Business planning, setting targets and using them to manage your business
Our Business Advisor Martin Reynolds on the importance of having a ‘live’ business plan
An old hackneyed phrase is “Businesses don’t plan to fail, they fail to plan”. This is true moreover if they do plan, often they do not keep that plan alive. It was a failing of my own in the early days. I would sit down over the Christmas break and produce a fantastic business plan with spreadsheets forecasting profits and cash flow – a marvellous piece of work. That’s exactly what it was: a piece of work that languished in my drawer until the following year when I would redo it all over again.
What’s more, it was only me that knew about it. My key managers were not involved in its production, and more importantly they were not involved with its execution. If a plan is to be achieved it must be communicated. The diagram below is a three-year vision for a fictitious company. This is a Growth Accelerator Orbit diagram. I found this tool invaluable when coaching my clients. We get all the key managers together with a blank diagram produced on an A0 sheet of Dry Wipe paper. We would then brainstorm the vision of the business over the next three years. Usually focusing on 8 key factors in the business that needed to be changed to reach our long-term goals. Invariably doing this in such a visual way enabled the management to see interrelations between factors of the business they would need to change that led to a modification of their plans.
I worked with air-conditioning company whose plan was to expand their new installation business. However when we looked at the required investment and cash-flow to do this it was apparent that a change in focus to increase the maintenance side of the business was going to be the more beneficial. They had a record turnover and profits 6 months later!
After we have developed the 3-year vision for the business we then produce a First Year Action Plan assigning tasks to key members of the team. From that I build 90 Plans with the staff and measure their activity to ensure they are doing what they need to do to reach company targets.
I have developed a Management information Tracker that shows and monitors the relationship between the forecast Profit and Loss for the company against the actual and the activities individual undertake in order to reach the forecast targets.
By focusing our vision and actions like this my clients have all outstripped their targeted growth plans. Keeping a plan alive and at the forefront of what you do drives performance. In my most recent role, there were 80+ businesses in the group. The growth for the whole company was 8% for the year – my clients were achieving double this growth rate because they planned, communicated and achieved.
