra members desire to make beautiful music is an early step in building a foundation for success. Without this inherent trust, performance suffers, employees are anxious, confused and feel devalued. This climate is not conducive to high performance. This lack of trust in business usually indicates that leaders feel themselves to be unassisted, even isolated. This translates vividly to team members. It is prudent to hire people you can trust and then let go!
It is conversely a dangerous practice to give full autonomy to employees that are untrustworthy.  Either practice can split the very fabric of a company’s morale.

3. Support- This is a multi-dimensional concept. How does a football coach support the players? How does an orchestra conductor support the musicians? Support is an unflagging attitude but it is also a series of actions. The conductor makes sure that the players have what they need- music, supplies, sound system, auditorium, and and practice. The business leader is the same. To make certain that employees have everything they need to do their job is imperative and it is the business owner’s responsibility.

 4. Adapt- Sustainability in today’s marketplace requires resiliency and the expertise to recover quickly from difficult situations. Complacency is most often the origin of an underperforming business. Imagine if an orchestra played the same symphony over and over again at each venue, because they were good at it. Soon they would lose their audience. What if a great football team executed the same plays over and over at each game, or kept trading out players, hoping the situation would turn around. Without renewal of process, both would die a slow death. It is a fact that we love our habits, but the fact remains that uncritical satisfaction with one’s achievements spells mediocrity in any human endeavor.

A sustainable future requires planning, trusting, supporting and adapting. Where do you stand with regard to these concepts?

Do You Have Control of Your Business…or the ILLUSION of Control?

by Donald Miller, President

Let’s start this discussion by defining our terms. The Oxford American Dictionary defines control as: “The power to influence peoples behavior or the course of events”.

The definition of illusion is “a false idea or belief” and “deceptive appearance of impression.”

Which best describes your company and your position in it? Most of the small to medium sized businesses we encounter have some things in common.  Usually the owner has expertise or some experience in the product or service the company is providing.  For example the Master electrician owns the electrical contracting company.  The homebuilder becomes the General Contractor etc. We know that they understand the technical side of their business however by choice that isn’t their job anymore.  They are now the President but they haven’t had the training for this job so by nature they revert to performing pieces of their old job which cannot have the desired results. The result creates the ultimate firefighter that works very hard but never seems to get ahead. After years of this they begin to accept things like breaking even or even financial losses as “well that’s the nature of this business”.  Or worse yet “you know the economy is bad” instead of saying what do I need to do to become President of this company?

Jack Welch former CEO of General Electric during its largest period of growth is someone I was able to spend some time with some years ago. He vocalized some of the basic tenents I’ve been managing with all of my life. For example:

An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage. (This is virtually the credo of The dMb Group)

• Change before you have to.
• Control your own destiny or someone else will.
• Don’t manage- lead change before you have to.

The point of this discussion is face reality as it is, not as it was or as you wish it to be. The mirror of every organization is its President. If you are willing to constantly learn your people will also be. If you are set in your ways and stubborn, so will your people be.  When I hear a President look at his work force and say “well look at them! What am I supposed to do with them?” I don’t look at them, I look at him.

The good news is there are solutions. There is no “Presidents School” but there are tried and true management methods and measures. As soon as you, the President, learn them and embrace them your profit, work effort and effectiveness will improve. As soon as you are committed to learn everyday your workforce will embrace that same ethic. So strive for knowledge and stretch your personal limits.

Remember the school of hard knocks leads nowhere but some hard bruises.

What is Your Competition?

Waste Incorporated is your principal competitor.  Every day it robs you of profits.  Waste can impact any type of business, no matter if it is small or large. Whatever waste you have is costing you money. These dollars would be additional profit for you and your people, and could be used to improve your business.  Think about it:

•  What is Waste costing you?
• How could you use increased profits?
• What opportunities are being lost?
• What is your business lacking because there isn’t money?
• What are you missing out on because you don’t have the income?

 Waste is difficult to find because it hides so easily.  It hides in people’s attitudes, in comfortable, accepted ways of working, and in unfocused activities.  Any unproductive, unfocused activity is a waste.  However, finding waste is critical because waste robs your business of profits.

