What Direction is Your Company Going in?

During the summer, I went to visit a friend. When I arrived at his place, I found him busily looking over a map of Ontario. I asked him where he was going and he replied, "I am taking the family to Algonquin park in a few weeks and I don't want to get lost so I am planning the route". I pondered over what he had said and thought to myself, most people would not dream of going on a trip to a strange destination without referring to a map to see how to get there. Similarly, business is also a journey that requires careful mapping. Many companies fly by the seat of their pants without a plan. Is running a business not important enough to bother planning or does the owner want to leave the journey to chance?

Some business owners will say that things are changing too fast to have a plan. I am not speaking of traditional business plan (the static large book that sits on a shelf and no one looks at it). In football, for example, before every play, the quarterback will tell the other players his "plan". In football things are also changing fast, you have no idea what the other team will do. Many factors can prevent the quarterback from making a successful pass. But without a game plan, individual players would not be working in harmony for the good of the team. This analogy also holds true for business. We don't know what the future will hold but we can have plans and contingency plans to help guide us to success.

So what is business planning? Business planning is the removing of the owner from daily operations to look at the big picture of where the company is going. The business map consists of a number of reports and systems. The first thing the business should do is look at where they have been and where they are today (historical data). Historical data can be found in your accounting system and other management reports that your company generates. Secondly, consideration must be given to the current businesses resources, market outlook, the competition, and where you want to be in the future. In business, there are infinite possible destinations where the company can end up. Some of the possible attributes of these ending destinations are:

• Level of profit
• Amount of cash
• Number of store locations
• Products or services that are offered
• Size of the business
• Number and qualifications of the staff
• Annual sales
• Owner involvement
• ETC.

The company's future attributes would be defined in writing with an implementation schedule that has a reasonable time line to achieve the changes. Since cash is vital to a business, a minimum of a one year cash flow is required to see whether there will be funds available for future operation and possible expansion of the business. Part of doing the cash flow is looking at your business' budget. By setting goals and objectives for your business for the next year, budgets can be established for the purchase of assets and for the day to day expenses of the firm

For many companies, especially companies that are just starting out, the marketing plan may be critical to the success of the business. If you have a great product or service, but no one knows about your company, you will not be able to make any sales. The first objective of your marketing plan would be to create awareness of what products or service you are providing. The next step is to communicate the value of purchasing the products or service from your company. Consumers buy products or services that provide a solution to their problems or that fills a need. Thus it is imperative that you communicate to your customer that you can satisfy their wants.

In order to tie the whole business map together, some form of performance measurement system needs to be implemented (see last issue on balanced scorecard). Allotting fifteen minutes every month comparing actual performance against budget will allow the owner to determine if the company is on track for success. If the company is on track, the fifteen minutes spent looking at how a company is doing will provide a sense of relief that everything is going as planned. If the company is off track, management can decide what corrective measure should be taken before they get too far off track.

What about the business that does not plan and is doing great today? If your business is presently making extraordinary profits it is only a matter of time before the competition recognizes your success and will try to copy what you are doing. By actively planning the competition can then perfect what you are doing right and may actually drive you out of business. A few years ago who had heard of Walmart? With successful planning and a vision, Walmart is doing a great job of squashing the other department stores who for years could do no wrong. It is not too late for some of the stores to prevent Walmart from destroying their business, but it will take serious planning and hard work.

So an owner has two choices, leave the outcome of their business to chance or decide for themself what they want their company to look like. Events will happen in the future to prevent or hinder plans, but a good planner will make educated decisions on what course of action will get the company back on track. Just like my friend who was going to Algonquin park, the map will not guarantee that he won't have problems getting to his destination; Construction on the QEW, for example, may lead him to the service road, but the map will let him know that he is off track and offer alternative routes to get back on the QEW.

The last issue in business planning is; Are you too close to the business to be objectionable? Having an outside person, preferably with business knowledge, go over your business plan is an ideal way to find bad assumptions, missed information, or over aggressive goals. It is always nice to be able to bounce ideas off of someone you trust. Some companies will form outside advisory board to overlook their business operation on a frequent basis. Reporting to an outside advisor sometimes is the extra motivation that an owner needs to meet and exceed goals because they do not want to look bad to their advisor.

Whether you are just starting out in business or have been in business for years remember to take time out each month to look at the big picture of your company. Remember:

Businesses do not plan to fail, they fail to plan!