This is the third part of business advisor Phil Symchych’s new four-part series on how you as a business owner can increase value for your customers, your company and your shareholders. Find part one in our Summer 2021 issue and part two in our Fall 2021 issue.
Are you winging it?
At a recent mastermind meeting with other business owners, we were discussing how they grew their businesses, not by developing and executing a formal business plan, but by trial and error, hustle, and lots of hard work. These business owners gave reasons (excuses?) for not having a plan:
- they achieved success without a formal plan
- they couldn’t have predicted the actual course they took
- they seized opportunities created by hustling
- they didn’t have time, and still don’t, to work ON their business because they were (or are) too busy working IN it.
Do these excuses sound familiar? If so, you’re bound to stay a small business, even if you have lots of employees, because the excuses represent a mindset I call “small business-itis.” If you’re not working on your business, do you know who is? Your customers and your competitors are in control.
The fastest way to enhance the valuation of your company—what it would be worth to an arm’s length buyer—is to think and act like a larger company. That means planning, measuring, adjusting, scaling what works, and fixing what doesn’t work. Planning reduces growing pains and accelerates growth, profit, and success. By the way, bankers say their top 25 per cent performing business customers all have—and use—business plans. The plans are not just prepared for the banker. They are an important management tool.
A good planning process starts with analyzing data to determine what you’re good at, and where and how you make money or lose it. Next, rank your customers and products by contribution margin—meaning how much total profit they bring in. The best companies will analyze their top customers and products on a regular basis.
Now, determine what changes you need to make to your customer base and offerings to maximize value to your customers (see my previous article in this series) and profitability. This is an important step. You change from the small business mindset of winging it to the big company method of proactively and intentionally determining what your offerings are and who you want your customers to be. The plan is about how you will attract your ideal customers, deliver value to them, lead your people, and manage the operations and finances along the way.
One reason some people don’t write business plans—other than thinking the plan will constrain them (it won’t) or they’re too busy (they’re not) —is because most templates available on any good bank’s website are about 15 or 20 pages long, before there is any content put into them. That’s overwhelming.
You need a plan that works for you, and ideally fits on two pages. Divide the year into quarters, the quarters into months, and the months into weeks, and you’ll have a clear action plan that is focused on goals and measurable. Plus, everyone will know the top three priorities for that week.
Answer these 11 questions, and you’ll have the foundation for a good plan.
- What are you good at doing (internal focus) and what value does this provide to your customer (external focus)?
- Who are your ideal customers? Be specific.
- What do your ideal customers want—and need—from you in the future that you could deliver but aren’t delivering now? This is the fastest way to grow: new offers to existing customers.
- How can you attract more ideal customers? More difficult, takes longer.
- How can you improve your quality, speed, convenience, and value? This is important heavy lifting for your leaders, and sometimes you need to break what’s working to make it better.
- How do you measure sales, operations, and financial performance? You need real time metrics across your business.
- What ideas do your front-line people have to improve sales, operations, and financial performance? Innovation happens at the front lines and by listening to customers.
- How can you leverage technology, from sales and operations to expanding your digital footprint, to grow your business and attract and serve more customers?
- How can you incentivize your people to perform as a team and grow your business? This is about training and compensation.
- What resources do you need, what obstacles do you anticipate, and what are the main steps to grow your business 20 per cent (or more) next year?
- What are the expected sales in units and dollars, margins, expenses, and cash flows to execute the plan? These becomes your measurement targets and budget.
Winging it is not a strategy. It’s a symptom of small business-itis. Analyzing what works, clarifying your goals, and developing plans and budgets to achieve your goals will help you grow, improve profitability, and increase the value of your business.
Full speed ahead!