How intentional are you in the planning and managing of your business?
I see a number of different approaches taken to business planning by business owners:
- Many don't plan. They operate their business on a day to day basis and struggle. There is some truth in the saying "If you fail to plan, you plan to fail."
- Some prepare financial plans because their banks require them to do it to either get a new bank loan or to continue to support their bank overdraft. However this is just a numbers exercise to keep the bank manager quiet and there is little intention of commitment to implement the plan. perhaps there is the misguided hope that because financial success is in the forecast, it will happen.
- Some think about what they want to do in the business and put together a profit forecast and cash flow forecast to give them a budget to monitor and assess their progress against.
- A few use a better, more productive way to think about their business.
Intentional Business Planning
Intentional business planning means starting with what you want to achieve and working backwards, challenging yourself on how you can do it.
In the last few days I have introduced this idea of intention business planning in two articles:
In these, you start with what you want to achieve and you work backwards through your key performance measures to reveal what you need to do to achieve the plan.
If you don't, it will manage you.
Instead of the business working for you, you find yourself trapped working for the business.
And it's an extremely hard, tough and demanding taskmaster that is never satisfied with what you do.
According to the E Myth approach and I completely agree, managing your business starts with deciding:
- What you want to achieve in your own life? What do you want your legacy to be? What do you want people to say about you? This is your Primary Aim.
- How will your business support your Primary Aim? What is the deal? In the same way that your employees only work with a clear contract that specifies responsibilities and rewards, you need to focus on your Strategic Objectives.
If you need a salaries and benefits package of £200,000 p.a. to live the life you want, how are you going to design a business to deliver that money?
On this topic, you might want to read How Much Should You Pay Yourself As The Business Owner?
When you manage intentionally, you're very clear about what you want to achieve. You're not accepting whatever the world throws out you.
You get there through intentional business planning.
Work Backwards From What You Want To Make Happen
You work backwards from the profit you want via the sales (and contribution) targets that means your business has to deliver all the way back to the real drivers of your business performance.
When you're clear about how many qualified customer leads you need each week, you will look at your marketing in a very different way.
It stops being a "spend and hope" activity and starts to be an "intentionally plan, action and expect" activity.
Again, the intention of starting with what you want to make happen and working backwards to how you can make it happen is the thing I find most appealing about the Seven Sentence Guerrilla Marketing Plan.
What Will Happen In Your Business If You Don't Make Changes?
You business will have a momentum at the moment. Change is always happening.
It may be positive with your sales revenue and profits increasing month of month because of your existing marketing.
It may be negative because you're losing customers faster than you're gaining them or prices are being forced down because you're products are struggling to compete because there is a price war in progress because of the difficulties of trading in the recession.
I encourage you to identify these trends and project your business performance based on these trends.
Gap Analysis - The Difference Between What You Want To Happen And What Is Likely To Happen
If you've done your intentional business plan and your trend projection, you will have two financial forecasts for your business.
The first is what you want to happen.
The second is what is likely to happen if you don't make changes.
The difference is the gap and working out how you can close the gap by taking specific actions is called gap analysis.
If your business already has momentum moving in the direction you want, the gap may be comfortingly small.
A few tweaks and minor improvements in what you do and how you do it may mean that you can close the gap easily and you'll reach the "business of your dreams" sooner than you thought.
Just don't be too complacent.
You need to be clear about your critical success factors and key performance indicators so that you can monitor your business and make sure that improvements are happening as expected.
However, if the trends indicate that your business is going backwards, the gap between what you want and what it looks as if you'll have can be frighteningly large.
This exercise can be a real wake-up call.
Although you may get stressed, be comforted by the idea that you've been altered to the problem early and you can take the actions needed to turn around your business.
Start brainstorming how the gap can be closed. Get your team involved.
Record as many ideas as you can before you make any kind of critical assessment.
Some of the ideas may sound crazy as soon as you hear them (or they spring into your own mind) but one of these might be the springboard for some genuine innovation.
Then go through and assess the better ideas. Get your team members to select their ten favourites and pool votes to see which have the most support.
- What will it cost in terms of time, effort and money?
- What is the lapsed time from starting to finishing. Some ideas may not need much work time but because of lead times (e.g. a special brochure at Christmas) may not work quickly.
- What results can you expect? I like to estimate high, medium and low and compromise halfway between low and medium in the forecast. That's because most forecasts I see tend to be biased on the optimistic side.
Eventually you will build up a series of action items that will help you to close the financial gap.
If you're always short of time, then you need to make sure that your time is spent on the most productive activities. If money is a problem, then you need to focus on the return on investment.
What If You Can't Close The Gap?
The idea of using gap analysis and identifying the actions needed to close the gap is very logical but you may struggle to think of enough things to do to close the gap.
That may be because you haven't made a realistic enough assessment of your business issues and problems.
Alternatively you might need some help to close the gap.
I can think of three approaches:
- You find yourself a very good business growth, marketing, profit improvement training product. This will help open your eyes up to many things you could do in your business.
- You join a mastermind group and share ideas with other business owners.
- You work with a small business coach or consultant (like me) - How I Can Help Your Business Make More Money