There are two types of planning—planning to achieve a specific goal, such as getting an order, and planning a special in a restaurant to help a specific shift or low sales day. The other planning process is for your company as a whole. Lots of business owners started a business because of their love of what they had an expertise in. They never set a plan, but they fulfilled their desire of working with their specialty.
We will talk first about a specific plan.
The first thing we need to do is establish the problem, spell it out, and define it. Identify the resources and the sponsor (the responsible person, usually you). Break it into tasks. Then, prioritize the steps to be done.
Using your manpower resources, create (with buy-in) assignments and timelines.
An example of this process dates back to my second year as a co-op trainee at a steel mill. I was in my second year of engineering school, only 19 years old. I was on my third term at the mill. The general manager said it was time for me to lead a repair crew on changing a cable on a large mill crane. I was out of my realm of comfortability. I thought about the job and followed some of the steps as delineated previously. I went to the senior union member on the crew (my resources) and followed all the steps delineated. With his help we came up with the following:
1. Talk to production and see when the crane will be available.
2. Get the new cable.
3. Rope off the area with yellow tape.
4. Let the crew do their job.
5. And most importantly, get four cups of coffee for the team. (I was the fifth person; I guess I didn’t rate a coffee yet.)
After we (needless to say, we are the sponsor) have defined the problem and identified our resources, we need to pull things together.
We start this with a kickoff meeting. This is an effective way to bring all of our resources and stakeholders together. Remember, your resources and stakeholders might be different groups. In the steel mill the maintenance general manager, his foremen, and the maintenance workers could all be resources. However, the works manager and the production team may be stakeholders and want to know what they can expect from the maintenance group’s work. Will it increase production, will it cause downtime, what will it cost, and so on.
The kickoff meeting is an effective way to start the planning process. I will have already run a few of the ideas by some of the people who will be resources, so that I don’t surprise anyone. Remember, people don’t like surprises.
A good kickoff meeting should be designed to do the following: build trust among the team members, take into account everyone’s ideas, and take a first step toward getting commitments.
Items to accomplish in the kickoff meeting are the following:
1. State the problem, vision, scope, and the start of a strategy.
2. Identify roles (hopefully some of the team volunteers).
3. Determine if you need subteams.
4. Set timelines for completion for the team and subteams.
5. Explain the importance of this plan (another step in getting buy-in).
6. Set forth the method of communication.
7. Most importantly, set a time for the next step or meeting.
In a kickoff meeting, I have found one question to be useful in identifying the team leaders from the rest of the troops. Why would you want to be a part of this team? If they say, “I like being a part of a project like this” I would put them in with the majority of the gang. I would be looking for answers that indicate they believe in the project such as, I think I can see the benefits of this project and want to help accomplish this.
Let’s now shift to the plan for your business. If you started your business as a home business and didn’t need to develop a plan to get financing, or if your business has moved on to the next level, you should develop a more strategic or specific plan. This will help in growing your company. Growth is what keeps a company on track. I believe in the old colloquialism that you either grow or decline. There have been way too many companies and people who have tried to live on their laurels and then went under. Let’s look at the difference between IBM and Polaroid. IBM set goals, followed a plan, and revised it when they saw a need (got out of the home computer business). Polaroid rested on their laurels of the instant camera. With the advent of digital photography, they went out of the picture.
The plan should at least include the following:
1. Your brand/image
2. Your resources, people, cash, expertise
3. Financial plan, by month for the first year, annually for 5 years
4. Your customer base
6. Plans for growth.
The most important part of the plan should be on how you want to brand your business. Since this has been mentioned in the previous chapters many times, you can sense my feelings for its importance. In our industrial company we branded it as giving our customer a surrogate employee by doing free inspections, tabulating life of the installed equipment, and so on.
In the restaurant group, we branded ourselves as treating our customers as guests, providing freshly prepared foods (each store had a prep cook, we didn’t buy from a frozen prepared food commissary) to accommodate each locality’s taste (remember the biscuits made with bacon fat instead of margarine or butter). The brand must stand and be in place for the length of your business life. It can be changed, but it costs, in the loss of business, and time to make the change.
When you brand your business, you are already looking at and defining your market, as well as making the best use of your resources. Let’s look at the music store. Their resources were as follows:
1. In his store, he had sound proof rooms in order to give multiple lessons.
3. He had knowledge of music.
His brand. The place to take music lessons. This created traffic in his store with potential equipment sales possible.
The next step is to analyze your market and check the demographics (age, economic status, education level, employment, and so on). This step lets you decide what changes if any are needed due to demographic or economic concerns or how it will it affect your business. For the day care, there was a period where the day care center could pull from a large market of children from infant age to 5 years old. However, after a period of 10 years, it looked like the market would decline sharply. Could they pay off their up-front costs in this time?
In our industrial business, the route to market changed over a 40-year period. In the 1970s, sales were direct to the users and original equipment manufacturers (OEMs). By 1990, 50 percent of our sales had come through industrial distributors. We had to change our salesforce and our route to the customer or suffer the loss of sales.
History will show you that you have to be able to adapt to changes that take place. What if you were a travel agent who specialized in booking air travel? You would be out of business now just like many are who didn’t make the shift to specialty trips and cruises.
You will have to periodically review where you are placed in the product life cycle of your business, and at some time to continue growth, you may have to consider some of the following methods:
1. Sell more of your current product to your present customers.
2. Sell additional products to your present customers.
3. Add customers by branching into another business.
4. Purchase another company and cut your fixed costs by combining the duplicated business needs into your staff.
In our businesses, we always checked not just profitability, but also our net worth. This was done so that we could always grade ourselves and be prepared to go to the bank and know how much we could pay and borrow if we decided we wanted to purchase additional businesses or real estate.
It also kept us apprised of where we were if we decided to sell the business. I want to stress that even though you are thinking of working at your business till you are too old to retire, you should always have in mind an exit strategy. I have seen too many business owners let their business slide as they age, and consequently, their business dies with them. This is a loss, as there are usually plenty of young entrepreneurs who would have loved to buy into it.
The aforementioned are the essential and critical factors: however, the small business bureaus have several samples and templates to help you write a formal business plan. Go to the website sba.gov for their standard plans and a pdf of one that can be used.