It's the end of another financial year and the start of a new one.
Now is the perfect time to plan ahead and set out your strategies for next year. Now is the time to write your business plan, even if you haven't done it before, because I will give you a methodology that you can follow in a step-by-step process to write your business plan.
But first, let's deal with one of the most frequently asked questions I get from small business owners about business planning:
"But I only have a small business - do I really need to prepare a business plan?"
My wholehearted answer is always "Yes, Yes and Yes!"
First, understand that any sized business without a plan is moving in the dark. There are no long-term goals, no real target. Any supposed goals you set for the year are actually parts of a giant to-do list because they are not coordinated toward a big picture that you need to work toward if you want to achieve your business dream in the long run.
Imagine going on a holiday without a plan, and just buying the first ticket that pops up. What would you pack? What currency would you bring? Where should you stay?
What do you want out of your holiday? If you wanted to go shopping but your unplanned ticket takes you to a remote beach resort, you're not going to achieve your goals.
But just put the common sense of having a plan aside. People say to me, to justify their lack of a plan - "but it's too hard, I'd rather just get on with running the business."
First, you want to "get on with running the business"?
How exactly? Doing what? To what end?
Second, it's not "too hard", it is a simple step-by-step process that anyone can follow, like painting by numbers. You just need the formula. So, what is the formula?
First, define exactly where you want your business to ultimately go - what will it be like to signify "success" to you?
Second, understand exactly where you are now so that you can see the gaps between current reality and the future, desired picture.
Third, create strategies that will move your business from the strengths and weaknesses you have now, to be the type of business you have defined as successful, and prioritise those strategies.
Finally, schedule regular reviews to see "how are you going?" and to adjust the strategies if they are "off". The military always says that the best plans need to be changed after the first shot is fired. You don't want to keep doing something that's not working.
That's it. Simple right?
Let's go through a case study of how this can be done - and what's more, how it can be done in one day! So put aside your concerns about "I don't have enough time", you have a day, don't you? To plan the future of your business?
In our online products brand called Teik Oh Dot Com, we offer a video-based online system to help you write your business plan in one day. In this case study, we will follow one of the businesses that bought the One Day Business Plan online planning workshop. He was an electrician and here's his brief history:
- He used to work for a larger electrical contracting company that focused on the rental market, working for leasing agents
- He decided to strike out on his own, and in the process, employ his retired father to give him something to do in the back office
- He had about a dozen householders and two leasing agents as customers.
Following the One Day Business Plan formula, he started by describing his Vision for his ultimate business, realising this was a long-term view:
- He would ultimately take on a partner so that the business would have two owners with the same vision and values about customer service
- His Dad would work for the business behind the scenes taking orders and invoicing - for as long as he wanted to
- He felt that the two owner-electricians could manage three electricians each so that ultimately the business would employ six electricians
- He and his partner would take turns managing the business and working as the seventh electrician in the business, or if his partner preferred, he would be the sole manager and his future partner would just be a senior managing electrician
- Of the six employees, at least two of them would be apprentices at any one time, thus allowing for succession planning as his qualified electricians left for other work
- They would be known for excellent customer service - arriving on time, working as quoted, providing quality fittings, cleaning up before leaving
- Their sales, based on 7 electricians, would be around $1.2 million per annum, with total salary costs of $600,000 to $800,000, leaving $400,000 to $600,000 to cover overheads and profit
- To encourage loyalty, he would ensure that Christmas functions would involve something special like a trip to a weekend resort
He then used the templates in the One Day Business Plan downloadable documents to define his Vision from four perspectives:
From the perspective of customers, he decided his Vision meant that:
- Customers would say that his fees were value-for-money because of the care and attention his electricians would give the customer
- Customers would value their customer service measured by arriving on time, doing the job in the time and cost quoted, providing quality fittings and making sure they cleaned up and checked with the customer if the outcomes were as expected before leaving
From the perspective of his employees, he decided his Vision meant that:
- They would feel that they could go up the ladder and even become a co-owner
- They would receive training in their trade and then practise the skills so that they would have personal value
- They would feel looked after and "part of a team"
From the perspective of his finances, he decided the Vision meant that:
- Each electrician would bill about $150,000 to $170,000 per annum
- His total wages bill would average $600,000 to $800,000 per annum
- He would keep overheads lean and mean (with no office and his Dad answering the phones from home) and target profits of $100,000 to $200,000 per annum per partner
From the perspective of key business systems, he thought his Vision meant that he would have to excel at:
- Marketing - to build to a customer base of $1.2 million
- Scheduling - so that his team could be scheduled to arrive on time and work to quote
- Customer-service training - so that his team displayed all the qualities identified as appreciated by customers
- Trade-training - so that his apprentices would be the best trained
Completing this work, he listed all the performance measures he would need to meet in future:
- Annual check to see the fittings used were in the industry top 10
- Number of complaints about not cleaning up
- Monthly team social events and staff rewards (and individual reviews about their performance)
- Industry best-practice training for trade skills and customer service, measured in hours per annum
- Monitoring of average billing rate per person
- Monitoring of total average salaries
- Check annual profits in the right range
- Marketing target to reach and maintain $1.2 million annual sales
- Online scheduling system measuring the number of jobs arriving late versus on time, and completed on time
He decided these nine Performance Indicators would be measured regularly.
