Business Planning and Business Plans – What’s the Big Deal?

Whether you are a veteran business owner, have recently begun your own venture, or are still in the dreaming stages, you have invariably spent many hours thinking about and envisioning your organization. While it is always exciting to try to realize your dream in your mind and to project that image into your future, the realization that barriers, stumbling blocks, and necessary “to-do’s” exist. These subjects range from broad to very specific, and can include questions such as:

  • Who is my ideal client?
  • What would be a good name for my organization?
  • What is my unique selling proposition (USP)?
  • How will I balance my work life with my personal life?
  • How big do I want this business to be?
  • Do I have the necessary resources? If not, where can I get them? If so, how do I most effectively utilize them?

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Business Plans – A Tool For Better Management

Things are going pretty well, you say? Sales are up. The employees are happy. There is even a little cash left over for that special project you are anxious to start. Why start messing with a good thing? “If it ain’t broke, don’t fix it.” Right? Wrong! Many managers believe that business plans are used for only one purpose: To raise capital. While it is true that business plans are written more for this purpose than any other, it is by no means the only purpose. An often overlooked and significant benefit of a business plan is not necessarily the Plan documentation, but rather, the process itself and its impact on the management team. A business plan requires the managers to take an objective, critical look at their business. The process can change how a business is perceived, open eyes to new opportunities or focus attention on those operations that are not

The planning process involves setting organizational goals that are then translated into departmental goals that are then translated into goals for the smallest logical part of the business, (e.g. each individual sales representative in the case of a sales department). The textbook definition of the smallest logical part of a business is a “Strategic Business Unit.” If you’re not concerned about impressing people, call it a Profit Center.

Profit centers are organized in a manner that makes sense to the particular business. Some businesses may organize profit centers by classes of customers. Other businesses may think in terms of individual product or jobs. Still others think in terms of lines of business. Do you have a different pricing structure for different classes of customers or for certain jobs? Do you require higher profit margins on certain products? Do certain products, customers or jobs just naturally “fit” together? Answer these questions and you will begin to think of your business, if you do not already, as a cluster of smaller enterprises. This cluster of smaller enterprises can be thought of as an investment portfolio with each profit center representing an individual stock. Which should be invested in? Which should be liquidated? An investor has an overall goal for his portfolio. To achieve that goal he may take on higher risk investment for potentially higher return or he may accept a lower yield for proportionally lower risk.

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Breaking Down Business Planning Roadblocks

Kicking & Screaming

Most business owners and department managers know they “should” have a plan. Yet in all my 25 years of helping business owners and managers grow their businesses, just four of my clients possessed a written plan, and only one was actually using it. Why do so many business owners skip this crucial step? Some common explanations I’ve heard go something like:

  • “I don’t need funding, so I don’t need a business plan.”
  • “My plan is going to change anyway, so why should I waste my time creating it?”
  • “It will take too much time.”
  • “I started to and found it overwhelming.”
  • “I didn’t start a business to do the types of things I did when I worked for someone else.”
  • “I don’t want a big company. I don’t want employees.” (I just created a J.O.B. for myself.)
  • “I don’t know which planning program to use; there are so many out there.”
  • “It’s expensive to plan and I need to spend my money on other things.”
  • “I don’t need to plan; I just want to work in my business.”

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