Does your Business have a Road Map (or GPS), or is it lost?

 

Too many businesses are floundering. They have a vague idea of where they’re going, but no idea how to get there.

Successful businesses have three things; a clearly defined destination, a route to get there, and the right vehicle to travel in.

Destination

What do I mean by this? Firstly is the destination clearly defined? A successful business will have an aim; a goal; a position that they want to get to and a timeframe to get there. When I say clearly defined, it doesn’t have to specify the turnover, profit, size, number of employees and the like that it will have at a certain point in time but the clearer this target is, the easier it is to plot it on the “Road Map” or to plug into the “GPS”.

It might be as specific as saying the aim is to be the number 1 retailer in a certain product range in a certain geographic area, or it might be a vague as being a major player in the retail sector in a particular city. It might be quantified, such as reaching $50M turnover within the next 3 years, or generating a profit of $X, $Y and $Z over the coming three years. The more specific, the better. However the three common characteristics of this destination among all businesses is that it needs to be realistic, achievable and challenging.

Route

How do you get there? Like setting out on any course, you firstly need to establish where you are. Without this, directions are meaningless. If you want to get from where you are now to the next suburb, the first thing you need to know is your current position. Likewise there is no point saying that you want your manufacturing business to produce 200,000 units of product this financial year if you are only tooled up to produce 1,000 per month. You need to have a rigorous assessment of the resources at your disposal, and for this you need to have full confidence in your accounting records and reports, and the ability to understand them.

Once this is established, you can plan out the route to get there. Of course expert knowledge of your environment, potential obstacles and roadblocks that you may encounter will ensure the plan is the best possible. It is in this phase of preparing a business plan, budget or forecast that I have often had to tell my clients that their predicted path is crossing a threshold which might incur payroll tax, a change in GST accounting practices, an increase in required capital or some other financial implication that should be factored in.

Are there impending statutory changes which will change the industry landscape? Is there a change in technology that will influence demand or supply of your product? Are there social developments or trends that may have an undue effect on your product sector? These are just some of the many factors that need to be included in any forward looking plan, and the more thorough the industry knowledge at your disposal, the more effective will be your resulting “route” to get there.

Vehicle

Do you have a Ferrari or a Fiat 500? Either way, if your route is to cross the Tanami desert you’re probably going to encounter more difficulties than if you are in a Land Cruiser. Your business too has to be fit for purpose.

Are you heavily weighted down with investment in plant and machinery to manufacture product but feel that sales are the biggest challenge ahead? Or do you have a fantastic distribution channel but aren’t certain that you can secure product supply in the future? Expert opinion on your business structure and the Return on Capital that is being achieved from the various parts of your business, is invaluable in achieving your goals.

Key Steps to Take

1. Identify where you are. Make sure your financial reports truly reflect your current position and that you can rely on your financial systems to track your progress.
2. Identify where you want your business to go. Be as specific as possible for two reasons; to plan the best route, and to track your achievements in reaching this goal.
3. Assess the environment that your business is operating in. This includes the commercial environment (such as who your competition is), the economic environment (what economic influences have the greatest effect on your business), the political/legal environment (are new laws or policies being promised by an incoming government), the social environment (is your product moving in or out of favour), and the technological environment (will a new app, service, development enhance or challenge your business).
4. Document your path and save it as your Business Plan, using all of the information available to you.
5. Use the plan!

In this dynamic world in which we operate, a Business Plan is fundamental to guiding your business. This is your “Road Map” or “GPS”. It is not a document to slap together that “the Bank should like”. It is a key guiding document for the growth of your business. It should also be a living document, regularly updated with the best available information. It should be used both to guide development and to assess the progress of the growth of your business.