This is the second in a series of articles describing how small business owners and managers can fuel the growth and profitable development of their business through the creation and implementation of a business plan.
I know the prevailing opinion among many small business people is that “planning” is for larger, more substantial businesses and that “they are too busy running their business to have time for planning.” In fact, many small business owners are “too busy” running the business, ignoring, at their peril and survival, that “to fail to plan is to plan for failure.”
I am convinced that the small business owner will benefit from participating in this business planning process due to the nature of carefully examining and thinking about the way their business competes and operates; -and how that will align with his determination of “what business they want to be in.”
This business planning process builds a stronger, more profitable business that delivers real value to your customers and the marketplace.
The business planning process described in this article is the most logical, pragmatic, and practical examination of small business possible. This process is far from arcane or mysterious, but it is totally focused on the reality of small business environments—the business, the economy, the competition, customer needs, wants, and desires—as well as the determination and allocation of company resources).
Business planning process: eight main steps
For the past thirty years, I have successfully used the following strategic marketing and business planning process. The following process consists of eight main steps that 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’ve even used this process with a national religious organization.
1. DEVELOP MISSION STATEMENT AND POSITIONING
2. AUDIT STATUS
3. WOTSUP ANALYSIS
4. MAKE ASSUMPTIONS
5. DEVELOPMENT OF OBJECTIVES
6. DEVELOPMENT OF STRATEGIES
7. SPECIFY TACTICS AND ACTIONS
8. PREPARE FORECASTS/BUDGETS/FINANCES
1. MISSION STATEMENT AND POSITIONING
Regarding the definition of the purpose and mission of your business, there is only one approach, one starting point; 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?”, therefore, can be answered only by looking at your business from the outside, from the point of view of the customer or potential customer. What the user or client sees, thinks or believes at a given moment must be accepted by the management of your company as an objective fact to be taken seriously.
By definition, the customer buys the satisfaction of a need or a want.
For example, here is a known and real example of a company mission that defined the way in which that company carried out its activities.
A drill bit manufacturer defined their mission as determining “what size holes customers need”, their focus was squarely on the customer’s needs and not their product specifications. They were customer focused and very successful.
Once the mission statement is complete, develop the positioning statement for competitive advantage and prepare the USP – your unique selling proposition. “Why the company is able to provide more effective and higher value solutions than competitors.”
2. THE SITUATION AUDIT – Internal and External
The situation audit is a description and analysis of past, present and future data (information) that provides the basis for carrying out the business planning process. It is an organized method for:
- collection of relevant information
- interpret its effect on business environments (market conditions)
- significant trend analysis
- projecting all relevant factors, which could influence the activities of the company.
3. WOTSUP ANALYSIS
The acronym WOTSUP stands for Strengths, Opportunities, Threats and Weaknesses Underlying Planning. This step flows naturally from the database (situation audit). The Weaknesses and Strengths constitute an internal analysis, that is, “in what are we good and bad?”
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 business strengths and opportunities.
4. MAKE ASSUMPTIONS:
Assumptions make planning possible. Without the use of assumptions, planning would be nearly impossible. Since planning deals with the “future of current decision making” and future events are almost impossible to predict with foolproof accuracy; – Assumptions make planning possible.
5. DEVELOPMENT OF OBJECTIVES
Overall goals are the real crux of the marketing and business planning process. They deserve every last ounce of time and effort, often frustrating. The objectives form the umbrella under which the balance of the entire planning structure is built. Due to the key role they play, they must be thought of and expressed in the most specific and concrete way. In simpler terms, an objective is… “what do you want to achieve?” Objectives are elaborated to overcome the 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 should explain, in a broad sense, how the objectives will be achieved.
7. SPECIFIC ACTION PROGRAMS:
After the objectives and strategies have been developed, describe the work to be done. Actions must be very specific; what work needs to be done, by whom, how and when.
8. FORECASTS/BUDGETS/FINANCIALS PREPARED:
The action programmes, once completed, form the basis for the preparation of the budget. The cost of each action and the income derived from the detailed actions generate the operating budget and the cash flows of the Business Plan.
Many organizations confuse planning with budgeting. An important purpose of the budget is to ensure that the business has adequate financial resources to function. Budgeting is about not failing, planning is about what is possible.