Without Plans, Businesses Fail

Many business owners will agree that profitability is a key indicator of business success and most measure their growth by tracking sales or market share improvements. Business owners are often on the look for new and improved ways to increase their business growth, yet many fail to see the link between long-term business sustainability and business planning. For some, business planning is a tedious process that they do not have time for, others are unsure of what to do. This article we will help you to understand the key steps when undertaking the business planning process.

According to recent figures from Dunn and Bradstreet (August 2011), business failures have increased by 25% in the past twelve months. Tony Featherstone from the Sydney Morning Herald analysed the figures provided by an ASIC study (2005-2010) in relation to business failures and found that poor strategic management is the highest cause of business failure. It accounts for around 43 per cent of all external administrator reports and has remained constant over the past six years.

Strategic business planning is essential for businesses to grow and improve. It enables businesses to see upcoming trends and create pro-active strategies to gain the best results. The clear focus and direction that comes with a plan will help you understand who your key target market is and the message that you should use when selling your business/product/service to them.

To create an effective business plan you first need to identify or confirm the overall business strategy that you are pursuing. In general you will be following one of three generic strategies developed by Michael Porter in 1980 in his book "Competitive Strategy: Techniques for analysing Industries and Competitors":

a. Cost Leadership - Here you sell at a low price with the aim to sell in high quantities to take advantage of manufacturing discounts.

b. Product Differentiation - This is where your product has higher perceived value to that of a competitor product. E.g. BWM & Mercedes both have a higher perceived value than a Holden or a Ford.

c. Market segmentation. - This is where you target your product specifically to a specialised market niche. E.g. Maternity Clothing - you target market is very specific - ladies who are pregnant or trying to become pregnant.

Once you have re-affirmed your strategy you need to do some external and internal analysis of the markets. With external analysis, a P.E.S.T.L.E. (Political. Economic. Social. Technological. Legal. Environmental) analysis is ideal to give you a good grasp on the market around you, the upcoming trends, opportunities and threats. A S.W.O.T. (Strengths. Weaknesses. Opportunities. Threats) analysis should then be carried out for the internal section. The S.W.O.T. analysis is a powerful tool due to its simplicity and effectiveness in helping to determine the critical issues to address and pursue. Strengths and Weaknesses are internal factors, while Opportunities and Threats are external and can be taken from your P.E.S.T.L.E. analysis. V.M.F also recommend that you include financial, competitive and channel/distribution factors within your analysis to gain the best picture of your market.

With the analysis completed you need to create your business goals. S.M.A.R.T. (Specific. Measurable. Attainable. Relevant. Timely) goals are recommended as vague goals will not drive success and can lead to employee dissatisfaction and incorrect business results which may lead your business astray. With your S.M.A.R.T. goals and your understanding of the market factors you now should determine the required factors for success. What resources (people, equipment, etc) do you need to fulfil your goals?

Following this you can start creating marketing strategies and tactics, including action plans for goal achievement along with how and when you are going to measure your progress for each factor (monthly, quarterly, etc).

The final and most important two steps are to implement the plan you have created and to monitor and continually evaluate the effectiveness of your strategies continuing to make minor adjustments along the way to improve their effectiveness in driving your business towards growth and your goal achievement.