“when it comes to planning, businesses need some improvement”.
- Only 13% have an annual budget in writing,
- Only 14% have an annual business plan in writing, and
- Only 12% have a long range plan in writing.
In all, nearly 60% of businesses have no plans on paper at all!
This could be a major reason why over 80% of small businesses fail within three years.
“if you fail to plan, you plan to fail”.
However, businesses and entrepreneurs aren’t the only culprits. Pathfinders client base includes companies ranging in size from $10 million in revenue to multi-billion dollar internationals. Whenever I call on a consulting prospect, I always ask about their business plans. It amazes me how few have a written plan. And of those who do, very few employees below the corporate board room even know about it. Or not updated since long.
There are many excuses for such haphazard management, but no justifiable reasons.
- Downsizing has eliminated a swatch of middle management who used to develop such plans.
- Some say that the volatility of the global markets makes such long range planning useless.
- Cost is often mentioned as a deterrent.
- Family run and privately held businesses seem to think they don’t need it, since they have been successful for years without formal planning.
I recently spoke to a group of experienced consultants, professionals who are paid very high fees to advise clients on the benefits of business planning.
Of the 35 in attendance, only 3 had an annual business plan.
Not one had a marketing plan!
I once asked a self-employed public relations professional if he had a budget (No!). I asked further how he could possibly determine his hourly rates…and he licked his finger and raised it to the wind!
Sound business planning doesn’t have to be costly or time consuming.
It should also be a “living” document, not some report printed, bound and sentenced to the credenza in your office.
Plans should be reviewed quarterly, with variance analysis reporting (actual vs. plan vs. last year). It is also very simple to do.
Each year during September-October, Pathfinders joins the clients for developing the following:
Long range plan – 3 years maximum is a revision to last year’s plan, and it updates your goals and objectives for the coming year
Marketing plan – lists the markets you need to improve in, new markets to penetrate, and those you want to drop
Sales plan – lays out which services to concentrate on, the mix you expect, and how you expect the revenue to distribute
Annual Budget – lays out your revenue and detailed cost on a monthly basis, and projects profit, taxes, and expected pension contribution. You can then accurately forecast “breakeven” points for fees and income
Each is done on one 8 ½ x 11 sheet of paper, and remains on the wall above our desk to be seen every single day.
Who says planning has to be difficult?
Suresh Shah, Pathfinders Enterprise