bizEDGE New Zealand logo
Story image

Show me the (business) plan

17 Dec 2010

Most Start-Upreaders, a well traveled bunch, know what it’s like to be in a new city. Butsuppose there’s a particular place you want to get to in that city, somewhereyou really need to be. But you have no written directions, no map, no globalpositioning system – no idea how to get there. How silly would that be?

So, why do many people in business try toget by in exactly the same situation? They know where they would like to getto, but lack the written directions, map or GPS to get there – in other words,they lack a business plan.

Not a smart idea at the best of economictimes, such a lack could be positively disastrous in the challenging year that2011 looks set to be.

Thinking about this recently – which isn’thard to do for anyone with a professional interest in business-performance – itstruck me that a great business plan is a bit like a CPS, or “companyperformance system”, something that represents your guide, your map foreverything you want to achieve.

Why is it, then, that some people go into anew line of business thinking they can get by without a CPS, rather like ourhypothetical visitor to a new city thinks they can survive without a GPS?

Part of the answer has to do with simplepressure. An entrepreneur comes up with The Great Idea and pursues it initiallywith great energy.  In fairly shortorder, though, they get beaten down with the never-ending day-to-day hurdles,and simply run out of time for the big-picture stuff. 

A clever alternative might be to approachthings from the other direction, getting the big picture – the map – drawn outfirst and then moving on to the day-to-day issues. That map, which is to say,the analysis, planning and testing of your idea, is the business plan.

With the new year looming, now might beas good a time as ever to take another look at your business plan, or possiblyto look at creating one.

The essential starting point involvesreflecting on what do you really want to achieve.

Set some specific targets, but do so withsome outside help because it’s often hard for a business owner to do this withcomplete objectivity on their own. At my own organisation, we focus on helpingclients develop and implement a plan that will help bring the necessarydiscipline and accountability into the culture of such an operation.

After all, the costs of working with afinancial planner will be more than covered in the resulting focus and toolsthat you can apply in your business.

Once you have the targets, work them back tothe key items you can measure on a regular (I would suggest monthly) basis toassess how well you’re tracking towards those long-term goals. Often thisprocess becomes overly focused on the accounting information. Yet I believe itis essential that the regular measurement and reporting on the businessincludes non-financial items, too. For somebody in a service-based business,for instance, a couple of obvious measures might be client satisfaction andstaff productivity, and other sectors will have their own as well.

While the client satisfaction can always bemeasured by two easily tracked measures, such as number (and dollar value) ofclients lost each month, along with number (and dollar value) of referrals fromexisting clients, these types of additional measures will also help one’sbehaviour with clients to further improve the way you service clients and buildthe client base.

Often, as a business owner, one is so busywith the daily activities that one never has the time to step back and look atthings afresh. As I say, there are only two ways to address this: make thetime, or pay someone to prepare the report. I prefer the latter for a number ofreasons, not least because a great business advisor will coach and mentor youto lift your business further than you possibly could on your own.

In either case, the chances for a successful2011 will no doubt be in direct relation to the state of your CPS. Happy NewBusiness Year.

• Stephen Nicholas(Stephen@openside.co.nz) is aChartered Accountant and chief executive of Openside CA (www.openside.co.nz), abusiness-performance company.