Would you take off on a cross country drive from Maine to California without a map or GPS of some kind—without some idea of spots to stop along the way or particular routes you would want to avoid?
That is exactly what most business owners are doing every day!
Running a business without a concrete WRTTEN plan is the business equivalent of taking that trip without a map!
Planning is the cornerstone of any successful business. But planning takes time, time that most business owners don’t think they have because they are too busy working in their business instead of on it!
Do you know the lifetime value of a customer or the cost to acquire a new one? These are just some of the important questions you need to ask early in your business and often as your business grows. If you have multiple product lines or services, do you know which ones are the most profitable? Without knowing this you could be spending most of your time chasing low profit margin activities–and no wonder you have no time to plan!
An overall strategic plan for your business starts with the most basic questions: why am I doing this business and what do I hope to gain from it?
Many business owners are so caught up in the daily tasks of opening up the shop, client meetings, ordering products and supplies that their day more closely resembles a job than operating a business. Having a real vision of purpose and the client you are trying to reach is one of the first steps in moving from a wandering journey to a well thought out itinerary toward your business destination.
A lot of people talk about purpose in their business and pursuing their passion. Often not enough time is spent figuring out if your passion is something that truly serves others and can be profitable for you. Passion without profit eventually must fail. How can a passion-driven solopreneur avoid this common pitfall? By focusing on the path that is indicated by the strategic business GPS, the odds of reaching your destination greatly increase.
Just like when we program the GPS in our car, we start out with the end in mind and a route is laid out for us to follow. However when traffic is encountered - or in business when our original strategy does not go as planned - we need to reroute and adjust course.
Course corrections and new direction are impossible to determine if we don’t have the right information.
Now that you are worried that you do not have a strategic plan you must be wondering what needs to be included in your plan.
The key elements should include:
- Clearly define your goals and priorities. If you are not clear, how can your customers be clear? Remember a confused mind does not decide and confused customers don’t buy!!
- Be specific in the market and customer you will be serving. You will increase your success exponentially knowing exactly what your ideal customer looks like.
- Make sure the goals you have set have a timeline attached to them. Even if you are on the right road you need to know when you have arrived or when you need to reroute.
- Track your progress and re-evaluate often.
How often should we recalculate our route?
At least annually most businesses should assess the past twelve months and compare where they ended up versus where they had planned to be. Many businesses wait until getting ready for taxes and use that data gathering time to review the past year. That probably is not often enough.
What is the right information that you must know in your business? You have to know your numbers-and for every business that might be slightly different but there are some key benchmarks all businesses should track.
Sales numbers are key - the frequency of tracking depends on the business but daily, weekly, monthly and annual sales numbers are important reference points to determine trends in your business. Is there seasonality to your revenue? Is there a particular day of the week or time of the month that most of your revenue is generated?
Knowing this is critical in planning your strategy and evaluating if it is working. If most of your sales happen in the first quarter of the year – it probably does not make sense to run a costly marketing campaign in April or July and nothing in the 4th quarter.
Often the best indicator that you are on the right path is monitoring cash flow. If there is more cash coming in than going out – that is usually a good sign! But how do you track this- just watching the bank balance is often the preferred method of business owners I have encountered.
The bank balance only tells part of the story. Your business could be generating a lot of sales but the bank balance is lower than expected because customers are slow in paying their invoices or you just made a large investment in equipment or training.
Even knowing key factors cannot always prepare you to avoid obstacles in the road ahead, but having the right data, tracking key performance indicators – knowing your sales and cash flow - and having a reporting system that you can manage or a great professional that can handle it for you can help you stay on the right path and get to the destination you have planned.
Make sure you have the GPS in place so you can enjoy more of the scenery on your successful business journey!
Photo by Ton Koldewijn on FreeImages.com
Deborah Daniel, CPA is an entrepreneur and expert in small business finance. By helping clients figure out what numbers really matter and showing them how to measure and evaluate these key indicators, she helps businesses take it to the next level.
