When you run a business you’re usually looking for one thing: profit. Of course you want your business reputation to be maintained and you want the world to know about your product and services – but really, even both of these elements comes down to earning a profit. So what can you do, as a business owner, to ensure that your venture continues to grow and bring in money? A business review. This is similar to the business plan you put together when you were first getting started. (If you are just getting started check out the course on how to create a Business Plan for tips.) However, now that you have some idea of your target audience, average gross profits and supply and demand you can fine-tune your efforts to experience even more success as a company. The two questions to ask yourself are: where are we now? And, where do we want to be? This is the essence of the business planning process.
Where are we now?
Seems like a simple enough question – but it’s not. Answering this effectively requires deep analysis of the company’s strengths and weaknesses, financial trends, target markets, assets and overarching goals. The shareholders and management should team up to do this assessment as honestly as possible. Where could the company improve? What doesn’t need to be changed at all? Perhaps gross profit goals are not being met, or the company needs to undergo a branding overhaul to increase its appeal to customers. Here are some facets of your business you should study closely.
- Resource Allocation
Every company has fixed and current assets. These two categories encompass the worth of the company. Fixed assets are resources that depreciate, or lose value, over time. They are also assets that are not sold to the public, rather they are used in the profit making process. Fixed assets include vehicles, machinery, property, office supplies, and the materials used to make the goods that are being sold (not the actual goods themselves – these are current assets). Current assets include the inventory ready for sale, cash, accounts receivable, short term investments and any other asset that can be turned into cash within one operating cycle, usually 12-months. During the business planning process the team should assess whether or not the resources, or assets, of the company are being used most efficiently. If the investments being made aren’t showing high returns – maybe it’s time to go back to the drawing board and find new places to invest company funds. If the equipment used to produce the goods and services need a little boost, maybe it’s time to upgrade outdated machinery. All of these factors should be taken into account when drawing up the business plan for the company’s future. Read more about your company’s operating assets in the article Working Capital.
This is a big section that mandates a lot of attention. Without effective marketing you cannot reach your target audience which results in less sales and less overall profit. Yes, marketing campaigns and branding can be costly to do but in the end it’s almost always worth it. Spend time looking at the campaigns the company ran over the past 12-months. Were they successful? Does the company need a new website with an e-commerce option? Is the brand antiquated? Should the company invest in email marketing campaigns or radio advertisements? Crunch the numbers and see how much you spent (time and money wise) on marketing efforts and compare it – to the best of your ability – to how much you made. Hone the marketing planning process by being specific in your business plan. Instead of writing “improve internet presence” do the necessary research to find out the steps you should take to make this goal plausible. To get a really good idea of what marketing strategies to utilize, check out the course Essential Marketing Skills.
- Opportunity Decision Making
Regardless of your type of company – you’re in the business of making money. Making money requires customers and customers are your source of opportunity. So when you are faced with a myriad of options as to which way to take the business you’re best to sit down with each option for individual assessment. Don’t leap at the dollar signs without due research because you could end up in the hole. Solving the customer’s problems and needs should be at the core of your company. If an opportunity knocking on your door allows you to do this more efficiently and in a more affordable way – take it. We’re looking at the long-run return on the decisions being made, not the immediate gratification.
Last but definitely not least are the finances. Even though you might micro-manage these to all get-out during the year it’s time to do the overall analysis. The basis of this section is: are we meeting our forecasted goals? And if not, why? This will bring you back through resource allocation, opportunity and marketing strategies, but it will also force you to reassess your financial forecasts. Every business does a financial forecast that acts as a guide to how much money should be going in and out over the course of a designated period of time. So if you forecasted to make a gross profit of $100,000 in 2013, but you only made $75,000… something is wrong here. That is a serious miscalculation as to the company’s impact on the market and the trend in which the business could be heading. Sometimes these reports can be misleading due to clerical errors or inaccurate reporting. Spend time going through each financial report and double checking for any discrepancies. They happen – a lot. Manage any inconsistencies with precision and caution. Doing so will lead you to a better view of what is really happening for the financial future of the company. Learn more about company finances in the course Basics of Business Finance.
Where do we want to be?
You’ve gone through all the paperwork and have analyzed all of the current company data. Now it’s time to ask the hard question; is this what we want? Chances are not everything is going to be 100% on par with what you want for your company. As you go through each section listed above consider the changes that need to be made to fix any undesirable circumstances.
During your recourse allocation analysis you may realize that your equipment is costing you productivity and money. Maybe the machinery is not energy efficient, maybe things are Jerry-rigged together and it’s causing inconsistent results, or maybe it’s time to buy that 16-person passenger van instead of the soccer mom van you’re currently sporting. Whatever it is, design a viable plan to get there. This is why it’s called business planning and not just assessing.
For marketing, I mentioned the example of increasing internet presence. If this is a mutual goal of the shareholders then the business planning process would begin with steps to accomplish this. For example:
- Update the website
- Design a new, trendier, logo
- Use Google Analytics so we can see where our traffic is coming from and where we should focus our marketing efforts
- Sponsor a huge event in town to increase exposure
Opportunity decisions requires playing out scenarios. If we bring on this product, how will that benefit our revenue? If we choose to discontinue this line of service, will we see a decrease or increase in customers? While these questions may not be directly applicable to you – you get the idea. Look at the opportunities in front of you and play it out as if you were choosing it. You can see the end game better this way and take a more educated approach to company decision making.
And lastly, the financial forecasting aspect of your business plan. After all of the above avenues of your business are thoroughly analyzed and decisions have been made to improve success – the numbers will fall into place. Don’t try and plan your forecast before doing the hard work. It won’t be accurate and you’ll end up scratching your head next year wondering what went wrong. For a more detailed guide on how to analyze your business process try taking the Learn Business Process Analysis course.
For organizational purposes, create a business processing plan booklet that includes a summary on each problem, the numbers backing it up and the plan that is mutually agreed upon to correct it. This way you have a clear and concise view of what the future holds and a reference should you get off track.