Business Planning
Most of us go through life planning ahead. It might be to build a new set of stockyards or re-fence the boundary next winter, construct a new dam, fix the truck … you get the picture.
My point is that everyone has a plan no matter how rudimentary it may be.
If you already have a written business plan then you can probably skip this article unless yours is collecting dust in your office—in which case you may need a prod to revisit it.
It is a well-known fact that a very large per cent of businesses fail within the first five years of operation. There are many reasons for the failures, but the most common reasons are:
• lack of vision, purpose or policies
• weak financial planning—undercapitalised, no measurement of performance
• limited market knowledge—not knowing your competitors or poor market strategy
• owners distracted by the technical work and not the strategic stuff.
Business planning was once described to me as booking in to see the dentist—you know you really should do it but you keep putting it off because the phone keeps ringing, the cattle need feeding, troughs to be fixed, kids to pick up and appointments to keep—leaving no time to create a business plan. Justified, right?
Ever heard the old adage: ‘businesses don’t plan to fail … they fail to plan’. In this day and age too much is left to chance by not taking the time to get your thoughts out of your head or off the piece of paper stuck to the fridge door, and written down in a formal business document.
A business plan contains vital information about your business such as how it will operate, market research and strategies, evaluation of your competitors, and risk and financial forecasts. It is one way to improve the odds of succeeding in your chosen enterprise, but don’t get me wrong—it certainly isn’t a magic cure.
When you first sit down to initiate the task of creating a business plan it may seem daunting, even a little overwhelming. There are questions about the future of your business that you will not know the answers to and probably some that you do not want to face.
To succeed in any business it is important that you take the time to get to know your:
• industry
• customers
• competitors
• resources.
A good way to start thinking about business planning is to think about your business using the SWOT method. This acronym stands for Strengths, Weaknesses, Opportunities and Threats.
I find that it is helpful to look at a SWOT from a business perspective and from a personal point of view too.
Goal setting
When setting your goals make sure their success can be measured and monitored. An acronym commonly used in project planning is SMART. There are several variations to this acronym; however, the one I like is:
Specific—well defined, clear to anyone knowing the basic project
Measureable—when will the goal be completed and how will it be achieved?
Agreed upon—do all key stakeholders agree on each goal?
Realistic—are the resources available to achieve this? Do you have the knowledge? Is the timeframe achievable?
Time based—do you have enough time to achieve the goal to the desired outcome?
Having a fluffy goal such as ‘to be the best beef producer in my district’ is not SMART. But, ‘to be the best beef producer in Northern Tasmania by increasing calving percentages by 20 per cent by 2015’ is.
Taking the time out of your working week to focus on business development is important. After building my first business plan I realised that allocating this time could help me take my businesses to the next level. I now set aside four hours per week to work on my businesses, not in them. I cannot emphasis just how important this has become. Here is how the business planning process has helped me:
It has:
• assisted in determining the sequence of investment
• maximised market options
• assisted in getting better finance options such as better interest rates
• allowed me to think about what I would do if I wasn’t able to operate the businesses for some reason
• helped me to see the reason why things have not gone to plan and assisted me to refocus and take corrective action.
Best of all, taking the time away from the hands-on stuff to work on your business allows you to think about problems with a clear, unstressed mind. Assessing certain situations before they arise can save you from making hasty decisions that can cost you an enormous amount in the long run.
Always seek professional advice for the area you are planning. As invaluable as a good accountant can be to your business in creating a strong financial future, don’t let them tell you how to grow grass.
So enough talk ladies and gents—take the phone off the hook, put your mobile on silent, put the kids to bed and lock the office door—it’s time to get serious about your business and start making a plan or allocating time out of your busy work week to move your business forward.
If you need help to get started there are many organisations out there who can guide you through the process, including Rural Connections.
Rural Connections has a huge network of professionals across Australia who can help you through this process—from the very basic plan through to the advanced. Please phone us on (03) 6257 5234 if we can help you.
Why not get a group of farming friends together to learn about the business planning process together in a group (and save a few dollars).
Let’s get to it.