You can buy a copy in hard copy or kindle version. But before it gets released to iTunes and to Audible, we’d like to give it to you as a free trial. We hope you look forward to some of the other things that we’ve got that you’re going to get absolutely free here and at www.moreprofitlesstime.com.
CHAPTER 7: BUSINESS PLANNING
- Step 21: The Sales Plan
- Step 22: The Operating Plan
- Step 23: The Management Plan 107
- Organizational Chart
- Employee Motivation
- Step 24: The Financial Plan
- Step 25: The Action Plan
THANKS FOR LISTENING!
Until next time!
TRANSCRIPT: BONUS EPISODE 12
Title: How to Turn Your Idea Into a Multi-Million Dollar Business (Chapter 7)
Date Published: December 4, 2015
Running Time: 16:01 minutes
Hi, this is John Millar. I’m the Naked Business Coach, stripping business back to its bare basics. As a special bonus, we’re giving you a free copy of all the chapters in How to Turn Your Idea into a Multi-Million Dollar Business.
Now this is available in Amazon and you can buy a copy in hard copy or kindle version. But before it gets released to iTunes and to Audible, I thought I’d give it to you as a free trial. I hope you enjoy it, took me some years to write. And I hope you look forward to some of the other things that we’ve got that you’re going to get absolutely free.
Thanks so much and welcome to The Naked Business Coach Podcasting Channel.
The Entrepreneur’s Guide Series
How to Turn Your Idea into a Multi-Million Dollar Business (And Avoid the Mistakes that Send Most Business Owners into Bankruptcy)
By John Millar
Chapter 7: Business Planning
Developing a formal business plan is a crucial step in starting your own business. This chapter provides you with a brief overview of the business planning process. Other than the financial section, this is probably the least “sexy” of the different sections in this book. It is certainly a topic that I see time and time again avoided like the plague. The good news is that this chapter contains a lot of great information, and you can find tools at the end of this book, and of course at our website, www.moreprofitlesstime.net. These tools will help make the learning process easier and faster than you thought possible.
Simply answer the questions in the Self-Assessment section and voila! You have the outlines for your first business plan and you are one step closer to creating the sort of strategic business plan your bank will want to see in detail (and ad nauseum).
I have been asked why I put this at the end of this book and quite frankly it’s for one simple yet powerful reason: Understanding. If you don’t understand and comprehend the information you have read up to this point, then how can you possibly—intelligently—plan and implement your business plan to give you the greatest opportunity for massive success?
I will present the bare minimum of plan components that can and do work together to form a business plan you can be proud of and one that gives you the flexibility to add to or adjust later on.
Are you ready for the home stretch?
Here we go…
Step 21: The Sales Plan
Many businesses (and I started one of them in the early days) enter the market without clearly defined objectives and strategies. Poor planning directly impacts your ability to sell products and services, particularly when there is strong competition from other businesses. So, it stands to reason that if you begin selling with a carefully developed plan, you’ll significantly improve your chance of success. The following steps outline a very basic but powerful approach you should take to develop a sales plan:
- Mission statement – Develop a phrase or statement that describes an overall outcome for your selling activities, such as “to make my business more profitable.”
- Assess your situation – Determine where your business fits into the market. You could use a SWOT analysis to assess your businesses situation.
- Establish goals – Build a set of goals that will allow you to capitalize on your opportunities and reduce the threats to your business.
- Establish strategies – Develop strategies and objectives to reach your goals that are Specific, Measurable, Achievable, Realistic and Time-measurable (SMART approach).
»»Delegate – Assign responsibility for specific tasks to your team.
»»Develop a plan document – Organize the information into a document you can distribute to your team and use for guidance.
»»Achieve your goals – Use the plan to achieve outcomes for your business and reward your team for achieving success.
»»Sales training – Determine who needs to learn what in both sales skills and product knowledge.
»»Sales tools – Determine the tools and assistance that needs to be developed or bought in to maximize the best opportunity for success.
Your sales plan should be developed and adapted as your circumstances change and your business grows. We go into far more detail, and offer more tools at www.moreprofitlesstime.net. We will also address these topics in future books. Your sales plan needs to remain current so you can effectively utilize it when making decisions and operating your small business.
Step 22: The Operating Plan
The operating plan describes the physical necessities of your business operations and includes information on staffing, systems and processes, equipment, facilities, and general risk management. Here are some of the components of your operating plan along with the reasons each one is necessary. These components blend together to give you a solid foundation you can build a superstructure on.
