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The Secret To A Successful Business Plan

Tuesday, May 06, 2014   By Mike Reddy

 


Small businesses are constantly bombarded by change.

Although we may feel that a lot of change is forced upon us and there is little we can do about it, the fact is that this is the environment that we choose to play in and with proper planning we can use it to our advantage.

If we were to go deep sea diving we would be regarded as foolhardy if we didn't first prepare for the increasing water pressure. The same would apply to holidaying in the northern hemisphere and taking our existing wardrobe with us. 

There is little we can do about it but we know the conditions we will be operating in will be very different so it makes sense to prepare.

In small business terms, although the external factors are largely ignored in the business planning process they still need to be factored in to our plan.  

Small business owners often cite examples of previous business plans whose usefulness hardly outlasted the day they were signed off.

My observation has been that most were prepared with the proverbial rose tinted glasses, they only accounted for one scenario (which happened to be a favourable one) and that the marketing plan didn't reconcile to the financial forecast.

The small business plans that tend to work, that tend to produce results and tend to deliver desired outcomes, are not prepared from business planning templates purchased over the Internet.

Successful small business planning is largely a result of the process itself - the final document is merely testament that the process was appropriate for the business' environment and objectives. 

And that’s where the Internet versions come unstuck.

They are specifically designed to take that process away.  To remove thought and replace it with a Q&A which steers the author down a certain, expedient, pre-defined track.

A good business plan might be a few pages long, it might be a few chapters long. But the proof of the pudding is in the eating. 

It is not the plan itself, but the extent to which it is supported by key performance indicators (KPI's) so the small business owner and key stakeholders can easily keep their finger on the pulse without having to refer to the plan itself.

The small business plan needs to allow for flexibility. It is a living document, one that succeeds because it is designed to evolve.

The secret is to regularly review, revise and correct.

And it needs to support the notion that you can easily identify and nurture your most lucrative customers and continue to respond to their changing needs.

Often a significant change in the business environment can result in a knee-jerk reaction which usually includes widespread cuts.

Too often, these cuts can impact on that business' ability to re-establish itself when conditions improve.

In fact, they often increase the hardship.

Instead, the plan should go through a review process to identify how the changes are likely to impact on the business.

It may mean preparing three scenarios:

  • best case,
  • worst-case, and
  • likely case

and applying a weighted average on each to come up with a pretty good forecast.

That forecast can then be used to adjust the various parts of the plan so the small-business owner can identify smart ways to control costs that will improve the business' liquidity while leaving it in a better position to increase its market share when things improve.

And, properly implemented, that approach provides a great opportunity to take a steal on the competition.


Mike Reddy is a Chartered Accountant, business coach and advisor helping businesses in Sydney, Melbourne, Brisbane and Gold Coast to easily increase their profits and cash flow. He is currently President of the North Sydney Chamber of Commerce, a Regional Councillor for Sydney North East and a member of the Institute of Chartered Accountants Sydney leadership team. As well as advising businesses, Mike presents business development seminars and webinars and is regularly contacted by the media to comment on small business matters. You can connect with him on Facebook, Twitter and Google+.