Planning a Business

Most business coaches will tell you most people spend more time planning their holidays than Planning a Business!

Think about just how sad that really is. The worst result from a badly planned holiday is you vow never to do that again. The worst result of a poorly planned business is financial ruin!

As a business coach I have heard multiple reasons as to why individuals don’t ever get around to creating a Business Plan but here are a few of the the more common ones:

1. How can you possibly know what is going to happen in the future?

Clearly you can’t predict the future of a business anymore than you can predict a airline will be grounded due to poor weather and that is exactly why you need to start Planning a Business before the business ever makes its first sale.
Your Business planning shows you a realistic path and provides measuring steps along the way. For example if you mow lawns for a living and can work 40 hours a week you cannot reasonably plan to make $10 000 a week on your own. What you could plan to do is have a team of 10 people working for you in three years time each earning $1000 a week. Your plan would then include Bench marks to show at what points in time and at what turnover levels you would look to hire new staff, buy new equipment, take on more clients etc.
Each month you compare your actual ‘real life’ position to that which you business plan predicted. If your mowing business takes off quicker then you might buy equipment and hire more staff a little earlier than the plan predicts. If your business takes longer to get going you delay the purchases and don’t hire new staff.
Finally whilst your original plan may have been to hire 10 people and turnover $10 000 a week you may find that after hirering 5 people the administration of staff is more taxing that you thought it would be so you look at ‘revising’ your plan and capping it at say $5000 per week.

2. Don’t know where or how to start Planning a Business?

Most people planning a holiday to a new destination will jump on-line and read up on where they want to go. Flights, accommodation the best time of year etc. They will write all this down, get some quotes from different motels and airlines and write that down.
A business plan is no different all you do is start with a time and place for final ‘Business’ destination in mind e.g Self employed mowing contractor with 10 staff and a turnover of $10 000 per week in 3 years time.
Now look at your current position e.g. a single self employed mowing contractor with a turnover of $1000 per week.
Let’s say that in your Business Plan you predict that each new customer will generate $50 in new turnover and you decide you can do a letterbox drop of ‘flyers’ advertising your lawn mowing business every month.
Your business plan predicts a 10% acceptance rate from your letterbox drops netting you $500 in new revenue each month.
Your plan points out that every time you find 15 new customers you will hire a new mowing contractor.
Now let’s say you plan works perfectly and in month 1 you do 100 letterbox drops and get 10 new customers. Month 2 you do the next lot of letter box drops and begin interviewing potential new staff. If, on the other hand. your letterbox drops only yield 5 new customers instead of 10 then you predicted in your plan. All you do is adjust your plan to now being over 6 years. OR!! double the number of ‘flyers’ to 200 you hand out.

3. Planning is very complicated.

Well in many of the countless books and websites written on the subject it certainly seems so but in truth a working Business Plan can be very simple.
Start with an Excel (or equivalent) spread sheet.
Create 12 sheets for the next 12 months of your business’ operation.
Then create sheets for 8 more sheets for the quartly targets for years 2 and 3.
Now fill in the way your business will look in 3 years in the final quarter of the year 3 quarterly spread sheet. Include all the detail you can e.g. turnover, staff, how many hours you will work, what your roll will be, where your office will be, how much equipment you will own. The Lot.
Now take everything in the final year 3 sheet and take 2/3 of each amount and fill in the final quarterly summary of the 2nd year sheets e.g. if you aim to have 10 employees at the end of year 3 then at the end of year 2 you need 6-7 employees and the turnover to match.
The take everything in the final year 3 sheets and divide it by 3 and fill in the final monthly summary of the 1st year sheets e.g 10 employees at the end of year 3 becomes about 3-4 at the end of year 1.
To reach the target at the end of year 1 you now know you need to employee one person every 3 months and make sure you turnover is rising accordingly.
Finally do a month-by-month checklist of each and everything on your 3 year list.

Planning a Business in this way may not be as sophisticated as some other methods but it does allow you to measure your progress.

If your letter box drops are not yielding any new customers then there is little point in keeping them going.

If on the other hand a letter box drop in a specific area yields 20 new customers then you should obviously do more as there is a ‘hole’ in the market which you can exploit.