Make a plan
Have you written a plan for your business?
You have hired a new counter person for your business. During the interview, you are impressed with their product knowledge. Over the years this person has worked for other good businesses in the racing trade. Several months after hiring this new employee, you are having second thoughts about their abilities. Your employee always seems intent on telling the customer how to do it their way as compared to engaging the conversation and asking what the customer likes or wants.
You always attend the show to see and order the newest and latest products for your business. It is easy to get caught up in the excitement of the show, but some eight months after the show as your racing season is winding down, as you are looking about your business, you see several areas of merchandise that you bought last December sitting on the shelves, having sold very little.
And, at the end of the year, you are reviewing your financial statements. There are a few of the categories of operating expenses, especially payroll and advertising, that are out of line; as a percentage of sales they are higher than they should be.
As you look at your advertising expenditures for the year, you think of how you have not achieved the results that you wanted.
With each of these challenges to your year, the question you are asking yourself is what happened that short circuited your plans. Perhaps, the question to be asked is whether or not you did actually have a plan.
Each of these issues have been an unnecessary expense to the business; wrong employee; wrong inventory; wrong advertising. At the moment of making a decision about hiring or each of these expenditures, you made a decision that went in a direction different from what you had envisioned for your business. Perhaps, part of the problem is that you “envisioned” a direction instead of having a written plan for your business.
These are but examples occurring over the course of a year. We should enlarge the score of our examination to look at the business over multiple years; not just at what has happened, but instead to look at where the business is going.
The essence of our message is that the business needs a plan; a written business plan. Having the written plan means you have given a sizable amount of thought to your business. And with many parts of the written plan, because it is shared with your advisors, mentors and employees, you now have individuals who will support you as well as hold you responsible for what you are doing in your business.
Definitely having written this business plan before you open your business makes sense. You would have written it before the busyness of operating your business had begun.
The majority of you reading this article, however, have been in business for many years; why look at this idea now? Because challenges, and opportunities for your business are not a one-time occurrence.
Your business plan begins with your stating why your business exists. It is a statement that everyone can read including your customers and employees. Look at auto manufacturers; BMW is the ultimate driving machine. Volvo is in business to make the safest vehicles in the world.
It would be challenging to have a mission statement as short as these; your mission statement will tell everyone why your business exists, and like the two examples, it tells people what to expect from your business.
The second component is where you want the business to go; the vision. Your vision statement looks three to ten years ahead. What are your expectations for your sales volume? Are you selling on the Internet? If you sell from a trailer at the local track, will you add a trailer for another track? What about a second location? Is adding a machine shop in your future?
This is more than just writing a paragraph or two with a moment’s thought. It is your planning how your business will grow. Your mission statement will coordinate with your vision statement. If your mission statement focuses on knowledgeable, friendly staff selling on customer service, this is not where your vision statement says you are going “item and price” selling on the Internet.
Your third component is the company description. It is a short story; about the size of this article. In short it is the “who”, “what”, “when”, “where”, and “why” of your business. Anyone can read the description; you should be reading it frequently so that as you make decisions, you are confident that each decision stays in line with what you have written.
You can see from the importance of what we have described that you are not going to create this over the course of one evening writing at home. It is too important as well it will require your reviewing and rewriting the initial document. Add to that, this business plan is never finished. Think of the person who wrote a business plan some twenty-five years ago; they would have had nothing in their plan about the Internet.
While these are three of the most important components of your business plan, here are several parts that that bear additional explanation. You will need to provide more detail about how you are going to get your message out to your potential existing customers. We refer to this as your marketing plan. This will include all of your advertising and promotional expenditures with details of which media and the amount of dollars being spent.
You will include additional information about your management and personnel. A part of this will be deciding if you hire primarily for product knowledge or personality.
A third additional segment will be where you give extensive financial information. For the startup you include where the money is coming from to start your business and how much you have to sell to break even. With the existing business you create your budget for the coming year as well as projections for several years. If you have no outstanding loans, you can budget for a minimum of three years. If you have borrowed money, you create a budget for the length of the loan.
Together, all of these items you have created, and regularly update, create your plan to keep you and your business on track for the future; it helps to eliminate mistakes that occur by a business owner not knowing, or remembering where they want their business to go.
A small investment of time and effort now, can pay great dividends for a long time.