Annual Plans:  Why Have One?

We have just started Q4 of 2017.  That means it is time to start looking forward to 2018.  In my view, that means the development of an Annual Plan.  This is somewhat different than a Business Plan because it has a lot of tactical details about how 2018 will be executed.  But we will come to the contents of a plan in another post.  Today, I want to talk about why we have one.

The first reason I want to give you is what I call “The 7% Problem”.  What is that?  It is the Operating Expense Inflation that businesses go through year after year.  When I used to measure it at Advanced Fibre Communications it was 7%.  It is the answer to the following question:  If I do nothing, how much Operating Expense will I have next year?  I found that costs went up about 7% year over year.

Now, I am quite sure that you have a different number.  But I bet it is not that far off from 7%.  Even in my own business today I saw a 20% rental increase on my office year over year.  So, this can happen to the smallest of businesses.  When you have employees, remember you have to give people raises.  Raises impact Worker’s Compensation and other Insurance costs.  In any case, you need to expect your costs to increase over time.

“The 7% Problem” is all about what you are going to do about it.  Are you going to increase Revenue?   If so, how and how much?  How about Operating Expenses?  Can you reduce them?  How about Costs of Goods Sold?  Is there a way of lowering them?  In any case, all of these things require Change to your Business and the way it operates.

That leads to the question:  If I am making a Change, how do I know it is working?  And that is the point of the Annual Plan.  You take last year’s business and you overlay it with specifics about the changes that you are going to make.  Most importantly, you build metrics around these changes.  This becomes part of your dashboard for next year.  You can review your progress against the metrics and figure out how to make them work or do something else.  You need to make these plans living documents to use them to help your business.

Have a great day!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

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Financing Your Business

Over the past 4 years, I have written on occasion about Funding and Financing Sources for a Business.  This will be a series about Financing and how to view it in your business.  The goal is to talk about various stages of funding for different kind of companies as well as the various types of players.  The thing is that this is so vast a topic that I will probably miss something.

The there are two issues that will be at the core of everything else: Your Business Plan and Return on the Investment.

There are people that will not want to understand Your Business Plan, but they are not going to fund most Businesses.  You need to be able to describe to people how you are going to make your Business work.  That is the point of the Business Plan.  But the part here that is front and center is the Financial Part of Your Business Plan.  People will expect at least 3 years of realistic Financials with some narrative with them that helps explain why your Financials will be that way.  Most people often don’t think through their Financial considerations in any detail.  For example, How many customers do you need to make your Business match the Financials that you have presented?  That question alone leads to a line of question involving Products, Marketing and Sales that help make a Business Plan tick.  So, there are several threads that you can follow through your Financials to make the narrative of Your Business Plan.

Now, the important part of the Return on the Investment is the addition of the word “the”.  I am not talking about how you are planning to improve your Business results.  I am talking about how your investors are going to make money.  When you talk to investors, that is what they actually care about.  The Business Plan is simply a vehicle to describe how your business will grow.  There is a difference in that translating to how the value of their investment will grow.  There is another difference in how that translates to the investor being able to exit their investment and get all their capital back and make a return on top of that.  You also need to ensure that you have the risk associated with the investment being comparable with the potential return on the investment.

If that is too much text, then let’s make it simple.  You need to tell people what they are getting and how you are going to grow the value of their investment by executing your business.  Remember, you are competing in a market for this funding.  You will find that investors have choice.  And it is your job to align with them to get their investment.

Have a great day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

The 4 P’s of Leadership: You

May 22, 2017/

We have talked about Leadership and my 4 Ps model of Leadership:  Products, Process, Plans, and People.  The last post before we wrap up on this topic is the most important person in this whole equation.  That would be You.

You can be the kind of leader that grows and develops your Business.  The kind that focusses their energy in alignment with their Vision and their Plan.  You can tune your Business Processes to make them work more efficiently.  You can deliver Products and Services that your Customer want.

Many of you believe that last and want things to stay the way they are to allow you to deliver them.  But status quo is not something that works forever.  We want things to be the way they used to be and long for the good ole days.  Those days are gone and we need to create the better days ahead.

And that is what this process and model is about.  Creating your future.  What do you want out of your business?  Are you on a path to get there?  If not, then what are you going to change to make that happen?  If you are not sure how to change, then you need to hire help to get that change in place.  I see so many owners who don’t like the way that their business works for them.  But it can be different.  If you are not sure about that then look around.  Does one of your competitors have a business that works the way that you want yours to work?  If so, then the business you want already exists.  That means that you can do it as well.

