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
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
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
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
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
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
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
Original Story from SBA.gov http://www.sba.gov/community/blogs/5-simple-steps-better-management.
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