By Dr. Robert Sullivan
Wednesday, December 3, 2003; 12:00pm EST
Planning is mandatory for business success. Fail to plan and you plan to fail.
Planning is difficult because there is no immediate feedback as to its value. But if you think of starting and operating your business in the same way you might think about climbing a mountain, the purpose and advantages of planning become clearer.
When you start up the mountain you never know what to expect: sudden change in weather, lost or broken equipment, mistakes in maps, an injury. Planning for these eventualities will allow you to deal with them and still reach your objective in spite of temporary setbacks. On the other hand, lack of planning can spell disaster. The more careful the planning, the more likely problems will be anticipated and not allowed to interfere with your ultimate business objective.
THE BUSINESS PLAN
Countless books have been written on how to write an "effective" business plan. The traditional business plan is a very well defined and structured document. It is written as a presentation to lenders, potential investors, and bankers in order to raise capital. As such, it is sort of an advertising document and, well, maybe tends to exaggerate a little.
Although many will argue the business plan is a planning document, it frequently is not because of these exaggerations. After a while YOU will start to believe the business plan... even if you know that what is contained within the document is absurd in places. (Yes sir, there is no doubt about it, sales will easily double each year... as long as we can obtain adequate financing.)
If your business is going to require investor capital at the onset, you will need that traditional business plan. But BEFORE you even get to this point, or if you are like so many of us and are starting a small business venture where little or no formal investment is needed, you need another plan... A plan for YOURSELF... A HONEST plan for you. You need a strategic plan.
THE STRATEGIC PLAN
A strategic plan is your plan for success. It will define your business mission, your present situation, and where you want to be in three to five years. A strategic plan, like the traditional business plan, should be well-structured, and include a number of short succinct statements covering the following areas:
Scope of Business
Goals and Objectives
Progress Reporting Methods
Every statement in your strategic plan will be important since it defines what your business will be, what your objectives are, and how you intend to achieve these objectives. If you find you cannot write about the areas that are about to be discussed, you need to stop and think carefully about your situation until you can. A strategic plan will allow you to anticipate problems and to make decisions that will help you meet your business goals and objectives. Without a clear goal in mind, the best decision
This is a short statement that defines your overall long term goal. This statement should define WHAT your business will be. It should be brief (20-30 words) and clearly define your customer base and you're providing. Too specific and it's not much of a vision; too general and it's unattainable. Your vision should be something to strive for... usually a multi-year effort.
Example: Build an automobile repair business, specializing in Porsche, that will gain a reputation for outstanding service within the community and will, first and foremost, always be responsive to customers' needs.
This is a definitive comment that tells WHY you are pursuing your vision. Why do you want to start a business? What do you have to give? Keep in mind that a lot of people have a vision but very few have a mission... At least one they are willing to pursue (many people shared Martin Luther King's dream but he was the one who also had a mission to do something about it).
Example: Make use of my background and experience with Porsche automobiles to provide high quality repair and restoration services; to provide jobs for locally qualified individuals; to provide for my family's needs
You must define the boundaries of your business. You cannot be everything to every-body. If the scope of your business is too narrow, the probability for success may be diminished due to the smaller number of potential customers. If the scope is too broad, you will never be able to focus on your objectives.
Example: We will provide our services for all Porsche automobiles with the exception of the 914 series. Our services will include general repairs and maintenance (less major body work), detailing, storage, rebuilding and restoring.
It is important to understand what specific assumptions you are operating under concerning your new business, since they determine and dictate how your business will grow and prosper. The more specific these assumptions are, the better. It may require a little research on your part to lay out these assumptions but the planning stage is the time to do it. It is difficult to give general examples, but in keeping with our Porsche repair facility, here are a few:
I will keep my present job for the next 12-months.
There is a significant number of Porsche facilities in the area and they are not perceived as doing a good job.
I will limit my involvement to 20 hours per week for the first 12-months.
I have fifteen customers that I can start with right now whose cars require major repairs.
GOALS & OBJECTIVES
This is a specific list that should include items that can be measured in terms of accomplishment and attainment. Goals should be realistic and attainable within one to three years.
Be able to quit my present job within 12 months.
Grow the business to generate $150K gross sales in the first year of operation.
Add 100 new customers by the end of the first year of business.
Sponsor a racing team by the third year of business.
Identify as many risks as you can. This might be difficult since it requires some negative thinking, but it is important for you to consider the downside in your planning. You must identify as many specific risks to your proposed business as possible. By doing this, you can more easily plan to deal with the risks.
Possible damage or loss of tools, inventory, facility.
Loss of customers due to the competition.
Loss of employee(s).
Loss of an important supplier.
Loss of lease, requiring a new location and facility be found
Your strategies are the methods you will use to achieve your goals and objectives in spite of the risks.
Sponsor a monthly "clinic" in which we will provide the use of my facility to members of the local Porsche club. (generates loyal customers)
Publish a monthly newsletter for all my customers. (excellent marketing), and use direct mail to identify potential customers.
Develop two reliable parts suppliers. (guard against loss of one)
Constantly reassess pricing with respect to the competition and your costs.
Be an employer worth working for... treat my employees like the important asset they represent.
A plan written and forgotten does not serve the purpose for which it is intended. Your business is dynamic - numerous variables that affect your business are changing constantly and your plan must reflect these changes and be updated or modified accordingly. Furthermore, you continually must assess your performance against the plan.
Revisit your strategic plan monthly and revise and update it as required. Your planning efforts, if carefully done in terms of assessing risk and the unexpected, should help you maximize your chances for success. You must constantly update your plan to ensure it is tracking changes that were not anticipated previously. If you find, by referring to your planning documents, you are not making satisfactory progress toward your goals, you must be ready to admit failure. Pull up stakes and cut your potential loss. Perform a post-mortem and assess the failure. What went wrong? Were the circumstances beyond or within your control? Could the event(s) contributing to the failure have been anticipated and possibly mitigated?
In the true entrepreneurial spirit, you will probably be involved in a new business venture sooner or later and you want to be able to take advantage of your previous experiences. By spending time performing a careful assessment of your failure, the lessons learned will be documented for future reference.
Lastly, be aware of this very important "planning for failure" truism: Pay yourself first or you may end up with nothing for your efforts.
Do not make the mistake of putting every dollar of profit back into your business. Your business may very well prosper for a number of years and then be plunged into sudden bankruptcy through no fault of your own. If this happens, and, if you have not planned ahead, you may very well have nothing to show for your time or efforts. Plan for this disaster by remembering that YOU are the business and deserve to be appropriately paid for your efforts. Never forget to pay yourself first. In bad times, the credi Protect yourself by placing a certain percentage of your income into a retirement account such as a SEP or 401K plan. Money in these types of accounts is protected from creditors. Plan ahead, you won't be sorry!
Fail to plan and you plan to fail. Be the exception to the rule - plan, assess, and plan some more. You MUST have a clear goal and a well-defined metho-dology for getting there. Take all the time necessary to produce a well thought out strategic plan. Plan for your success but also plan for failure.
Source of Article Robert Sullivan is the author of The Small Business Start-Up Guide, and United States Government - New Customer!. He frequently lectures on starting small businesses and appears on CNBC's "Minding Your Business" as a small business expert. His books may be ordered toll-free by calling 1 800 375 8439.
Robert also developed and maintains an extensive award-winning Internet website, "The Small Business Advisor," at http://www. isquare. com/.