Key components in and organisation's success will depend on a great degree on how well you;
can gather and interpret information
adapt to change
manage staff and resources
promote your business
look after customers and more.
This is where forward planning can help you.
A colleague once told me that 'even a bad plan is better than no plan at all'. A bad plan at least shows that you have given some thought to the direction you want to go in.
A good plan takes time and effort, especially the first time you do one and many business owners or operators think they don't have the time, or don't see the value in it. But believe me... it is worth the time and effort!
It is an opportunity for you to build solid foundations for your business, based on known facts and these allow you to:
be very accurate in your plans and future projections.
avoid unforeseen pitfalls and crisis situations
spend your money and/or other resources in the most effective way
stay ahead of the market
make the most of every opportunity
be pro active and choose your own course rather than be reactive and follow everyone else
stop wasting time, effort and resources on inefficient processes and more
Good business planning involves:
looking at what you've done in the past few years
looking at where you are now
drawing conclusions from the above two points
based on that information determining your objective for the coming year/s
setting key strategies to help achieve the objective
Analysis of Past Performance
In this section of a business plan you look at the past year (or two) to take a good look at what worked and what didn't. Where you came from is every bit as important as where you are going. You need to look at:
What promotional activities did you run- for example did you have any discount deals, special offers etc?
What worked? What didn't?
Why did the activities work so well, not so well - find the reasons
Advertising campaigns
(again) What worked? What didn't?
Why did the campaigns work so well, not so well - find the reasons
What mediums did you use? (ie Newspapers, magazines, radio. List the actual companies you used as you may have used a number of different ones.)
How much did you spend on them?
Which ones generated enquiries and which ones didn't?
Did you keep track of the enquiries, if so, what were the results?
Keeping statistics on where enquiries come from can help you to use your advertising budget in the most effective way. There's no point in spending a lot of money on advertising on television, for example, if most of your enquiries come from newspaper ads or word of mouth. Asking customers where they heard about you and keeping a record is the best way of determining advertising effectiveness.
Were there any noticeable or unusual increases or decreases in your business? If so, why did they happen?
Were the increases/decreases at any particular time of the year, or did they affect any particular product or service. If so why? Do a detailed analysis of product and service sales. How many of each individual product or service did you sell? Break these figures up by month (as shown in the graph above) as this will, again, show up regular high and low periods which will then allow you to forward plan. For example in high sales periods you know that you will have to order more stock and put on more staff whereas in low demand periods you order less. You can plan for these peaks and troughs in advance... because you have statistically shown that they are coming. An example of a detailed sales analysis is shown on page 15.
Did your competitors do anything that impacted on your business? If so, what was it?
How did it affect you?
Are they likely to do it again?
What did you (or could you) do about it?
Budgets - income and expenses. This is extremely important and we will look at this in detail later in the document. Over the years these statistics will build an extremely accurate picture of your expenditure habits and sales that will show trends. With this information you can anticipate what is going to happen and proactively avoid any pitfalls or take advantage of upcoming opportunities. You can forecast - with a fairly high degree of accuracy - how much you will earn and spend in the coming year. While you might have an accountant to look after the "book keeping" for you, it is essential that you know exactly where your money is being spent and what your income is made up of.
The answers to these and any other questions relevant to your particular industry and business will give you a solid base upon which to build your plans for the future. Knowing how you got to where you are now can show you where you went right... and where you went wrong and gives a clear
Conclusions
Looking at the above information - what conclusions can you draw? For example:
What will you do again next year and why?
What won't you do again next year and why?
What will you do differently and why?
Were there any lessons to be learned?
What were they?
Did you spend money on areas that were unsuccessful / unsuccessful?
How much?
Was this money well spent? Why / why not?
Which products sold well / not well?
Will you expand your product line?
Are there any products you should discontinue?
Overview of Current Situation
It is very important to have a firm grasp of your current business environment. This is where you look at what is happening around you right now. Things that are happening that could potentially have an impact on your business. This will:
give you a clear idea of any issues that might get in the way of your plans in the foreseeable future
give you the opportunity and the time to take proactive action on any of these issues. This is much better than having to "react" to a change or problem that you didn't anticipate.
It's like having a high powered torch in a tunnel as opposed to a match!
A good overview of your current situation will involve looking at:
the business environment in which you are operating
your strong and weak points
what your competitors are doing.
Business Environment Analysis
What exactly does "business environment" mean?
At its widest view point it can mean the sum total of a number of external and internal factors that affect you and the organisation you work for.
External factors could include such things as:
Political issues. The stability of the Government can have a dramatic affect on the country's or state's economy.
Legislative issues. New legislation can have an impact on your particular industry.
Economic Trends. Are people spending money? What are they spending it on and so forth.
Social Trends. What's in.. what's not? Safety & security issues as well as environmental protection issues etc are considered here.
Competitors. What is your competition doing and how does that affect your business?
Technology. This is an area that is constantly changing and can have quite an impact on the way business is done.
Also known as a PLESCT Analysis this is a thorough look at the world around you and the influences various issues may have upon your customers, suppliers and therefore your business. Doing this type of research means that you should not be caught unawares by new legislation, trends, changes or advancements. PLESCT stands for: Political, Legislative, Economic, Social, Competitor and Technology and looks at each of these sectors and how they may affect you positively - or negatively .
