The ABC’s of Business Planning
As a business coach, I am often approached by business owners with common questions such as these…
“I have an exciting idea but I’ve never been in business before. Where do I start?”
“Why do I need a plan? What will I gain?”
I am here to answer the most common queries and misconceptions around business planning in the hope I can share my insights and experience and encourage you to proactively plan your business. It’s not good enough to just “wing it” or expect that your success will continue indefinitely.
Why is planning so important?
The odds are against small businesses in Australia today, with more than 60% of small businesses ceasing to operate within the first three years of starting (Australian Bureau of Statistics). This is alarming given that small businesses account for 97% of all businesses.
The higher the quality of the planning that takes place, with continual monitoring, the higher the odds of success become.
If you were building a new home, what is the first thing you would do? You’d start to think about what the house will look like, and you’d think about the finished product right at the start. You would know how many bedrooms and bathrooms you want, the layout, what type of flooring, your budget, and so on. You would invest time in planning something that will meet your needs…
...So why plan a business without a plan? The reason is usually because people start a business to be their own boss, and they think they can do a better job than ex-employers. What they often don’t consider are the details required to run their own business - and thus, a plan is not considered.
What will I gain?
If you came to me and said you were starting a business without a detailed plan, I would tell you that if you're not prepared to write a business plan then you shouldn’t be in business. It’s as simple as that – just like a house built without plans would be doomed to fall over!
To put it into perspective, it is like going to a builder and saying,
“I'd like you to build me a house please, but we would like to save a few thousand dollars and not draw up a plan; You’ve built plenty before, so I'm sure you’ll know what to do.”
But how can they? A house is in the details and the details are all planned long before any foundations have even started.
Another way of looking at it is; would you employ someone to run your business that has no expertise in running a company?
The business acumen needed to run a company includes dealing with team members, financial planning and budgeting, stock control pricing, marketing, sales and systems and processes.
By planning your business and being guided by an experienced professional to create a comprehensive plan with strategies to follow, you are setting yourself up for success.
Where do I start?
The best place to start is simply with a goal. It doesn’t matter if you are going to a running coach, golf coach or business coach, the first question is always “What do you want to achieve?”
You should always start with the end in mind and work backwards from there to create an awesome plan of how you can achieve the goal. The building of the plan starts off with the big picture and goes right down to the actual actions, step by step, that need to be done.
What is the vision of your business in the future, lets say 10 years from now?
- Is it local or international?
- Are you building it to sell it in a few years or do you want to create residual income?
- How many team members do you have?
- What is the picture of it finished and successful?
- How much money do you want to earn?
- What are your basic expenses?
- Do you want to leave a legacy business for your children?
Don’t be afraid to dream big, because you may fear failure. It’s far worse to leave unrealised potential on the table.
So many amazing things have been created all started with a tiny glimmer of a dream, then the vision of that dream grew, and they built a plan on how to achieve their dream.
Why change the way I run things now?
Many people say to me “I’ve done well so far and I’ve never had a business plan.”
Yes, that may be so but as your business grows, everything else grows and changes with it and things get a little more complicated. The team is larger, more clients to deal with, more processes to organise, more bush-fires to put out.
Success doesn’t always breed success.
If everything is in your head; as much as we would like to be able to put a USB in your brain to get it all out, this is not possible yet. Which means you never get a proper holiday, you work late nights to support the business and pay the wages and the business is running you instead of you running the business.
The romantic idea of starting your own business to be your own boss and come and go as you please, is so far from the truth. The days of holidaying, taking a sickie and still getting paid are just a pipe dream. The real boss is much worse than the old one. The boss now is the tax man, the bank and the creditor.
To allow yourself the freedom of choices, you must plan ahead.
What’s the point?
Having a plan is about being able to easily adapt and be agile when the goal posts move, or when things change around you that are out of your control. Having a solid plan means you can be on top of how those changes affect your business, and remodel things quickly so your business doesn't crumble (*Think, COVID!!)
For example; if a supplier puts your prices up, you need to go into your plan and put the changes into the cost of goods to see how it affects the gross margin and break even. You may then need to make adjustments to your sales revenue to maintain your net profit. You might put your own prices up, focus on a product with a higher margin, increase your targets, sell more products or reduce expenses.
If you are on the ball, you can tweak your plan to proactively adjust to all the changes that get thrown at you. If you build a solid foundation, you will be far more adept to handling changes and challenges.
The time to plan is now!
When is the best time to plant a tree? Now! --Just like a business plan.
Whether you just have an idea, are a start-up business, a small business owner who has been in business for years or successful entrepreneur; you need to be serious about creating a comprehensive plan to get clear on the big picture and work towards the vision of what your successful business looks like.
If there is one thing you can take away, it’s that planning is for everyone and the time to plan is now.