66 BUILD 122 February/March 2011

BUSINESS MANAGEMENT

Businesses don’t plan to fail, they fail to planSetting up a business without a plan is like travelling without a map. If you want to survive and succeed, your planning needs to be ongoing. By Fred Stewart, www.businessdoctors.co.nz

Imagine knowing that you will be airlifted into far eastern Russia. You’ve never been there before, and you’re expected to drive to your destination in Moscow as

efficiently and effectively as possible. Then add the challenge of setting off without a road map and probably not knowing the language.

This is like many people’s approach to their journeys in business. They have a vision of where they want to go, but they don’t formalise that goal in writing or prepare an achievable route that considers the business environment.

Lack of planning is often a major reason for business failure. Travelling blind without a business plan or map can be slow, frustrating, risky and sometimes even impossible.

In contrast, if you look at today’s top businesses, you will find that a common denominator for success is a carefully developed and constantly referred to business plan.

Define your business – be informative

A business plan should define your business precisely. You need to know exactly where you

are now, where you want to go and the best way to get there. A business plan will: ❚ direct a disciplined strategy that asks the right questions of the right people on the right subjects

❚ guide you in making business objectives specific, so you can measure progress and stay on track to sustainable and profitable growth

❚ enable you to create a persuasive case when you need to secure outside financial resources for starting, expanding or acquiring a business.

Business plans need to be informative, not complicated. To get into business is relatively easy; the challenge is to survive and succeed.

Carry out a SWOT analysis – strengths, weaknesses, opportunities and threats – and write these down. Do this even ifyou don’t develop a complete business plan. You might be surprised at what such analysis reveals – like where you are heading and why.

Develop budgets and cash flows

Budgets and cash flows allow you to plan your cash requirements in the future, rather than getting caught out at vulnerable times. When developing your budget, it’s always advisable to underestimate the sales forecasts and exaggerate expenses.

Remember, a budget is only a guideline of how you believe your business will operate over the next 12-month trading period. Each month, you must religiously compare the actual against the forecasted budget. If the results show any anomalies, take the appropriate steps to resolve them immediately.

Monthly financial results are only a guide. Quarterly results provide a more accurate position of your business’s performance.

Planning is on-going, not a one-off

Business planning is a dynamic obligation, not a one-off activity designed to obtain commitments or financial participants to launch the venture. It permits you to set targets and monitor the accuracy of your judgement on a regular basis.

When your success as an independent businessperson can be measured, it’s much easier to get support for other projects or business expansion. Such support isn’t always so forthcoming when starting out.

The same approach applies to the established business that may be preparing its first business plan after several years of operation. A track record of even moderate success, particularly if it’s linked to business plan forecasting, will show that the business owner/manager knows what’s going on and may be considered a sound investment prospect.

All successful business owners monitor and review their business and marketing plans on a regular basis (preferably weekly) and develop new ones on an annual basis.