People: Many things require consideration when employing people to assist with the operation of your business. As discussed previously, these relate to the hiring of staff, your legal obligations to employees, staff management and the termination of employment. The operating plan is a good place to formalize and record these processes and procedures.
Systems and processes: Planning and designing systems and processes for business operations involve the arrangement of management and staff, their roles and functions, and business administration requirements. It also takes into account business facilities and equipment, inventory management, and policies and procedures for other business functions.
Equipment: To ensure a smooth and effective business operations start-up, it is important to have the right equipment in place at the outset. This includes not only production equipment but also administration and communications equipment. The equipment you require for your business to become fully operational is dependent upon your particular situation. After determining the required equipment, you will also need to finance the cost of that equipment.
Facilities: Choosing the appropriate business premises requires careful planning and consideration. An inappropriate or poor location can be damaging to your operations, particularly where the business relies on ease of access or exposure to consumers. In order to make an informed decision when selecting a facility, you should keep in mind the needs of your employees, customers, and general operations.
Risk management strategies: Risk management involves identifying unfavorable events that could negatively affect your business, and developing strategies to overcome them. Potential risk events can range from minor to serious and likely to unlikely. This range includes:
- Natural disaster
- Departure of key business staff
- Key suppliers relocating or closing down, or a change in their credit policies
- Poor cash flow
- Family emergency
- A breakdown in occupational health and safety
- Bad debts
Here are five key strategies you can implement to cope with business risk:
1) Risk Prevention
2) Risk Reduction
3) Risk Avoidance
4) Risk Retention
5) Risk Transfer
To avoid making your eyeballs bleed and making you want to take me out for a beating, I won’t go into too much detail here. I will just recommend that you get your business coach, accountant, insurance broker, and financial planner together to work out—as a team—those things you need to do better in this area. I meet with my clients’ accountants, financial planners, business bankers and so on every 90 days so we can see where we have been, where we are, and where we need to be to stay on track with exceeding our 90-day goals. Use your team wisely, and if you don’t have a team, GET ONE as soon as you can!
Step 23: The Management Plan
If your organization has at least one employee, it is big enough to require that key business roles be delegated to management staff. It is critically important to ensure you have a suitable management structure in place. You need to select qualified and experienced personnel inside and outside your
FROM AN IDEA TO MAKING MILLIONS
business to fill the roles in your business. You should also be constantly looking for opportunities and methods to better manage your business and your team. An example of this is hiring a bookkeeper so you can focus on making more money for them to account for with your accountant and not trying to do tasks like this yourself. Believe me when I say they will do it faster and more accurately than you could ever possibly do.
To help you plan and develop a management structure and select the best people for each position, you should create a comprehensive list of the various tasks that need to be performed to run your business along with the responsibilities involved for each function. For example, such a task would be “Supervision of employees.” You can then establish key management positions and assign roles and responsibilities to each position. This will help you match up suitable personnel to each management function and map out what I like to refer to as “who is who in the zoo.”
Once you have defined the key management positions, their relevant requirements, and task descriptions, you can develop this into a formal “Job Description” document.
Job descriptions provide the opportunity to clearly communicate each individual’s roles and responsibilities in the organization and overall scheme of the company. They also serve as a good baseline so you can more accurately measure performance. Do this by establishing Key Performance Indicators (KPIs).
A job description generally includes the following:
- Duties and tasks to be performed
- Responsibilities within the business
- Working conditions
- Material and equipment the employee is required to operate
- Working relationships, teamwork, and individual work
- Reporting relationships
- Relevant performance indicators and measurement details
- Other relevant job information as appropriate
With the necessary functions needed to run the business, and the roles of key individuals in the organization defined, you can develop and refine the structure by producing an organization chart which can be as simple or as complex as your heart desires. I usually recommend creating an organizational chart with the positions you want your business to have in 10 years and then create position descriptions, duties, responsibilities, budgets, and KPI’s for each one.
You may be asking yourself: Why go to all this trouble if you don’t have any staff members yet? The answer is simple. You create this organizational structure, and you put your name in every box in the organization chart until you start hiring people. Then see if what you expect for the position is what you can produce. As your business grows and flourishes, make sure it grows how and where you want it to and that the positions you define never become dependent upon one particular person, which can be dangerous in the extreme. If you are not careful about this, you face the predicament of becoming a total “control freak” and having the business overly dependent upon you or a select few key individuals.
