When I started my business I had no plan. This is nothing new; most people who start a business have no idea how to plan.
Very few businesses get down to formal planning and laying out what they are doing, why they are doing it and how they could do it better.
In practice most business owners devote a lot of time thinking about the future of their business. It would be an added discipline and focus if they actually put their plans down on paper and investigated each missing strategy.
Every business has a unique reason for its existence. Is that small corner store owner in business to sell magazines, papers, drinks and newspapers?
Or are they in business to sell whatever the customer in that area wants to buy?
Typically higher margin emergency type goods. Those who believe they are in the former business and have not adapted to meet changing demand patterns have steadily gone out of business.
This is perfectly true in the Hifi business, I remember clearly when Yamaha Hifi invented a product called the DSP1 a sound field processor. This device converted a conventional two channel stereo system into a multi-channel home theater experience.
The DSP1 was used with multiple amplifiers and extra loudspeakers, designed with the intention of not only providing the listener with a new level of excitement but the manufacturer and reseller an opportunity to sell more product.
The acceptance of this product into the market took a lot of effort; it required wild enthusiasm from salesmen and was slow to catch on. It became very accepted in the USA, New Zealand and Australia but was awfully slow in Europe.
I was totally excited by this product and was invited by Yamaha in Germany to give a presentation to a network of European dealers while attending a major show in Berlin before I retired from Sound Group Holdings Ltd.
This brings me to another point about the small engineering factory.
Are they in business to manufacture its standard range of products or is it in business to manufacture the short run products in which the large companies have no interest?
Many books have been written on corporate strategy and business planning- the basic concepts are:
Objectives
Objectives, goals or aims are the main reasons for being in the business you are in.
They are supposed to make a profit and survive.
In my opinion they should include a lot more detail on why you are there and how you can capitalize and exploit all the advantages you have.
As an example the shopkeeper on the corner may decide to stock a wider specialty range of cheeses and become known for this in the area, thereby attracting more customers who will make a variety of purchases. This being a possible way to increase turnover.
The engineering factory may decide to purchase some new equipment so that it can manufacture a wider range of products for the same reason.
These types of decisions are now much easier to manage with the availability of the Internet. It is now possible to research and find out what people really want before committing to any major invention or stock plan.
Planning
Plans generally identify targets and action steps you must take to achieve your objectives.
Plans also detail the resources, material, labor, plant, funding etc. required to meet those targets within a timeline.
The shopkeepers plans would normally include the additional sales from the special cheeses, the cash required for that stock, display equipment, refrigeration etc.
The engineering factory must plan sales, stock holding and production levels for the new range together with plant, raw material and labor requirements, marketing and selling costs.
In many cases these types of plans don’t work out, they may not have enough cash, or may not have ability to recruit enough labor and therefore the plan needs to be reworked until they become feasible.
What I have described above is an overview of a typical business plan that is about detail.
I feel a far superior idea is to formulate a bigger and wider plan. Structured in such a way there can be a very clear picture of the entire business.
A plan that can be viewed from above or from outside looking in as a complete picture.
This should be set out with the major objective at the top of a hierarchy and broken down in parts of what needs to be put in place to reach that objective. This type of plan has nothing to do with how, it is all to do with what must be put in place to ensure success. Such a plan is available by APT.
Budgets
A budget is something I actually did on a regular basis and at least I can lay claim to that. Whether they were achieved or not was another story.
A budget provides a framework for detailing all your short term plans in financial terms.
Against this detail, performance can be monitored and any necessary actions initiated.
Most companies budget future performance month by month for a year ahead.
These three elements, objectives, plans and budgets are the basis of detailed business planning and are necessary regardless of the business size.
The level of detail may vary as a manufacturer may have more requirement than a small shopkeeper for more specific reports. However they both require analysis of turnover and profit by main product lines.
This will tell them where the profits are coming from and perhaps where the business is heading.
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