Eight Steps To The Next Level – The Business Plan, “The Engine of Small Business Development”
This is the second of a series of articles describing how small business owners and managers can drive their business growth and profitable development through the creation and implementation of a business plan.
I know the prevailing view among many small business people is that “planning” is for the larger, more substantial business and “they are too busy running their business to have time for planning”. Indeed, many small business owners are “too busy” running the business, but they ignore, at their own peril and survival, that “failing to plan is planning to fail.”
I am convinced that the small business owner will benefit from engaging in this business planning process because of the nature of carefully examining and thinking through the way their business competes and operates; – and how that will align with their determination of “what business they want to be in”.
This business planning process yields a stronger, more profitable business which provides real value to its customers and the marketplace.
The business planning process described in this article is the most logical, pragmatic and practical examination possible of the small business. This process is far from arcane or mysterious, but totally focuses on the reality of the small business environments (the business, the economy, competition, customers’ needs, wants and desires) as well as the determination and allocation of the firm’s resources).
Business Planning Process – Eight Major steps
For the past thirty years, I have successfully used the following business and strategic marketing planning process. The following process consists of eight major steps which are sequential and continuous. I will describe the nature and function of each of these steps.
This process applies to all types of organizations; regardless of size, products, services, or industry…. I have even used this process with a national religious organization.
1. DEVELOP MISSION AND POSITIONING STATEMENT
2. SITUATION AUDIT
3. WOTSUP ANALYSIS
4. MAKING ASSUMPTIONS
5. DEVELOPING OBJECTIVES
6. STRATEGY DEVELOPMENT
7. SPECIFY TACTICS AND ACTIONS
8. PREPARE FORECASTS/BUDGETS/FINANCIALS
1. MISSION AND POSITIONING STATEMENT
With respect to the definition of your businesses’ purpose and mission, there is only one focus, one starting point; it is the customer or user of your products/services. The user defines the mission of any function or business. The question “what is our mission or purpose” “what business do we want to be in?”, can therefore be answered by only looking at your business from the outside, from the point of view of the customer or potential customer. What the user or customer sees, thinks, or believes at any given time must be accepted by your business management as an objective fact to be taken seriously.
By definition, the customer is purchasing the satisfaction of a need or want.
For example, here is a well-known and real example of a business mission which defined the way in which that company conducted its activities.
A drill bit manufacturer defined its mission as determining “what size holes customers need” their focus was directly on customer needs and not on their product specifications. They were customer-focused and very successful.
Once the mission statement has been completed develop the positioning statement for competitive advantage and prepare the USP – your unique selling proposition. “Why the business is able to provide more effective solutions and greater value than the competitors.”
2. THE SITUATION AUDIT- Internal and External
The situation audit is a description and analysis of past, present and future data (information) which provides the basis for pursuing the business planning process. It is an organized method for:
- collecting pertinent information
- interpreting its effect on the business’s environments (market conditions)
- analyzing significant trends
- projecting all pertinent factors, which could influence company activities.
3. WOTSUP ANALYSIS
The acronym WOTSUP stands for Weaknesses, Opportunities, Threats and Strengths Underlying Planning. This step flows naturally from the fact base (Situation Audit). The Weaknesses and Strengths constitute an internal analysis, i.e. “what are we at good and bad at?”-
Opportunities and Threats, on the other hand, form an external analysis. From this analysis, objectives can be formulated with specific action plans designed to overcome weaknesses and threats by exploiting the business strengths and opportunities.
4. MAKING ASSUMPTIONS:
Assumptions make planning possible. Without the use of assumptions, planning would be almost impossible. Since planning deals with the “futurity of current decision-making” and events in the future are almost impossible to predict with unfailing accuracy; – assumptions make planning possible.
5. DEVELOPING OBJECTIVES
Overall objectives are the real crux of the Business and Marketing Planning Process. They deserve every last ounce of time and effort – often frustrating. The objectives form the umbrella under which the balance of the whole planning structure is built. Because of the key role they play they must be thought through and be expressed in the most specific and concrete fashion. In simplest terms an objective is… “what do you want to accomplish?” Objectives are prepared to overcome weaknesses and threats developed in the WOTSUP Analysis and to exploit the opportunities and strengths.
6. STRATEGY DEVELOPMENT:
Once the objectives have been developed, the preparation of strategies is the next step in the process. Strategies, must explain, in a broad sense, how the objectives will be achieved.
7. SPECIFY ACTION PROGRAMS:
After the objectives and strategies have been developed, describe the work to be performed. The actions must be very specific; what work is to be done, by whom, how and when.
8. FORECASTS/BUDGETS/FINANCIALS PREPARED:
The action programs when completed form the basis for budget preparation. The cost of each action and the revenues derived from the detailed actions generate the operating budget and cash flows for the Business Plan.
Many organizations confuse planning with budgeting. One important purpose of the budget is to ensure the business has adequate financial resources to function. Budgeting is about not failing, planning is about what is possible.