Then he turned his attention to the One Day Business Plan module on understanding where his business was currently.
He started a Strength, Weakness, Opportunities and Threats (SWOT) Analysis on his business.
He found his Strengths were:
- He is a good electrician
- He already displayed all the characteristics of customer service that he had identified
- He was driven and would work hard
- He had a friend from the previous employer who might join him
- He had a small, but loyal customer base to start with
- He could live on the smell of an oily rag at the beginning
- He had good contacts with suppliers
His Weaknesses were listed as:
- Starting from the very bottom with about $120,000 of customers, which would just pay him, his Dad and some lean overheads
- No partner to help bear the load
- Insufficient capital to invest initially
He decided that he had the following opportunities:
- The rental market was booming, so leasing agents would need trades to repair electrical work in the rental houses
- The home renovation industry was booming so he could find renovation jobs
- Interest rates were historically low
- There was a scarcity of qualified electricians in his town
Looking at the other side of the coin he identified the following threats:
- It was hard to find apprentices
- Qualified electricians earned about $100,000 and this would be hard to fund initially without capital
Reviewing his Vision and his SWOT Analysis he wrote down the following gaps on the One Day Business Plan gaps worksheet:
- The gap between capital and employing electricians to grow capacity
- The gap between a profitable (growing) base of sales and his current customer base
- The gap between finding more (initially affordable) electricians and their scarcity
- The gap between customer service standards and capacity to do the jobs until he grew
Following the One Day Business Plan guided process he designed the following strategies:
- To use the historically low-interest rates to borrow to fund the salary of another employee for 12 months
- To conduct a rigorous marketing campaign to contact ten leasing agents and five bulders a week to offer his services, and to keep in touch with his existing private customers to see if they needed more work and could refer new customers
- To implement a savings regime to save capital for the second year, and employ another two employees who would be an apprentices
- To teach at his local trade school in the evenings so that he was in contact with apprentices
- To write a customer-service manual that all and any electricians working with him would follow
- To employ his father as his "back office" resource, based at home to save money
He then prioritised his strategies:-
For the short-term:
- To borrow $100,000 to fund a salary for 12 months
- To hire his friend
- To contact 10 leasing agents and 5 builders a week
- To call his existing customers once a month
- To save 20% of every job in the first year
- To teach at the local trade school
- To employ his father and work from home
For the medium-term:
- To employ two apprentices
- To write his customer-service manual
- To provide in-house customer-services training and apprentice training
- To continue saving capital and growing profits
For the long-term:
- To gradually employ up to six electricians
- To offer his friend a partnership
- To continue working from home and save costs but rent a small warehouse for storage
He then focused on his short-term strategies in accordance with the One Day Business Plan objectives of writing his one-year business plan.
He decided his Goals for the next 12 months were:-
- To employ one qualified electrician
- To grow his sales from the existing $120,000 to $400,000 per annum by the end of the year
- To have saved about $50,000 by the end of the year
- To be in contact with at least 2 apprentices training at his local trade school
- To pay his father a fair wage
Using the One Day Business Plan Action Planning Worksheets, he stepped out all the detailed actions he needed to do in order to carry out his strategies and achieve his 12-month goals.
These Action Plans became his daily reminders of the actions he needed to take to implement his Business Plan.
Before he finalised and documented his Business Plan, he followed the One Day Business Plan process to schedule monitoring and evaluation of results.
He decided that:
- He would measure and review results every month
- Once a quarter, he would adjust any Action Plans or even strategies if it was required
- Once every 6 months, he would check outcomes against his Vision to see if he was on target
Finally, so that it was all documented and put into a file that he could refer to continuously, he wrote up his Business Plan using the format set out in the One Day Business Plan program.
This meant that he could use the document to tick off his actions and that he knew exactly where to find the information he needed to make decisions.
The next day, he started implementation!
As you can see, despite being a very small business, the electrician decided to invest his time in the value of a Business Plan so that he could set targets that aligned with his long-term and ultimate Vision of "success". In this way, he felt that all his actions, even in these early days, were aligned to getting the outcomes he wanted.
As you can also see, he was able to do all of this himself, just by following the formula as laid out by the One Day Business Plan online program. These were logical step-by-step actions that led from one stage to the next in an understandable and practical way.
So, in conclusion, whatever size business you own, you need a business plan.
Otherwise, instead of "Ready, Aim, Fire," it's actually "Fire, Ready, Aim"! How can you get to the success you want without planning? Every step you decide on is not guaranteed to take you to where you want to ultimately be.
Go and learn more about business planning by learning more about the One Day Business Plan program, so-called because it is designed as a timed workshop to take you through the above process in just one day (knowing how short of time you are!).
If you feel you're not quite ready, why not take my shorter - and free - four-part video training course on how to write your business plan yourself? Sign up for the free course here.