Management Tip: Plan for the Success of your Business

Newsletter  Aug. 2009 by John Boyens

Successful Franchise Owners are not “fly by the seat of their pants” entrepreneurs but rather people who employ a sound planning process that details their business plan, avoids mistakes and minimizes risk.  That planning process should be detailed in a comprehensive business plan that clearly defines their business, identifies their goals (both short-term and long-term) and serves as their company’s roadmap for success.

A business plan also helps Franchise Owners hire the appropriate people at the right time, schedule capital expenditures, manage cash flow and handle unforeseen complications. It provides specific and organized information about their company, their capital requirements, their operational needs and how they will market their products and/or services.  The business plan is the repository of all proprietary information (financial, operational, etc.) about their business.

Despite the critical importance of a business plan many Franchise Owners drag their feet when it comes to updating the document they created for their Franchisor, their banker or their investors when they decided to purchase their franchise in the first place. They often argue that their marketplace changes too fast for a business plan to be useful or that they just don’t have enough time. You wouldn’t expect a builder to start construction without a blueprint so it makes sense that Franchise Owners shouldn’t rush to market without a detailed plan for their success!

Before an Owner begins writing (or updating) their business plan it is important that they answer the following four core questions to give them “top-of-mind-awareness” about their business:

1. What service or product does your business provide and what needs does it fill?
2. Who are the potential customers for your product or service and why will they purchase it from you?
3. How will you reach your potential customers?
4. Where will you get the financial resources to run your business?

So what goes in a business plan? The body of the plan can be divided into four distinct sections:

1. Description of the business (i.e., what does your business do, what makes it unique, what products or services does it offer, etc.?)
2. Marketing (i.e., who is your target audience, who are your competitors, how will you go to market, etc.?)
3. Finances (i.e., what are your income projections, what are your projected costs, what are your cash flow requirements, etc.?)
4. Management (i.e., who are the key players in your organization, what are their roles and responsibilities, what are their experiences, etc.?)

After completing the business plan the next step is to utilize it as a “business tool.”

As a communication tool, it is used to attract investment capital, secure loans, convince people to join your organization as employees, assist in attracting strategic business partners and to attract customers. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit. It requires a realistic look at almost every phase of business and allows you to show that you have worked out all the problems and decided on potential alternatives to ensure the success of your business.

As a planning tool, the business plan establishes goals and milestones to help guide you through the various phases of your business. A well-developed plan will help identify roadblocks and obstacles so that you can avoid them and establish alternatives. Many business owners share their business plans with their employees to foster confidence in their future with this business.

As a management tool, the business plan helps you track, monitor and evaluate your progress. The business plan is a working document that you will modify as you gain knowledge and experience. By using your business plan to establish timelines and milestones, you can gage your progress and compare your projections to actual accomplishments.

Use the following five steps to grow your business:

1. Know your numbers…Before you create, amend or update your business plan take a hard look at your numbers.  Specifically look at revenue growth, cash flow and margin performance but more importantly look at profitability the more successful Franchise Owners I know establish sales metrics and sales management key performance indicators (KPIS) to check the pulse of their business on a weekly, monthly  and quarterly basis.
2. Track your competitors…Be aware of who your competitors are and how they position themselves in the market place. Constantly evaluate your competition and your competitive differentiation.
3. Staff up for growth…Adding staff increases overhead but being understaffed might keep your business from growing at all.  For instance if you’re considering adding an Outside Sales Rep ask yourself, “How much revenue does this person have to generate to pay for themselves?”
4. Retain your current clients…It can cost up to ten times more to “win” a new client than it does to maintain an existing client.  If you are able to keep an additional five percent of your client base year-over-year you can actually double your bottom-line profits!
5. Stash some cash…Building a cash supply is not novel advice but it’s often forgotten until it’s too late.  No amount of planning can prevent a recession or natural disaster but keeping as little as 30-days worth of cash on hand can be the difference between a Franchise Owner making it or going out of business. The newer a business is (e.g., less than two years old) and the more seasonal the business is, the more cash (or access to capital) you need.

The most successful Franchise Owners review their business plan on a quarterly basis and update their plan throughout the year based upon changing market conditions.  Remember, once your plan is completed the key to your success becomes the careful execution of your plan!