I have written of the difficulty of writing a Business Plan. This was based on experience with clients who have struggled to write their own plans. As a result, we are now collaborating and making good progress. The hard thought that goes into crafting a good Business Plan is real work.
Usually, a good Business Plan is going to end up with some typical elements:
Sales Growth (the business needs to be bigger)
Profit Improvement (profit is the driver of value)
Organizational Changes (the business must change, not just grow)
Development of Systems and Processes (essential to replication)
Changes in the Owner’s Role (Oh my)
I’ll discuss more of each of these below. But layered on top of all this is the fact that most business owners have never done this before. Serial entrepreneurs aside, the typical business owner will build a business of real substance only once in their lives. That means most of this is new to them.
Sales Growth
Growing sales is easy on an Excel spreadsheet. Growing real sales is harder. This can take many forms, from geographic growth to adding product lines to organic growth to a strategic acquisition. Sometimes sales are easy; the business is there, the company has to just go get it. Most times it isn’t that easy and sometimes growing top-line revenue is the biggest challenge.
Profit Improvement
While growing sales, most Business Plans include an increase in profitability. Sometimes this is the natural result of economies of scale. Other times growth means more layers of overhead and increasing the profit percentage is difficult. But businesses are valued based on profit (or something close to profit) and a multiple. Larger businesses have higher multiples, so increasing profit has a double benefit to the value equation.
Organizational Changes
With sales growth, invariably the headcount increases. Any person can only effectively supervise six to ten people, so the solution is another layer of management. Growth may also mean remote/branch offices which bring supervisory challenges. The very nature of the organization must change; a $15 million business does not look like a $3 million business that’s just bigger. The challenges include envisioning the organization chart several years from now, planning the intermediate steps in the transition and picking the right people to fill the various roles.
Development of Systems and Processes
As an organization grows, it is always difficult to design systems and processes that ensure consistent service/products, customer experience and financial results. This takes many forms. One form is the way the tasks are organized. Another form is the policies and procedures the company creates. Still another is figuring out how the handoffs occur between departments. All of this needs to be designed, planned and implemented. The goal, of course, is to create processes that can be replicated so that there is consistency throughout the organization.
Changes in the Owner’s Role
This is the toughest one of all. The owner of the business must change in so many ways. At the beginning, the owner probably did most tasks themselves. Then, with a few employees, all were “direct reports” to the owner. With growth, the owner must manage managers, that is, employees who have others working for them as direct reports. The owner must transition from being a “doer” to a “manager” and then to a “manager of managers.”
Another role of the owner becomes planning, especially strategic planning. That strategic plan, including the vision for the business, needs to be communicated. The owner becomes a communicator and, yes, a leader. For leadership is different from management.
It can all seem overwhelming sometimes to the business owner. Fortunately, these changes typically occur over a number of years. These skills can be learned if they don’t come naturally. And finally, there are those who have trod this road before who can help guide the owner.
No comments yet.