Why Plan Your Businesss?

The owner of a small sheet-metal fabrication company once told me, "Why plan? It only gets in the way of what would have happened anyway." That's a fatalistic notion often held by managers of small businesses. Too many believe that they're totally at the mercy of larger competitors. In fact, for many, exactly the opposite is true.
Think of the reasons for your company's success. You'll probably come up with a series of traits that are uniquely yours-characteristics that your larger competitors can't begin to duplicate. That's why you're in business.

Of course, you may already believe in the idea. However, you may have to sell it to the others in your company. This ammunition may come in handy.

Recognizing Uses of the Plan

For many of us who left corporate America in favor of a smaller work environment, the idea of drafting a business plan may seem offensive. After all, isn't frustration with all that busywork one of the reasons we left in the first place?

We all have an aversion to doing anything on our job that doesn't immediately help the situation we're now experiencing. However, isn't it also true that a little foresight and action before the fact can help eliminate many of the problems we face each day. Wouldn't it be nice to anticipate something like a price cut by your major competitor or a rise in the interest rate on your credit line? Of course it would. And with that anticipation comes an organized and effective response. That's what planning does. Additionally, we prepare a workable business plan to

• Determine where the company needs to go


• Forewarn of possible roadblocks along the way


• Formulate responses to contingencies


• Keep the business on track to reach its planned goals

Planning for Promotion of the Company

Many people associate a business plan with start-up companies. Often our first exposure to a business plan is for the purpose of convincing investors and lenders that we have a viable idea at which they should throw money. That's not what we're developing here.

Though the techniques may be similar, the purposes are entirely different. So are the results. Promotional plans are often untested, pie-in-the-sky theories of what someone thinks will work. The goals, objectives, and numbers are usually unproven. Detailed departmental plans for hitting targets are frequently hazy-if they exist at all. Promoters don't want to burden their investors with the mechanics of execution. That comes later, after the money is in the bank.

Think of a start-up's promotional plan as concept-driven. It's more general in nature. The presentation leaves many questions of practical execution unanswered. These plans are fine for their purpose. However, most aren't intended as a blueprint for running the company.

Planning for Operational Purposes

We're not creating a promotional plan for a new start-up company. Instead, by using this book, you create a practical realistic planning tool for your business. The emphasis is on integrating the details of what each department within the company does to help the firm reach its overall goals. We want to tell each person in the company the single most important thing they need to do-must accomplish-to contribute to the overall success of the business. Certainly this results-oriented attention to detail can (and probably should) be used for a start-up venture. However, the promoters are right-it would confuse outsiders not familiar with the inner workings of the company.

Our focus is on practical solutions to everyday business objectives. We design these to work in concert with one another. When they do, the company moves from where it is today to where its owners, investors and managers want it to be.

Establishing Goals

Why establish goals? I've heard from colleagues who run other small businesses that they always seem to fall short of any goals they set for the company. There's almost a feeling of helplessness. Their companies are small and lack the resources needed to turn goals into reality. Some wonder why they should spend time developing a business plan that might help the company make money over the next year or two-especially when they could be working on something else that's guaranteed to make money today. That's hard logic to refute, especially in a tight economy. Many small-business owners and entrepreneurs go after the quick buck. Those are the ones that don't last. Companies that lack a definite direction and the ability to stay on course eventually sink. It's the firms with vision and a plan to exploit that vision that become the stars. If you don't set goals and then try to reach them, it's guaranteed that your firm will stay right where it is today. With changing technology, changing customer demands, and increasing sophistication, marching in place is business suicide. During the 1990s and as we approach the next century, no company has the luxury of conducting business as usual. If you stay where you are today, the rest of us will leave you in the dust.

Company Goals

These are the targets for change and transition that your firm must reach over the planning horizon-for our purposes, the next twelve months. Company goals cover such major issues as

Products offered

• Customers targeted


• Company image


• Competition


• Levels of service


• Product quality

Companywide goals established in the business plan move the company into the position where it needs to be.

Department Goals

At very small companies, often that's for one person. No matter. Design department goals to connect with specific requirements of both the overall company goals and the goals of other departments in terms of product and timing. We make department goals in order to

• Assist other departments that depend on those specific results
• Achieve the overall company goals

A good example would be in the area of finance. Say the firm needs additional funds to buy the machinery needed to expand its manufacturing operation. This will generate the sales revenue needed to meet overall profit targets. Here are examples of specific department goals:

• Get additional funds.


• Purchase and take delivery of new machinery.


• Expand manufacturing.


• Generate added sales.


• Help attain the overall profit objectives.

Failure to reach of any one of these department goals could jeopardize reaching the overall company's target. Additionally, within every department, it's easy to identify exactly what that department must do to further the company's cause.

Appraising Your Current Position

The question here, however, is why do this? After all, most managers of small businesses are close enough to their everyday operation to know where they are, aren't they? Not necessarily. At least few take the time to think about where they are, then write it down so that others can judge its accuracy. We're talking about things like:

• Market position


• Company strengths and weaknesses


• Reputation


• Industry viability


• Technology


• Product line


• Adequacy of capital


• Capability and sufficiency of employees


• Sufficiency of plant, machinery, and equipment (the infrastructure)

Often the hardest part of starting a business plan is honestly determining your current position today. It's not always so obvious. Take the case of Domino's Pizza Corporation. What business is it in? Of course, it sells pizza. So does every one of its competitors. The Domino's planners decided that differentiating Domino's product based on higher quality was too hard a sell. Besides, it wasn't necessary. So what business is Domino's really in? The convenience industry. Its pizza isn't any better or worse than most of the competition. However, the niche Domino's chose for itself in its plan was the business of selling convenience. For a while it had that entire market to itself. Another example is that of a payroll processing service. Its current position is that of providing financial convenience to its clients. The company performs a task that other companies would rather not do. While assessing the current position, someone came up with the bright idea of expanding the services offered. After all, financial convenience extends beyond simply doing the payroll. Why not add bookkeeping, tracking and collecting receivables, and personnel consulting? See how the planning process not only answers a lot of questions you may not have thought about for some time, but prompts questions that may turn into opportunities? That's the kind of penetrating thought that goes into assessing your firm's current position.

For more related article check out:
All in One Business Planner