Most of us embark on a new year with the best of intentions – quit smoking, dust off the old treadley and conquer our fear of lycra, spend less time procrastinating… But somewhere in between January and December, life gets in the way and our best-laid plans get laid to rest.
The same is true for businesses. Many business owners return from the Christmas break feeling refreshed, reinvigorated and full of great ideas to conquer the world, or at least the relevant industry. But by the middle of the year, they’re drowning in a sea of day-to-day operations. This is why you need a plan, something by which to hold yourself and your business accountable.
Not sure where to start? Obviously, the finer detail will be different from business to business, but the following is a ‘bare bones’ guide to what to include in your annual business plan.
While financial performance is a key element of creating a business plan, you should also use this process as an opportunity to take stock of your broader business goals. Maybe you want to achieve a better work-life balance? Or expand your business into a related field? Try to break these objectives down into quarterly and monthly goals. And don’t limit yourself to the year ahead. Think big and imagine how you would like the next three, five or 10 years to look.
If you have an existing business plan, now’s the time to dig it up. Take a good look at how you are tracking in relation to the earlier goals you had set out. Remember, this is an internal document not a client pitch, so be prepared to unearth the good, the bad and the ugly. An honest assessment of your strengths and weaknesses will help you keep your visions realistic.
To some extent, market analysis will necessarily overlap with your situational analysis. However, in this section you should to take a more outward focus and analyse environmental factors that may affect your business. For example, what is the economic climate in the industry – is it in growth mode, or has it been adversely affected by the prevailing economic conditions? Are there any regulatory issues that may affect your ability to expand your business? Any significant new players, or gaps that have been left by departing players? If possible, try to look at the overall performance of the industry for the same time period in the previous year.
Unless your competitors are publicly listed, you won’t be able to delve into their financials, but you can collect useful data on their pricing and marketing strategies. When considering your competition, think broadly. For example, if you run a carpet laying company, your competitors are not only other carpet layers but also providers of alternative flooring materials such as floorboards or tiles. Think about where you stand in relation to your competitors in terms of target market and promotional strategies. If your competitors are discounting their products, maybe you need to think about positioning yourself as a premium provider with superior customer service? Or maybe it’s time to think about a more aggressive advertising strategy… which brings us to the next point.
Your assessment of your current situation, market conditions and the activities of your competitors should largely inform your marketing strategy and key messaging. From there, you need to decide on the most appropriate mediums (e.g. radio, TV, social media etc), your budget and the timing of your campaigns. Will you be resourcing your marketing internally or using external providers? Most importantly, you need to consider how all of this should impact on your bottom line and how you plan to measure the performance of your efforts.
Your operational analysis is essentially an exercise in looking at how you can be more efficient. This can involve reviewing a broad range of operational areas including fulfilment, customer service, management, personnel, technology and reporting processes. The best way to do this is to seek feedback from your employees and your customers on possible areas for improvement. Then you can make decisions on whether existing systems or functions can be upgraded, or whether they need to be replaced or outsourced.
Up to this point, your business plan might have been more about ‘blue sky dreaming’ than reality-checking. This is fine but at some stage you need to work out whether your lofty ambitions are actually achievable. This means setting out your profit and loss forecast, your cashflow forecast and drawing up a balance sheet. If you’re not confident with crunching the numbers, this is where you should enlist the aid of a competent accountant or financial planner.
Staying on track
It’s one thing to have a well thought-out annual business plan. Actually sticking to it is another thing altogether. The key to ensuring your business plan doesn’t go the way of the average New Year’s resolution is to make sure that you review it at regular intervals and be prepared to revise it where necessary.
Rather than committing yourself to revisiting the whole plan on a regular basis, summarise the important action items into a high-level to-do list. This document should ideally be no more than a page and should outline each task, the person responsible and the timeline for completion. This summary should then become an ongoing agenda item at your monthly management meetings so that performance against it can be monitored. Keeping these action items realistic will also help to ensure that everyone involved stays on track with your business plan
Lastly, accept that not everything will be within your control. Maintaining a flexible approach to implementation will help to keep the compass pointing in the right direction and will avoid your business plan simply becoming a ‘to-do’ list for January.