Final Thoughts on a Business Plan
I hope you have a 3-ring binder with a few paragraphs and lots of notes.
Here's an outline of what we've done so far:
- Get a 3-Ring Binder (Part 1)
- Download the excel spreadsheet (Part 1)
- Commitment 20 mins/day (Part 1)
- Examine 2008 finances (Part 2)
- Create first-run draft of 2009 financial projection (Part 2)
- Set goals for 2009 (Part 3)
- Draft mission statement (Part 3)
- Draft 3 goals for Q1 2009 (Part 3)
- Draft 3 goals for year 2009 (Part 3)
- Begin creating written business plan (Parts 1-4)
- Revisit numbers from 2006-2008 (Part 4)
- Project numbers from 2010-2011 (Part 4)
- Draft Marketing Plan / Revised Budget (Part 5)
This is what's called an iterative process. That means you keep going back and doing it again. With each iteration, the plan becomes more real.
By real, I mean the numbers are more realistic, the projections are more realistic, the costs are more realistic, the effort is more realistic, and the results are more realistic.
We started with the proverbial view from 30,000 feet. I hope you spent a little time each day on this, at least for part of the month. We examined 2008, where we are, and how we got here. Then we speculated about 2009, where we're going, and how we'll get there.
The mission statement is critical because it helps you focus more clearly on both the WHY and the HOW. All too often we accept that our business exists to grow, but that may not be your personal mission for your business. Why are you in this business and what do you want your business to do?
Goals help us focus even more clearly.
Small businesses need this focus more than large businesses. We're easily side tracked. And, more importantly, very specific goals are easily attached to very specific actions. If I have a goal to get out a newsletter every month, then the actions needed to accomplish that are pretty clear.
Goals and mission statements won't motivate you to get off your butt. Or out of a rut.
But once you get off your butt, or out of a rut, then having goals and a mission will help you figure out what to do next.
Central to all of this is your budget -- income and outgo.
Whether you plan it or just do it, every significant action you take will cost money. Every significant success you have will bring in money.
Does all that "just happen" to you, or is it planned?
It could be planned. It should be planned.
With every iteration of examining your business plan, you also re-examine the budget. Your budget should become more accurate every time you touch it.
Looking ahead, notice that the spreadsheets you downloaded in Part One had a row with the work "Projected" above some months.
As you complete the finances for each month, fill in the monthly column with real numbers from your QuickBooks of MS Financials. When you're sure that all the credit card stuff and little slips of paper are accounted for, you can remove the "projected" label.
As the months roll on, you have a part of your year that is based on what really happened and a part that's based on what is projected to happen.
As things move along, you'll be tempted to play with your projections. This is fine in small doses. Remember that your projection represents a great deal more than idle speculation. It is the financial representation of your goals in support of your mission statement.
I recommend that you revise you financial projections once a quarter. As you add clients, you can adjust the revenue numbers up for future month. Assuming you're selling managed services, you'll have a very good idea of what the ongoing revenue will be.
If you get increases in major expenses, you should adjust them quarterly as well. This might include more licenses for Kaseya or another product.
It is also extremely important that you look at your projections vs. reality on all the little costs. You though office supplies would be $500 (because you've never tracked it before). Now it's consistently $1,000. What can you do?
The point of having a budget is that you can track these things and adjust as needed. Buy supplies as needed and not just because there was a good price when you walked by a stack of paper. Hint: We cut our supplies budget noticeably when I stopped going to the store. I have the power to impulse buy whatever I want. Jennifer buys what we need.
Most small business owners hate finances. That's one good reason so many go out of business. They're no better off than someone who doesn't know a balance sheet exists! If you don't pay attention to money in and money out, I promise that more will go out than in. That's the nature of the universe.
Each week, you should look at a few key numbers:
- Accounts receivable (money owed to you)
- Accounts payable (money you owe to others)
- Billing for the week. (I highly recommend billing your clients every week. Just do it and it will become a small chore very soon.)
- Balance in your check book / other bank account
- Available credit (cards, leasing arrangements, financing, line of credit, etc.)
On any given day, these numbers will give you a sense of where you are financially. Over time, you'll get a real sense of whether you're expanding or contracting, becoming more profitable or less, etc.
Your finances are the pulse of your business.
At lease once a month, you should review your income and expenses and update your excel spreadsheet. Is your spending under budget or over? Is revenue coming in at the pace you need to meet your targets.
Monthly Business Tune Up
And on the business side . . .
Post those quarterly and annual goals where you can see them.
Post your mission statement where you can see it.
Once a month (at least), review how you're doing. Are you moving toward your goals?
If these are the most important things you need to achieve, then what next action step will you take to achieve each of them?
If these are not the most important things you need to achieve, then re-write your goals.
There's no cheating here. You get to decide what your goals are. If you change your mind, nothing bad happens. You just start pursuing different goals.
The biggest excuse in the world for not reaching goals is that there's too much little stuff to do, and not enough time. That's a bunch of baloney!
We all have the same time every day. Are you spending it focused on the goals you stated, or are you allowing yourself to be distracted? When you decide to focus on your goals, you will achieve them. You have every excuse not to. But when you choose to be successful, you'll have every reason to do whatever it takes to advance your goals.
One of the key tenets of the Relax Focus Succeed philosophy is that you get better at whatever you put your attention on.
You don't have to be a business major or a financial wizard to do the few things outlined here.
Just work on it. Use that 20 minutes a day to think about your business. As Michael Gerber (and now everyone else) says: Work ON your business rather than IN your business.
If you spend a small amount of time working on your business every day, every week, every month, then you will tune into the goals and the financials that will move you forward.
It can take a long time to form a new habit. Some say you have to do something 42 times (of course that's a number picked out of thin air, but let's roll with it). So, if you spent a little time every day for a month, plus a little weekly time, it would still take you five or six weeks to develop the habit of paying attention to the goals of your business.
Don't let all of this become overwhelming.
I hope you have something written down, some kind of budget, and at least enough of a "business plan" to get you started.
Please don't hide it on a shelf.
Put that little binder where you'll see it all the time. Pick it up occasionally and flip through it.
Anything you do to plan your future will be good.
A business plan is a great way to start holding yourself responsible for moving ahead.
Please don't let the next year sneak in without planning. Every day makes it a little easier to put off planning. Every day is an opportunity to START planning and moving in the right direction.
Good luck. Let's make 2009 a spectacularly successful year!
Karl - thanks for the guidance and taking the time to write these excellent articles. As always it is very much appreciated!ReplyDelete
thanks Karl, i have (sadly) just got round to following these through. i am feeling better about tackling the challenges ahead.ReplyDelete
All the best for '09 Karl,