Making a business plan can be fun when you have a small business

April 4, 2009

(Article of mine published for the Vancouver Board of Trade’s Small Business Council in November 2003)
To many people, business plans have a bad reputation. Here are some common misconceptions about business plans.
Making a business plan is no fun. Actually, a business plan follows the same process as planning a vacation. The same questions need to be addressed: where to go, how to get there, how long it lasts, how much it costs, etc. No one seems to have a problem planning vacations.
You need a business plan to get a loan. A business plan is not a “marketing tool” to access funding, it is the very essence of your company.
Business plans are for big corporations, not for small businesses. All companies obey the exact same business, market and accounting rules. Small businesses are simply smaller.
A business plan is about financials. Surprisingly enough, it is not. The financials come at the very end, after all the elements of your business have been thoroughly described and analyzed.
A business plan does not need to be a complicated process. Here are some tips to you get started.
Define the vision and mission for your business.
Start with the sales plan because money flows in from revenue; make sure you have that right from the start.
Know the strengths and weaknesses of your company.
Review the opportunities and threats in your business environment.
Set your objectives and determine your strategies.
Go backwards in your supply chain to identify the cost items directly related to realize the sales, then review all the other cost items. This way, you set up your profit and loss statement.
Only then, quantify all your assumptions. These are the financials and provide possible scenarios for your business.
Do not forget to make a cash-flow statement.
Always be in charge of the plan. If you do not write it yourself, make sure the writer consults with you.
Do not hesitate to involve others and ask for feedback.
To sum up, think of your business plan as the best way to make sure you will still be able to plan vacations in the future.

Copyright 2009 The Happy Future Group Consulting Ltd.

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Posted by Christophe Pelletier

Why use revenue to define top companies?

April 4, 2009

(Article of mine published in the Vancouver Board of Trade’s Sounding Board of October 2003)Some of you will likely wonder why I ask this strange question. By recently reviewing such a list, I wondered about the relevance of the revenue criterion. Indeed, this review raised an interesting question: What does top 100 really mean? Are the companies the best? Are they the most profitable, the most sustainable, the most viable? Or are they just the ones cashing in the most revenue? If so, what about the cost side, in particular the cost control aspect, of business we hear so much about when we hear business specialists comment on company performances? Are the high revenue companies also the most cost efficient?
Clearly, investors and money lenders are much more focused on profit than on revenue. And what about working capital and cash flow? It seems we hear about them only when it is too late.
To define the best, it would be quite interesting to present the list based on an indicator such as economic value-added (EVA), which is a combination of profit and working capital. Such an indicator provides a good estimate of how the company uses its resources and how it financially performs. It also reflects how much wealth is created and allows simple comparisons between companies, not so much on how big but on how efficient and viable in the future they will be. Using this indicator as a management tool will also create a totally new approach to business, by aligning goals from all departments and staff, from the CEO down to the workers. Everyone will have the one and same objective: A higher value for the organization, which nicely meets the current trend towards more value-added products versus producing mostly commodities and raw materials. Further, an EVA-like approach would help make communication and employee compensation simpler and more consistent.
Creating more value for companies, together with a positive competitive atmosphere between businesses of all sectors, would stimulate our economy to excellence.

 

Copyright 2009 The Happy Future Group Consulting Ltd.

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Posted by Christophe Pelletier

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