How Planning Affects Profits

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Karen Anthony, Negosentro |  When you started your business, you’ll have prepared a detailed business plan, detailing what you would do to make your business successful. You would have looked at cashflow, marketing, budgets, financial planning; every aspect of what you hope to achieve will have been under the microscope. You might have needed the plan to get a business loan or investment, or you couldsimply have done it to prove to yourself that the idea was viable. That may have been six months or six years ago, but if you are honest, when did you last look at your plan? Has it been sitting on your desk or a file on your computer, unread since the business opened? Or maybe you take it out now and then to check your progress against your predicted schedule? Either way, if you’re not making your plan an integral part of your day, you are missing opportunities to help your business reach its potential.

A business plan is for life

A business plan takes a degree of clairvoyance to complete. You base your plan on known facts, reasonable outcomes and a logical progression, but you are still trying to predict the future. Take a look at your original business plan now, andbe honest about how accurately you foretold what was to come. The first stage in breathing life back into your plan is to find out what you can learn from your original predictions. Where have things turned out as you expected, and was that due to how good your strategy was, or did unforeseen factors influence the outcomes? What about the predictions that didn’t come true? If you forecast that you would start to turn a profit in the third month of your third year, was this achieved, and if not, why not? Were your figures inaccurate; did a competitor open up a few months after you; did you fail to account for increased running costs or get your staffing wrong? By examining your original plan with the benefit of hindsight, you can identify problems with your business and also with your planning skills.

Using your business plan

Having dusted it off and found out what worked and what didn’t, you now need to update the planto guide you in the future. The traditional form of an annual or two-year plan for businesses has been superseded by more modern planning techniques, such as the quarterly review. You should use whatever format works for you and your business, but if you find planning a chore, break the year up into manageable chunks so that you can tackle a more immediate and predictable period of time. A rolling cycle having a detailed plan covering three months is easier to prepare and monitor, and you will be more motivated by the progress you make and the number of items you can check off. After three months you review how things are going and update and adjust the plan for the next three months. You should still have a set of long-term goals for the business, and use your quarterly plans to work towards achieving these.

What should you cover in your plan?

You need to have a schedule for examining your accounts on a regular basis so that you can keep a check on revenue, profits,and expenditure. Use your data to inform decision-making on maximizing profits and reducing costs. For example, if you make cardboard packaging, you will be dependent on some specialist machinery to maintain output. If your machines break down, you will fall behind with an order, which has a knock-on effect on your remaining orders. You might then have to pay overtime to your staff to get back on target. You’ll also have repair costs to deal with, which can be pretty hefty when it comes to complicated machinery. To avoid this situation, you need to plan to complete checks and routine maintenance at regular intervals. You can use maintenance scheduling software to automate this task, but until you identify that this kind of situation is having a detrimental effect on your business, you won’t understand the importance of finding a solution. You should also think about;

  • Staffing.Have a plan for how you will manage if anyone is on leave or off sick, a calendar for staff training, and ongoing reviews to ensure your staffing is at the optimum level.
  • Outgoings. Have a system for appraising overheads to ensure you are keeping costs to a minimum.
  • Health and safety inspections and fire drills, or any regulatory requirements for your sector.
  • Keeping up to date with industry developments and other changeable factors that can influence your business,e.g., the economy, new trends, new software that could increase productivity and so on.

How do you use the plan from day to day?

Your business plan is like a living thing, growing and changing according to outside factors and internal influences. You need to keep the plan at the forefront of your mind as you carry out your daily duties, continually reviewing what is in the plan to ensure you are on track, that you have a realistic schedule, and that you factor in anything that you hadn’t foreseen. Discuss your plans with your staff, and encourage their input. They will have a different perspective on how things are going, and will very often have insight into areas for improvement that you hadn’t considered. They will appreciate you involving them in the planning process, and happy, motivated staff are more likely to have higher productivity levels and will be eager to come up with bright ideas and ways to save time and money.

Without a plan in place, your business is just trundling along like a tortoise with its head inside its shell. It may keep on the straight and narrow by sheer luck, but it will be going much slower than it could, and if anything blocks the path, it will find it hard to get around the problem. Better to be a hare, moving with speed but with its eyes wide open, ready to jump out of the way of obstacles or find a better path to take.

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