How successful do you want your business to be?
You only have so much time and so many resources
The most successful businesses spend time planning to ensure that their time and resources are put to best use exactly where wanted
Imagine you are building a house…
Do you just turn up, start digging and laying brick? Of course, a house can be built in this way and there is a chance it might go well. The bigger and more complicated the house, the smaller this chance would be
Nearly all of us employ architects to help plan the size and shape of the house and how to build it. We massively increase the chances of a well built house by planning
Why would you not plan the size and shape of your business and how you are going to get there?
Planning co-ordinates activities within your business
Co-ordination of activities within your business is important, regardless of size. As businesses grow, the complexity of keeping all the moving parts working to support each other becomes harder. More time spent planning, the greater the level of co-ordination achieved
A simple example: what would happen if you carried out a marketing campaign which is expected to result in a 50% increase in sales but no-one had told the production team or you have not hired additional staff to deliver the work?
It would be somewhere between a waste to a disaster. These situations happen within businesses that don’t plan, regularly on a smaller scale, sometimes on a large scale
This wastes resources, time and energy and results in lower profits and at the extreme can be fatal
Planning improves performance
- Planning provides focus for the people and resources in your business increasing the chance and speed of achieving your goal
- Less waste and unfinished activity / projects
- Planning helps identify potential problems early. This provides the opportunity to develop solutions before the problem becomes reality
- Planning reduces firefighting which is usually very time and energy consuming
for these reasons and more, the result is usually significantly better than if no planning took place
Why goals help
If you don’t have a goal, then where are you heading to? How do you staff know where the business is heading to? How can they make decisions that support a common direction? If your business does not have a goal or a set of goals, it makes planning that much harder
Deciding and agreeing on specific goals can be challenging, especially when there are very different views within the business. The benefits of articulating clear goals to the wider business which staff understand, can relate to and are happy with, is significant. [The goals should not be just financial targets]
How else are you going to engage with the team members in your business and get common understanding of the direction of travel for the business?
Starting to plan
What is the key thing that you do?
What is the key product / service or group of products that you sell?
What activities and processes are undertaken to take the inputs into your business and turn them into the outputs?
Who needs to do what and when?
Some of the above will be obvious, some less so. There are likely to be many other questions specific to your business that also need to be considered
Another key area to understand is the relationships between different areas and processes within your business
For example, if you buy X minutes of TV advertising on a specific channel at a specific time, your sales for the next 3 weeks increase by Y%, which then reduces down to the original level plus z% over the following three weeks. This means that you need to increase production 4 weeks prior to the TV campaign to increase stock levels, which means increased total hours work in production…
The plan should focus first on the activities and then translate the activities into a financial budget to check if the plan delivers against profit, cash , return on investment and any other criteria the business uses to judge its success
It is normal in a strong planning process for lots of debate on all the potential choices that could be taken. Bringing together different team members (e.g. production, marketing, sales, finance , HR etc each with different backgrounds, viewpoints and pressures) helps create a robust plan and should promote understanding of the interdependencies across the many areas of your business
A lot of businesses focus on just the financial plan and then expect the relevant departments to plan what activities they need to do to achieve their part of the financial target in isolation. This does not promote cross departmental understanding/co-operation, understanding of the relationships between departments nor does it help resolve the choices that come up during the planning process
The financial budget or forecast
The financial forecast should be used to check what the operational planning delivers in terms of profit and cash. If the financial forecast is not good enough, go back to the operational plan and make changes. Revisit the financial forecast
This cycle should continue until you are happy with both
When should you undertake planning?
The one thing you can be sure of is reality will be different from your plan. There are a whole raft of variables in every business, with many often changing on a regular basis. Your plan should be updated on a periodic basis to take into account the important changes
How often depends in part on your business, the rate of change in your marketplace, the resources you have available and how you manage the planning process
An annual plan is rarely good enough to maintain co-ordination across the business for a year. Consider quarterly, monthly or even weekly planning cycles. The key focus should be the activities that need to be undertaken and the allocation of resources across those activities to produce the targeted result
If you would like help with your planning, forecasting and budgeting processes, please contact us