Your Vision for your Business is something you need to share.  Share it with your employees and partners and customers and prospects.  Tell them what you want to achieve for them and for you.  Tell them why you are great.  Then most importantly make sure that your Business delivers on what you promise you want to do for your customers.  I call this your Brand Promise.  Make sure everyone involved knows what this is.  Make sure that you and your employees deliver on your promise.

It is never easy.  There are bumps along the way.  But if you believe in what you are doing then those customers that believe as you do will come to you.  It is you as the most important person that can lead your Business into the future.

Have a great day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

Visit the FocalPoint Norcal Forum – We have many tools for helping your Business!

The 4 P’s of Leadership:  Change and People

This series has been about why businesses need to continue to evolve and some thoughts about how this happens.  We need to get to the core of this and this is people.  People are the element that causes any long term growth in your business.  Why is that?  If it wasn’t clear from the last post, then I will be explicit.  Plans require Action to be successful.  Plans without Action are wishes.  Without people there is no Action.

That is why we have gone to all the trouble to understand the change in our Business and to create distinct measurable activities.  These activities need to align with our plans for growth.  The reality is that all of this change and growth will create holes within the organization.  There will be skills that you don’t have and there will be skills that you will need more of.  That all comes back to more people and the right people.

If you are constantly hiring those new skills from the outside, it limits the growth potential of your current employees.  These are the folks that brought you to where you are today.  In comparison to a new hire, they should be at a higher trust level with you.  They might lack a skill, but you know that you can depend on them.  Are you better off hiring from the outside or training/promoting from within?  Ideally you want a mix of both.  When you bring people from the outside, they will bring their experience and ideas with them.  That diversity of viewpoint is not a detriment.  It is a strength.  You want to balance that with opportunities for existing employees.

As you think about the Changes you are going to make, ensure that you understand any skill gaps that you need to close.  Those skill gaps will help define your hiring and training needs for the future.  Neglecting these gaps will mean a plan failure or a significant change to the plan.  Training also helps motivate and retain employees.  Even if you are hiring to close skill gaps, training can be a powerful tool in your arsenal.

Businesses are simply collections of people with their skills and ideas.  Don’t forget that as you build your business.

Have a great day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

Visit the FocalPoint Norcal Forum – We have many tools for helping your Business!

The 4 P’s of Leadership: Goals from Top to Bottom

You have created a real Business Plan based upon the strategic situation that you documented in your SWOT.  Great.  Now what?  The answer is to put that plan into action.  This will turn the near term parts of the Business Plans into actions on either you Products/Projects or your Processes.  Those actions need to have Goals and Objectives to be met.  That way that they can be monitored and course corrected.  Depending on the size of the organization this can be a simple or a complex exercise.

But no matter what, everyone needs to understand how they fit into the plan.  In large Businesses, this is cascaded down through different levels of Management.  In smaller Businesses, this can be a direct conversation.  Again, in either case there are 2 questions to be answered:

– What part of the plan am I responsible for and how will you know that I am delivering?
– What are the actions I need to take to execute my part of the plan and how will you know that I am doing them?

The answer to the first question is what is called a KRI or a Key Results Indicator.  We may track many things but within a Business Plan there will not be more than 3 to 7 measurements that are critical to the success of the Business.  Revenue, Gross Margin Percentage and Profit are three Key Results for everyone.  Any others are specific to the Plan and the Business.

But it is action that makes a Plan work.  And that is the answer to the second question.  It is called a KPI or Key Performance Indicator.  KPIs are trackers of action.  The idea is that if everyone performs the actions that can be measured by their KPIs then the Business Plan (and thus the Business) will succeed.  Let me give you a simple example that can help explain this.  Let’s say that you want more Revenue.  You can do one of several things:  You can get more Customers;  You can sell Customers more things;  You can charge Customers more;  or You can sell Customers things more often.  That is pretty much the range of ways of raising Revenue.  If you are going to do one or more of these things, the Business will have to change (however slightly) for this.  The actions that you take to do this should be measurable. For Example: I will call on 6 prospects per day instead of 5.  The beauty behind a KPI is that it defines the action that you take, so you can control it.

