What direction is your business heading in? - U of I Extension

News Release

What direction is your business heading in?

FOR IMMEDIATE RELEASE

August 22, 2017

A business plan states expectations, defines risks and explains how resources will be most effectively utilized.[i] My definition of a Business Plan is; the steps necessary to accomplish stated intentions. Defining, highlighting, sequencing and clearly communicating them are challenges. Content is dictated on a case-by-case basis, and complex plans require greater organizational effort. Tools such as a summary, table of contents and an appendix with numbered exhibits help. No matter the size, a frequently used roadmap is much better than an archived file. Think quality, not quantity. In recent workshops, I have distilled mandatory content down to four areas-

  1. Intentions and the critical steps necessary to accomplish them.
  2. Financial projections that quantify resources required and results expected.
  3. Historical and situational data used to make choices.
  4. Supplements that corroborate choices (hint- price lists, menus, specifications, resumes, bills-of-material, references, etc. generally go into an Appendix).

Narrative should cover business type and orient me to goals and opportunities. Explain intentions using timelines and define the elements of your USP- Unique Selling Proposition.[ii] Elements such as branding, products offered, features, service, price and availability go into building your USP. Tell me who your targeted customers are and why?

Transition into projections by defining the number of customers available and resources necessary to attract them. Accurately state your present financial situation and look back at least three-to-five years. Then, you must venture into future projections regarding revenue, costs and profit. Without forward looking one, three and five year snapshots, a plan is not complete. Run various scenarios and locate weak assumptions. It is better to struggle with this in theory before taking on the risks of reality.

Important historical and situational information must prove that your USP is both correct and wise. Include answers to questions like-

Is the demand for my business growing or shrinking?

Is my industry changing and what trends can I identify?

What is my share of the defined market?

Who do I compete with and what are their strengths?

Have I actually tested and confirmed my USP with customers?

Many years of marketing has shown me that customer attraction and retention estimates are generally overstated. It is hard to get your message heard- even if it is compelling.[iii] As creatures of convenience and habit, it is hard to steal customers from competitors- who fight back in various ways, including price cuts. For this reason, I monitor the first few months of a launch or new strategy, but really focus on what is happening six-to-twelve months into a venture. Like elections, early returns can be misleading. This is also one reason why a new idea must be adequately funded!

Determining how customers and competitors will react to your actions is an important part of planning. SWOT (Strengths, Weaknesses, Opportunities, & Threats) Analysis is a tried-and-true technique to use.[iv] While seeming to be an easy exercise, it is one that improves over time when greater insight and group discussion is applied. Another helpful and well developed tool is the Business Canvas Model.[v] I like this model because it visually depicts issues and works well in a team discussion.

I use an Alice In Wonderland quote by Lewis Carroll to remind workshop participants why we plan-

Alice: "Would you tell me please which way I ought to go from here?"

The Cheshire Cat: "That depends a good deal on where you want to get to."

Alice: "I don't much care where."

The Cheshire Cat: "Then it doesn't matter which way you go."

Logical people will agree that having a plan is good, and helps deploy time and resources most effectively. Is plan preparation difficult- yes. My advice is to excel during the data collection and research phase. Formatting and organizational help is obtainable once the options and facts are gathered.

There are many resources to help in planning business direction, so first go to www.sba.govto locate a variety of tools. Trained advisors may be found within the Illinois Small Business Development Center network and where SCORE Chapters exist.[vi] During plan development, encourage varied viewpoints and discussion. VOC – the Voice of Your Customer MUST be included via focus/discussion groups, product trials, surveys and feedback collection. Legal, financial and tax advice is helpful, particularly for start-up ventures and succession planning.[vii] Speculation needs to remain in the ideation phase, and be replaced with details during planning.

I recommend that "departments" such as human resources, marketing, operations and sales have detailed action items. My preference is to keep them separate (or in the appendix) on the premise that a business plan is strategic in nature, while department actions are tactical.

Finally, all plans must identify KPI's- Key Performance Indicators for judging results. Ultimately, I recommend that a Dashboard be developed. KPI's and Dashboards spotlight what is on track and what is not, so deadlines, timelines and milestones are necessary. A solid plan should be accessed and used at least monthly. Maybe I am a traditionalist in thinking that plans should go through annual updates/revisions. In the shorter time frame, react to opportunities and threats, but give your hard planning work time to play out.

[i] ROI = Return On Investment. Please see www.investopedia.com for a basic definition. A ROI that I encourage all business owners to measure is TIME and to always be thinking about how to use it most effectively.

[ii] USP = what will compel your targeted consumers to purchase your product, service and brand in lieu of other options/choices available? This term is commonly used in marketing workshops.

[iii] The challenge is well covered in "Platform: Get Noticed In A Noisy World" by Michael Hyatt, 5/1/2012, published by Thomas Nelson Publishers.

[iv] "How To Create A SWOT Analysis" by Erwin Henriquez, 5/1/2017: http://blog.euromonitor.com/2017/05/create-swot-analysis.html.

[v] Wikipedia has an excellent summary of the Business Canvas Model, developed by Alexander Osterwalder in 2008 and then formalized by him with ensuing thesis, guide books and articles. It has enjoyed wide usage since then.

[vi] There is a national network of America's Small Business Development Centers http://americassbdc.org/.

[vii] By my definition of a Business Plan, Succession Planning fits. This is a growing area of need as baby boomers age out of ownership. This illustrates that planning is not just for new businesses.

 

Source: Steven Groner, Extension Educator, Community and Economic Development, stevenrg@illinois.edu

Pull date: March 31, 2018