Doing a PLESCT Analysis
Some of the issues to consider when doing this analysis can include such things as:
Political issues. Here you should look at the general political stability of the country or state.
Is there an election due? People get nervous around election times and are cautious about spending / investing their money
Has there just been an election? In which case is the new government likely to make changes to the status quo - and if so, how will this affect you?
International economic and social environment - how stable is the situation?
and so on....
For example changes in government often have an impact on businesses dealing with health, education and employment as existing programs are often changed or discontinued after an election, or new programs are introduced. International economic crises often have a big impact on our own market as does the increasing threat of terrorism or conflict situations.
Legislative issues
Have any new legislations been passed / or amended that affect your industry?
If so, what will you have to do to comply with them? How will these changes affect:
staff?
resources?
policies and procedures?
costs?
Do you need to obtain any licenses or permits?
For example all staff working in the childcare industry, or dealing with under 18's, must have a Blue Card, while industries dealing with tobacco or alcohol have very strict licensing laws.
Economic issues and trends
What is the current economic climate?
Does the current international climate have an effect on us?
Are people spending more / less money?
What are they spending it on?
Are they likely to spend it on your product or service?
For example, the cost of living is currently rising faster than wages - things such as petrol prices and interest rates are increasing rapidly and people are thinking twice about spending their hard earned money.
Social issues and trends
People will often be influenced in their purchase decisions by "what's IN", or may wish to keep pace with friends
Environmental issues such as water saving, conserving energy and so on can have an impact on people's purchasing decisions and so need to be considered
Cultural issues also need to be considered - people from different countries and backgrounds have views and customs that may dictate how they make their purchasing decisions.
Competitor information - This is a very important part of your business environment analysis - you need to know as much as you can about your competitors. Questions you need to ask are:
Who are they?
Where are they located?
How big are they (compared to you)?
Do they have any affiliations?
What are their promotional activities?
How do they advertise?
What do they advertise?
How does their product range compare to yours?
How do their prices compare to yours?
How does their service compare to yours?
What impact do they have on your business?
The answers to these questions will give you an overview of how you compare to them and what you can do to improve, and therefore win extra business.
If practical, a product/price comparison grid is an excellent way of keeping an eye on how you are faring against them.
It's also a good idea to also do a SWOT Analysis on your main competitors (next section) - you need to be able to:
counter their strengths
take advantage of their weaknesses
take advantage of the same opportunities and
maximise their threats.
Technology -
Is there any new technology available that will have an impact on the way you do business?
Is it viable for you to adopt this new technology from a cost point of view?
Can you afford not to adopt this new technology from an efficiency point of view?
What impact does the internet and electronic means of communication have on your business?
Internal influences also need to be taken into considerations and could include:
The overall economic state of your business. Is it doing well or not?
Change of ownership or management of the business. This could have a big affect on the internal workings of the company and the company morale.
Change of direction for the business. Are you offering new services or products?
Updating or upgrading of the business. New premises, new equipment etc.
Down or Upsizing. Are you laying off staff or hiring more?
Looking at the PLESCT Analysis and your internal influences in detail will give you a firm understanding of what is going on around you, and will help you:
avoid unpleasant surprises that could be costly and damaging to your business
stay a step ahead of your competitors
help you take advantage of new opportunities quickly
minimise the impact of negative trends.....
SWOT Analysis
A SWOT analysis allows you to have a deep down, honest look at your organisation in terms of its strengths, weaknesses, opportunities and threats and to look at ways to make you stronger.
Strengths
What are your organisations strong points? For example:
Do you have a great location?
Is it easily accessible?
Is it a long established company?
Does it have an excellent reputation?
Does if offer anything unique?
Do you have a lot of repeat business?
Are your prices the best?
Are you a market leader?
and so on.
Weaknesses
What are your organisations weaknesses? For example:
Is it a newly established business and not yet well known
Is the infrastructure in the surrounding area poor making it difficult for customers to get to you?
Are there any problems with suppliers or staff?
and so on. A point to remember is that not all weaknesses are negative and could be viewed as opportunities for improvement.
Opportunities
What opportunities are there that you could take advantage of? For example:
New legislation opening new markets to you
New housing or business developments bringing new customers into your area
New technology that will make your production or processes more efficient
Introduction of new product or service lines that will increase revenue
and so on.
Threats
What things could stop you from achieving your goals? For example:
A new competitor in the marketplace
A change in legislation that will mean major changes to your business practices.
Re-zoning of your area or roadways changing and taking customers away from their current routes (where you are located)
and so on.
Conclusion:
When looking at your SWOT Analysis what areas need to be addressed?
Strengths - what can you do to capitalise or maximise on them?
Weaknesses - what can you do to minimise or negate their impact. Which of them can be turned around to become a strength?
Opportunities - what do you need to do to take advantage of these opportunities? How can you ensure you get your slice of this opportunity?
Threats - what can you do to avoid or minimise the impact of the threat?
The answers to these questions will form part of your business plan.