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Planning For Profits

November 16, 2009

Success was earned by doing, so the natural tendency is to keep on doing. Why change? One reason might be because the opportunities that gave rise to your initial success may change. Other opportunities, better yet, may develop.

Typically, the managers of closely held businesses, often the founders, have excellent survival skills that have enabled their businesses to succeed. They recognize the value of the planning process, but generally feel that they don’t have the time, experience, resources, or patience to plan. These businesses stay in the reactive mode, usually moderately successful, but always vulnerable.

There comes a time when the entrepreneur’s survival skills are no longer a sufficient formula for success. Strategic planning is needed. Strategic planning is not an esoteric luxury for larger corporations with excess dollars to be wasted on staff research. Strategic planning is the blocking and tackling of business. It’s business basics for organizations of all sizes.

Closely held businesses tend to focus on operating problems, which they handle with greater skill and pleasure than activities with delayed feedback, like planning. Many small businesses feel their flexibility and proximity to their customers makes planning superfluous. Others utilize forecasting and budgeting, both of which are planning tools, but not an acceptable substitute for true planning.

Planning is the only means by which a business can truly take control of its own destiny. Strategic planning is the process where a business takes the initial steps towards becoming what it wants to be. Despite the inherent obstacles and natural bias against planning, the smaller corporation must develop methods to effectively plan if it truly wants to be in control.

Planning is carried out to determine what tasks must be accomplished this week, this month, or this year so that the business will be where it wants to be next month, and next year. Planning is not concerned with making certain decisions about an uncertain future. Planning concerns itself with the future impact of today’s decisions.

Small and medium sized businesses have some advantages when it comes to planning. While scientific methods are utilized in the planning process, planning remains more art than science, it is a thinking and creative activity, the results of which are not directly related to the amount of resources expended. The executives in the smaller business are closer to the action. Their ‘feel for the product’ and their ‘pulse on the market’ will often be far more valuable than hours of staff research and expert opinions.

The basics of any planning process can be found in the answers to three questions. Where are we now? Where do we want to go? And how are we going to get there? Planning for the smaller business should include the selection of strategies from realistic options, the allocation of human, physical, and financial resources required to implement the strategies, and the establishment of a control process over the implementation of the strategy.

Strategic planning is the determination of what products or services are to be offered to what potential customers. All the platitudes and generalizations about planning must be brought down to specifics. The starting point is to determine what each company does well and poorly. What are the strengths and weaknesses of the business in the areas of people, products, finances, and markets? Strategic planning typically covers a time period of from three to five years.

Operational planning is the determination of how to run the present business most effectively. It customarily deals with the activities of the current year. Operational planning should include the participation of every manager who will have a role in the implementation of the plan.

A budget is not a plan. Budgets identify revenues and expenses that are expected as a result of a particular course of action.

Many managers see planning as an extension of the budgeting process. In an effort to deal with the uncertainties of the future, managers want to see concrete plans for the future. These plans place an emphasis on numbers and are usually presented in a budget format. This is the opposite of how good planning evolves. It should begin with identification of key issues to which numbers can be later attached.

Because it’s your business, start to deal with the issues that will determine your future before they do. There is no one right way to plan, but there is only one sure way to get control of your destiny and that’s to plan it.

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