 If this is so detrimental to businesses, why not just fix it?  Typically, most business owners are experts in their craft.  Business operation is not necessarily a strong suit.  Every day demands push aside long-range planning, so it is not uncommon to run a business as a series of daily events.  In addition, core problems are seldom obvious, and the business owner is so accustomed to living with the problems, they overlook symptoms.  As problems take root, distortion, bias and inhibition start to manifest and block change from the inside.  All of this makes it difficult for a business to improve by themself.  Waste costs you money.  Change, on the other hand, can make you money.

 So what is the solution? How do you rid your company of its most devastating competition? Try a full scale business analysis.  This will identify problems and roadblocks in your business, and help you prioritize a solution. Why is a business analysis important to you? Ask yourself these questions:

•  Why did you lose your last 10 sales to the competition?
• Why did your last 5 employees quit?
• What’s the best thing about doing business with you?
• Is that what your customers think?
• If your business closed, would it matter? To whom?
• What do people think when they see your literature?
• What do people think when they see your ads?
• What do you want them to think and do? Are they doing it?

 You owe it to yourself and your future to eliminate your competition once and for all!

The Sales Myth

Let us start by saying that only an imprudent business owner would not want an increase in revenue! But the myth that “sales will hide all evil” is at best exaggerated and certainly misunderstood.

Over 15 years of analyzing and helping small and medium size businesses, I find this is one of the first “solutions” a client will ask for. There is a perception in this business sector that revenue equates directly to profitability and cash flow improvement. In reality, the only true contribution to profit derives from the Gross Margin/Profit associated to this new revenue. The second factor is the effect on overhead that would result from this increased revenue and the associated activity. So before I would say “lets drive this thing up” I would ask myself a few questions:

1. Does my company have a formal Sales and Marketing Plan in place which clearly identifies end goals? Does this plan identify new customer base, pricing parameters, distribution methods, manpower performance standards, compensation methods?

2. In my company do I currently have the Financial Management Systems in place to have fingertip control of direct expenses which will have a direct effect on the Gross Margin?  Direct Expenses are defined as any expense directly related to the creation of revenue. Common examples would be Material and Labor. These two factors alone are the predominant expenses in most companies. When a company does not have fundamental Budgets, Cash Forecasting and Balance Sheet Management in place, a growth in revenue can have devastating effects on the back-end.                      
                                  

Lets stop. If you as President of your company answered no or maybe to these first two questions, then slow down and rethink. I have found the majority of the small to medium size companies I have analyzed are ill-equipped in these areas. The good news is that any company can make the leap as long as they understand that there are massive differences in what separates a $1 million firm from a $10 million firm in terms of an operating culture, and methods. Trust me when I say that “growing out of business” can be a reality.

Another reality you must face is that in many cases for companies in this revenue range the sales of these firms are limited by various demographics that would logically not change. Can you increase your market share in these demographics? Of course. But how and at what price must be a consideration.

When most entrepreneurs start a company, it is because there is a confidence in the ability to exceed competition performance or capture a new product opportunity. But the business side of the business cannot lag or be left behind. This will limit your ability to act in the role of President, which is essential in any company. Certainly this position is critical in any company over $1 million in revenue.

Advice! Act … Feel… Look… Function like a $ 10 million +++ Company. Learn to maximize true profitability at your current level. Then grow that thing to the Moon!

So next time someone is advising you that you need to “Grow your sales”… just tell them “Only a fool wouldn’t want more revenue! But what I really want is profit!”

Are You Ready?

The business climate in today’s economy is like no other in history. Innovative and ever-changing competitors, viral marketing, e-commerce, shrinking financial resources, and a vast discerning consumer base create challenges for businesses of all sizes.  Growth and success depend on precise controls and methodology in place to monitor change and make adjustments.So you made it through the decline, but that doesn’t guarantee you are ready for the future! Many of the elements that left you in a vulnerable position probably still exist within your firm. How are you different today than you were eighteen months ago?  Our focus is to make sure our Clients have the fundamental processes in place as we head into a recovering economy.

 

Ask your self these questions:

1. Have you strengthened your administrative functions to better plan and control?

2. Have you installed budgets and forecasts both for profit and cash management?

3. Have you installed a plan to take advantage of a reduced competition field? We have seen a historical percentage of companies fail since 2008. Now is the time to grow…. but correctly.

4. Have you taken advantage of this period to improve and hone the skills of yourself and your staff?

Challenges can often be overwhelming and seem complicated, but the solutions often incorporate basic business concepts that are logical and achievable.

Make sure your company is set to thrive no matter what the future holds!