Editor’s Note. The following feature is an edited and condensed version of Fred Haskett’s multi-article series on business planning. For more from Fred, CLICK HERE to check out his episode as a guest on The Snow Magazine Podcast.
While the start of a new year offers a natural launching point for new ideas, plans and goals, it’s always a good time to think about what you do and ponder how to do it better.
When you come down to it, planning is just another goal you set for yourself. And like all goals, the most important step in achieving it is to prepare. I believe Ben Franklin said it best: “By failing to prepare, you are preparing to fail.”
Business planning is the process of creating a vision of your future, aligning your people, processes and systems, and creating the necessary steps/goals towards that future. It is like looking at your company and industry from a helicopter to see where it is going, what has changed, and to see if there are other opportunities, and finally returning to earth to set the direction for your business based on the gathered information.
Business planning answers these three primary questions:
- Current Reality – Where are we today?
- Goals – Where do we want to be in the future?
- Action Plan – How are we going to get there?
Other questions come into play as a part of the three primary questions:
- What is standing in our way?
- Who are our competitors; are they better, why are they better, are we better? etc…
- What helps govern our decisions?
Once these questions are answered, you can start working towards your objectives.
A solid annual business plan will help you -- and others in your company -- make decisions today based on your long- and short-term goals. It will help you take your business to the next level.
It is also a means for you to communicate your ideas and your vision to other people who can help you build your business. In addition, the plan helps focus the company and the people involved on a direction and helps them commit to making this idea a success. Remember the wise words of Yogi Berra: “If you don’t know where you are going ... You’ll end up someplace else.”
Now, let’s dig into the steps to creating an annual business plan. A critical path item as you work through this process is to tackle each of the three primary questions separately.
The thinking process or mindset for each of these is different. So, I recommend approaching them as separate exercises.
Step 1. Start with the “Current Reality”
Before you can determine where you are headed you must first determine where you are at.
Where are you at? What is your “here?” What is current reality? By definition, “current reality” is the total of all the elements, metrics, and factors, internal, and external, that are present at a given point in time “Here.”
We know that operating from an awareness and acknowledgment of who and what and where your business is, as well as being aware of the factors going on around you, is the only way to be truly in touch with current reality.
People and companies who are not in touch with their current reality are deluded. You need to be brutally honest with this process to create the platform for identifying the goals in Step 2 that will make a real difference in getting you from “Here” to “There.”
Step 2. Getting from Here to There...
“If you don’t know where you are going ... you’ll end up someplace else.” — Yogi Berra
In the previous article – “Your Plan for 2020” – we identified where you are at Current Reality, which is the total of all the elements, metrics, and factors, internal, and external, that are present at a given point in time. This is the starting point and first step for the whole planning process, and it sets us up for the second step – goal setting.
Set Your Goals
These are the big goals, like how much do I want to grow my business, and how much profit do I plan to make? Each company must find its own goals based on its own needs.
To define them, ask yourself three things:
- What will your company become?
- When will it happen?
- Who will make this happen?
Next, describe each goal and answer basic questions like …
- How many employees will we need?
- Who are the customers?
- What is the scope of the service that we will provide them? Your decision-making procedure should include asking a lot of specific questions. Be sure to write the answers down for future reference.
- You’ll be dealing with two types of goals – strategic and supporting.
Strategic goals identify the intended accomplishment of a business strategy. When companies create strategic goals, they directly identify what they see as the outcome of their business efforts. These should be part of a company’s long-term vision.
For example, strategic goals may include increasing revenue; managing costs; diversifying and growing revenue streams; cross selling more services; improving client satisfaction and client retention, to name a few.
Solid supporting goals keep your day-to-day operation in line with your long-term vision. However, establishing supporting goals is the hardest part of planning because it is where you begin linking today’s actions with your vision for the future.
For example, let’s say you have 200 customers now and are doing around $1 million in business. To reach $1.5 million in 2020, you might need to add 100 more customers. How will you do that? If your plan is to get there this year, then you’ll need to:
- Begin quoting 50 new customers a month
- Generate and share more positive customer reviews
- Building a stronger brand
These are supporting goals, and each requires multiple actions to achieve them. Each of your supporting goals leads directly to meeting the bigger goal – $1.5 million in 2020. You can have multiple layers of supporting goals, with each supporting the ones above it. For example, to generate 50 quotes a month you may need to commit resources to hire a new estimator, invest in software to increase efficiencies, and focus on a marketing campaign to generate more raw leads.
Keep Your Goals Simple and Few
Focus is a key benefit of goal setting. Pursuing too many goals at the same time can be as bad as not pursuing any at all. Keep your high-level goals few so you can focus on them. This may require hard decisions about which goals to pursue now and which to defer until later. Therefore, prioritization is important. We recommend between three to five upper-level goals, each supporting your top-level strategic goal.
Now, we’re ready to discuss an Action Plan, or the road map that will get us from here to our ultimate destination – a solid and productive annual business plan.
Step 3. Ready for Action
Okay, quick recap before we hit the final step in our journey to establish a solid business plan that will actually work to propel your business forward and improve your bottom line.
Step 1 dealt with the current reality and the notion of getting a handle on where you are presently at before you can determine where you’re headed. By definition, current reality is the total of all the elements, metrics and factors – both internal and external – present at a given point in time.
Step 2 set the goals. For example, how much do I want to try to grow my business, and how much profit do I plan to make? Each company must find its own goals based on its own needs.
So, now that you know where you are at and you have laid out where you are going. The final step in the planning journey is to develop your action plan. How are you going to get “from here to there?” This will be your road map for achieving your goals.
High-level and supporting goals are critical. They are also the precursor to the important question: “How am I going to get to there?”
Cowboy’s coaching great Tom Landry may have said it best about goal setting: “Setting a goal is not the main thing... It is deciding how you will go about achieving it and staying with that plan.”Once you have established your goals, make sure your goals are SMART ones. The SMART test helps you ensure your goals can be validated and effective.
Are your goals ...
Specific – What is expected, why is it important and who is going to do it?
Measurable – How will I know if it’s done? How will I know if we’re on track?
Achievable – Is it possible and realistic to succeed?
Relevant – Will achieving this goal drive you toward a meaningful objective?
Time-Based – Specifically, when will the goal be met, or will be unmet but finished?
A part of creating an action plan is to achieve each goal to identify ...
- The who, as in who will champion this initiative? The why, relating to why are we doing this? Will doing it achieve the goal?
- The what, inferring what steps and metrics are we implementing?
- Is the progress measurable?
- Is it possible to accomplish?
- Does it address your big-picture objectives?
- Can you give it a timeframe?
If so, it can be a SMART goal. If it fails any one of these tests, then try again.
This three-step model isn’t the most formal or rigorous planning process, but it will give you a quick win for 2020. If the system works for you, use it to create annual and quarterly goals to plan out your growth from year to year and from season to season.
Philosopher Ralph Waldo Emerson said it best: “Few people have any next... They live from hand to mouth without a plan... And are always at the end of their line.”
While 2020 is well underway, it’s never too late to develop a plan for your success. While no plan is perfect, the gravest error is to continue forward with no plan at all.