Although the United States is officially out of recession1, uncertainty still abounds for the economy. Housing prices- a consistent topic of discussion in our area and driver of consumer confidence- are flat. While Congress considers extending (and possibly expanding) the home buyer’s credit, many news outlets are reporting a predicted decline in home prices in 20102. In uncertain times, planning is imperative.
Did you create a business plan before starting your business? Have you kept it current? Business plans are not just for businesses looking for funding from lenders or venture capital firms; they are for all businesses serious about success. While business plans are key for business start-ups, they are imperative for growing businesses and businesses going through changing economic environments. As we hope for an economic recovery, we need to plan for continued economic difficulty. One key for success in any economic climate is an up-to-date business plan.
BENEFITS OF A PLAN
1.) Determine areas of past business success
2.) Creating benchmarks with which to evaluate success
3.) Count the cost of future action
DETERMINING AREAS OF PAST BUSINESS SUCCESS
Nearly all businesses have varying products or service lines, major customers or service regions. During times of economic growth, your business may survive without knowing which areas of your business are financial “all-stars” and which are pulling down the “team average.” During times of economic decline, one bad business area or major customer could make the difference between a profitable year or loss. A key step in creating your new business plan is examining where past success has come from and determining if that area may be counted on to be an area of continued success.
CREATING BENCHMARKS WITH WHICH TO EVALUATE SUCCESS
Once you determine where success has come from, it is important to create benchmarks with which to evaluate future endeavors. Past success came at a cost; be it a function of time, materials or marketing, costs should be related to return. For instance, it may have taken you 10 hours to complete a project for one client and 15 hours to complete a similar paying project for another client. You would need to determine if the benchmark is 10 hours or 15 hour, and what caused one project to be a 50 percent greater investment than the first. Once you have determined what a reasonable goal is, incorporate this into your plan. It is also highly beneficial to incorporate these benchmarks and other aspects of your business plan into your employee job descriptions.
COUNT THE COST OF FUTURE ACTION
Every decision you make in business has a cause and effect relationship. Spending 15 hours on one project, may mean you only have 5 hours for another project, or more likely, you are going to have to work 5 hours on the weekend on that other project. Having determined your areas of success in the past, you need to determine if serving the same market segment in the future will cause future success or failure. One product of this exercise we generally observe is that this helps businesses further define their niches. By focusing on a more narrow market segment, businesses are frequently more productive and more successful.
A business plan for a growing company is, in many ways, a more useful tool than one for a start-up; it benefits from business history and the business owner’s firsthand knowledge of the industry. Further, it may take less time if the business has a copy of its original business plan, which may be updated rather than creating a new one from scratch. Make revising, renewing or resuscitating your business plan a priority item for the last two months of 2009, and create a road map for your business’s future success during economic decline.
Please contact us if you would like help creating your successful business plan.
1 Conor Dougherty, “Economy Snaps Long Slump”, Wall Street Journal, October 30, 2009
2 David Streitfeld, “Fears of a New Chill, Just as Home Sales Had Begun to Thaw”, New York Times, October 28, 2009, (www.nytimes.com/2009/10/28/business/economy/)