Many Business Owners and Executives struggle with KPI development.  This is something that I can help with as KPIs are critical to the success of a Business Plan in action!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

Visit the FocalPoint Norcal Forum – We have many tools for helping your Business

The 4 P’s of Leadership: Controlling Change

The last couple of posts in this series has been about factors that cause Change within a Business.  Many of these factors are external to the Business and so are not directly under control of the Owner or Executive.  I had a client who sold items to High End, Brick and Mortar Toy Stores.  Needless to say, this client was having to shift to an online business.  They were unhappy about the loss of the Toy Stores.  I pointed out that this was not a choice that they had control over.  The only choice they had was to how they were going react to the change in how their products reached the end consumer.  I pointed out that by selling online that the company had a theoretically larger potential market and that they could end making more money by eliminating the Middle Man.  They were not happy, but were accepting and we moved on.

This is where Business Plans come in.  Given the changes that are going on, how are you going to operate your Business so that it thrives under the new conditions?

There are lots of people who ask me about how to make one and what is important or what is the best kind of plan.  The answer is that there is no best plan.  There are better plans and worse plans.  The reality is that if you work the process, that any plan is better than no plan.  Why is that?  Because effective plans have goals and metrics that you can use on the way to your Goals.  This process allows for course correction over time.  This is only true if two things are true:  Goals and Metrics are measured and maintained dispassionately and Corrections are implemented efficiently.

The biggest single challenge with Goals and Metrics is changing the measurement during the plan without a replan.  Especially the first time you do this, you are not going create great Goals and Metrics.  But you should not just throw them away.  I see so many people changing Goals so that they are met so that they can feel good about their achievement.  Don’t fall into the trap.  If something has drastically changed (and it happens), then do a replan.  Everything has to be back on the table.  The good news is that all the work that went into the first plan will dramatically shorten the replan.

Corrections are another problem.  I worked for a company that acted like it had ADHD.  Products went from the most important to on the chopping block within a span of a few months.  This created more chaos than it did momentum.  It is hard to make progress if the priorities of the company change so rapidly.  It is important to know how to detect the success or failure of initiatives and that is a problem area for people as well.  They will set goals that are too optimistic or not have a complete plan to support that sort of optimism.  But the Goals should stick, plans need updating and should do so with some concern for too much course correction.  Think about teaching someone to drive.  Until they start looking down the street, they make too many corrections and riding with them is not pleasant.  Similar things here.

Have a great day!
Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

Visit the FocalPoint Norcal Forum – We have many tools for helping your Business!

The 4 Ps of Leadership: SWOT

As we evolve our thoughts from Process to Planning, we need to think about the Status Quo.  The first challenge to the Status Quo is Inflation which we discussed.  That causes a mix of strategic and tactical projects that change the Processes within a Business.  The challenge we then need to look at is the strategic context that the Business resides in.  The first tool that can be used to examine this is called a SWOT.

SWOT stands for Strengths, Weaknesses, Opportunities and Threats.  This is a tool to examine the current state of any business.  The idea should be obvious but each of the categories of the SWOT.  The one thing that may not be clear is that Strengths and Weaknesses are internally focused.  Opportunities and Threats are externally focused.  Most Small Businesses are pretty good about understanding their business so get the internal factors.  They struggle a bit with the external factors.

For example, here in Sonoma County there has been a rebirth of Passenger Air service in the last 5 years.  The flights are very full and a second airline has just come into the picture.  This is a major potential source of revenue for many companies.  There was significant construction required in a Runway expansion as well as an expansion of the terminal.  The number of passengers has increased, so it represents a potential market for travel.  So, there are literally a dozen or so industries directly and indirectly impacted by this growth.  Most small businesses did not give this expansion a second thought.  Because of that, there has been little to no involvement by smaller businesses.  They missed an Opportunity.

As more and more products are purchased on-line, brick and mortar retail is struggling with how to compete.  This extends to things like Insurance.  I have had agents complain about eSurance or Geico, but that is going to be the way the world works in the future.  It is simply a matter of time.  Really the question is what will folks in that business do in 20 years?  I suspect there will be specialty practices and markets that will remain with brokers for a very long time.  The question really is can somebody identify them and focus on these markets.  If so, they will survive the long term decline of the general market.  We see this in Print.  Print is dead right?  Well, general print is dead.  Specialty print is doing quite well.

So, do a SWOT for your business.  Engage with it and make plans to address your findings!

Jim Sackman
Focal Point Business Coaching
Business Coaching, Leadership Training, Sales Training, Strategic Planning

Change Your Business – Change Your Life!

Visit the FocalPoint Norcal Forum – We have many tools for helping your Business!