By Tim Berry
Good news: Here’s a simple process, five easy steps, to improve your business. It’s easy to do. And, if you’re not doing something like this already, then this simple addition to your process offers you substantial business improvement.
Step 1: Visualize your main story
Take a step back for the business and visualize the main business story. Imagine the ideal customer, what they want from your business, how they find you, and how what you do matches your business’ unique qualities and what that specific person wants.
Don’t make this hard. Don’t sweat the details. You don’t even have to write it down, although writing down a few key bullet points can be really valuable for reminding yourself and others, later, about strategy.
Do make it strategic. Strategy is focus, so it’s a lot about what you don’t do and who isn’t in your market. Real business strategy has three elements mixed together: identity, which is what’s unique about your business; target market, which you want to define strategically; and business offering, which should also be strategic. Who isn’t in your market is as important as who is. What you aren’t doing is also important. For example, if your restaurant is about a quiet, leisurely, gourmet dining experience, don’t offer take-out or drive-though, and don’t have kids eat free.
Step 2: Identify your main assumptions
Don’t make this one hard either. Take a step back from the business for a moment, and think about the assumptions you make all the time. Are you assuming a healthy economy, for example, or strong regional growth, or good weather for growing lemons? List these key assumptions. Don’t go into too much detail; you’ll run into diminishing returns. What you want is a good list to help with regular review and revision (my step 5 below).
Step 3: Set your milestones and performance metrics
Milestones have to do with dates, deadlines, and specific task responsibilities. You write these down for yourself and, if you have a team, for your team members. You don’t really get accountability into the business without writing down and agreeing on what’s supposed to happen, when, and who is supposed to do it.
Even if you’re running your own business entirely by yourself, you still list milestones so you can track progress later. I’ve learned the hard way on this one, both in my one-person consulting business that I ran for 14 years, and for the 50-person product business it became. If we don’t write our intentions down, we lie to ourselves later about what we thought we were going to do. I hope that’s just me and not you; but I doubt it.
Performance metrics add backbone and accountability. Some are about basic business performance including sales, direct costs and expenses. But many others are also valuable. For example, leads, website visitors, traffic, meals served, trainings, trips, conversion rates, orders, presentations, incoming calls, minutes per call and so forth. These key performance metrics help you stay on top of the pulse of your business.
Step 4: You need to manage your business cash
Profits alone don’t guarantee cash. For example, you can be profitable, but have too much cash tied up in accounts receivable, or inventory, so you end up without enough money to make payroll or cover necessary expenses. To manage cash, you need to project sales, direct costs, expenses, extra spending (for loan repayment or buying assets and such) and extra income (from borrowing, bringing in new investment, or selling assets and so forth).
On this one too, don’t try to accurately predict the future. Instead, try to lay out how sales, costs and expenses relate to each other, so later when sales are different from expectations, you have an easy time of identifying the related changes you need to expect in direct costs and make in expenses. Think of what drives sales, such as pricing, marketing expenses, traffic, conversions, leads, pipelines and so forth. And don’t go into too much detail because, as with assumptions above, you’ll run into diminishing returns if you do. For example, a restaurant shouldn’t project sales for every menu item, but summarize and aggregate for dinners, lunches, drinks and other. And a bookstore doesn’t project sales by title or author or subject, normally, but rather hard over, soft cover, magazines and other. Keep your categories manageable.
Step 5: Review, revise, repeat
Set a specific day of the month, such as every third Thursday of the month, to review results and revise as necessary. If you’re working with others, make sure they know about this regular monthly meeting and miss it only when they have to miss it for good business reasons.
Start your review meeting with your list of assumptions. Identify whether assumptions have changed, and how, and what that means for your business.
Include a review of milestones for the past month, including whether or not expected milestones were reached. Then look at milestones for the next month, to review expectations and compare the milestones with the underlying assumptions.
Finally, review performance metrics. Track and manage the difference between actual performance and established expectations.
And now, lo and behold, you have a business plan
I didn’t use the words “business plan” in the title or first paragraph because I don’t want you to dismiss it because of the myth of the formal business plan document. Too many business owners read the words “business plan” and dismiss the idea, thinking of some hard-to-do term-paper-like formal document that they don’t need unless they are applying for commercial credit, seeking investment, or dealing with issues like selling the business or managing a divorce settlement.
The real business plan, however, is as simple as these five steps. You keep this business plan fresh and up to date and it optimizes management of your company. And when you do need a formal plan, you take this real business plan and dress it up with more description and explanations for outsiders, and print it as a formal business plan document.
Via: The Industry Word