The organizational chart is simply a tool that helps define the inter-relationships between all departments, divisions, teams, and people. It defines reporting structures and lines of authority and responsibility, and provides a picture of how the business functions.
Keep in mind that failing to define workplace roles and lines of authority can create tension, miscommunication, and inefficiency within your business. People can be unsure about their responsibilities and who they are required to report to, creating inefficiencies and potential conflicts that will cost time and money.
Another important aspect of managing your staff effectively is employee motivation. In order to find, retain, and manage the people with the right skills for your business, you need to consider and identify those things that employees may be looking for in a job. There are a number of motivators you can use to keep your employees happily motivated, including:
- Better work-life balance
- Performance-based incentives
- Remuneration packages
- Training and education
- Promotional opportunities
- Different job designs (such as job rotation, job enlargement, job enrichment, etc.)
Step 24: The Financial Plan
Your business plan should include various financial elements. You will notice I am repeating some of the information I presented earlier in the book, but it is only because I want to emphasize the critical nature of this information. The financial planning section of your business plan involves explaining your situation with respect to the following elements:
- Financial requirements
- Securing finance
- Profit and loss statement
- Balance Sheet
- Cash flow statement
All of these critical components should be included in the plan. I will discuss each topic in turn.
Assets: Assets are items owned by your business that have a commercial value and are used to generate revenue, such as cash, inventory, production machinery and office equipment.
Liabilities: Liabilities are financial obligations that your business has to its creditors, such as loans and purchases made on credit.
Equity: Equity is the amount left over after you have deducted total liabilities from total assets. It is classified into two categories; capital contributions and retained earnings. This number gives an approximate value of your business.
Financial Requirements: Your financial requirements include all the potential costs you will face in starting up a new business. These include the start-up costs, the ongoing costs, and the initial working capital for the early stages of your business.
Securing Finance: Securing suitable finance for your business involves identifying available sources of finance, understanding potential government grants and assistance, assessing the available financing options and understanding the typical requirements you need to prepare for when applying for finance.
Profit and Loss Statement: A profit and loss statement (also known as an income statement or a statement of financial performance), communicates the profitability of your business during a particular financial period.
Balance Sheet: The balance sheet (also known as the statement for financial position), provides you with the “net worth” of your business assets and liabilities at a certain date.
Cash Flow Statement: The statement of cash flows represents the cash inflows and outflows from business activities during the reporting period. Cash inflows are all the cash the business receives during the period, and cash outflows are all the cash the business expends during the period.
Budgets: Budgets are used as a planning tool to plan and predict future income inflows and expenditures. They are also used to benchmark performance as a point of comparison between expected and actual income and expenditure. Budgets should also be used when applying for financing using various projection periods and to represent what you plan to use the financing for in order to maximize your business success and generate a positive net income.
Step 25: The Action Plan
This is not a “think about it” plan or a “plan you write and stick on the shelf to collect dust” plan; rather, it is an Action Plan that integrates all of the strategies you have developed throughout the business planning process into a highly organized and prioritized plan of action designed to achieve your stated business mission and goals. This is achieved by breaking down the strategies you developed into small, achievable steps and then identifying the actions you need to take for each step. It can be used as a short-term (6 to 12 months) action plan to achieve short-term business goals, a medium-term action plan (2 to 3 years), or a long-term action plan (3 to 5 years).
An action plan identifies the business goal (what you would like to achieve) and the strategies that can be implemented to reach that goal. It also explains the specific actions required to achieve the business strategy. This includes the timeframe, roles and responsibilities, performance indicators, and alternative methods that can be implemented to reach the business objectives. The action plan should be reviewed at least every 90 days with your business coach and accountant to make sure you are on track to achieve your goals. Failure to regularly check on the progress of your performance against the goals outlined in the plan may lead to a result far different from what you had envisioned and quite frankly you may not like what you get.
Generally, action plans are limited to a small and manageable number of goals. This helps keep the plan realistic and achievable. For each action, you should identify:
- The timeframe and priorities for each action.
- The people responsible for undertaking each action.
- Specific performance indicators to help you determine in the future whether your business has succeeded in achieving the business goal.
Once you have these details identified, you can formulate a series of strategies to achieve the goals of each action item. It often helps to break the various strategy tasks down into simple, specific steps to keep the plan on track and avoid getting overwhelmed or losing control. The first action you need to do is focus on the next few pages where I will ask you 20 very simple questions. In fact, they are so simple I have even given you a variety of answers to each question that you can add to if you want. Be honest; the only one you will be lying to, and letting down, is yourself!