Strategies for Success

Developing a Business Plan

New as well as established companies need to be governed by a solid business plan if they are to remain healthy and productive. Here are some invaluable tips for developing or strengthening your company’s plan.

Simply stated, a business plan is a written statement of your company's goals and objectives and how they will be achieved. There is not necessarily a best way to write a business plan, but there are many elements that you need to include. I have outlined these elements, and after you've considered them, the challenge is yours to create your own plan.

Thinking Strategically

There are two stages of the planning process that build upon each other. The underlying base is the strategic plan--the longer term goals that comprise your mission statement and define what your business is, its guiding principles, and your long-range objectives. Once you complete this, you can move into a more specific, short-term, one- to three-year operating plan. From this operating plan you should develop an annual budget that sets your financial goals for the current year, as well as define your non-financial objectives for the same period. Although you can approach the two plans separately, they obviously relate to each other, so you must reexamine the strategic plan as you monitor and review the shorter-term business plan.

Perhaps the biggest challenge to achieving our managerial goals is adjusting to the rapidly changing external environment in which we operate; managing change, if you will. In the broad sense, this environment includes elements such as changing technology, uncertain financial markets, and deregulation in industries like transportation and utilities. As an example within our industry, look at the recent importance environmental concerns have assumed in our operations. Identifying these kinds of issues and g through a response to them are parts of the strategic process you must work through when building a plan.

When you're ready to develop a strategic plan for your operations, follow these steps:

Assess the external environment in which you operate. Identify your competition and try to anticipate all the factors outside your control that might affect your business. This will help you minimize potentially troublesome surprises.

Evaluate internal resources. Take a good look at the people, finances, and intangibles such as motivation that are Part of your corporate culture. Evaluating your strengths and weaknesses in all these areas is an important part of assessing your ability to establish realistic goals and objectives.

Define your business--both products and markets. Know your boundaries by understanding what your company is and, just as importantly, what your company is not. No company can be all things to all people.

Write your mission statement. Spell out your vision for the company. It will clarify your own goals and communicate to employees what you want the company to be. Your statement also will build morale and help channel action for accomplishing the desired results.

Hammering Out Details

Stage number two in developing a business plan is moving from the lofty world of strategic planning to the real world of operations planning, which becomes the means by which you achieve the success you want for yourself and your company.

The data you'll need to bring planning down to the operating level you will derive from the work that went into establishing the mission statement; however, you'll need to expand this data and be much more specific. It is most helpful to develop a three-year projection of key financial data as an overview and then construct an annual operating budget. To accomplish this you need to expand the thought process begun in the strategic planning effort. You need to understand your product or service, your market, your competition, your marketing strategy, your operational strengths and weaknesses, and the quality of management. Ultimately, you have the capacity to translate all this information into the financial plan. Let's examine each of these elements more closely.

Product or service. We have discussed previously the need for understanding what your business is, and that this may not be as obvious as it seems. Are you in the scrap metal business, the recycling business, or the waste products business? Are you a manufacturer or a service operation? How you answer these and similar questions will determine what direction your company takes.

Market. Who are your customers? Are they the people you want to serve? Do you have a choice in whom you serve? In our businesses we need to ask the same set of questions about the customer from whom we buy and those firms to whom we sell. Consider segmenting your market by doing simple research to understand trends. If you're considering moving into new markets--either new territories or different market segments in existing territories--ask the necessary questions to evaluate your potential success in these areas. Target your markets, analyze them, and then tailor your business to those specific market types.

Competition. Look at competitive factors in the marketplace and try to evaluate your market share and its potential. Understand as best you can your competition, its strategy, and its strong and weak points. We all need some sort of competitive advantage, and the only way to define this advantage is by understanding the competition.

Marketing. This becomes the strategy for implementing the trading plan you have established. A marketing plan should include answers to myriad questions and issues: how, when, where, and at what price do you buy and sell? How do you compensate your traders? What should be your pricing policy? Can you justify higher or lower prices than a competitor by differentiating yourself?

Operations. Efficient production is a major factor in a recycling company's success, unless you are only a broker. Your production abilities become an important link to financial projections.

Management. Evaluate or re-evaluate the people who perform the major functions for your business: accounting and finance, sales and marketing, and operations. Be certain you understand the make up of these key functions, the responsibilities of the people involved, and their capabilities. Put an organizational chart down on paper, and share it with all employees.

Financial Projections. Take a two-tiered approach. First make some broad projections that look at an educated guess of your financial picture for a three-year period, and then develop a specific budget for the current operating year. This budget is your working plan for the short ten-n and should be the standard by which you measure your monthly financial performance.

Measuring Your Success

You design your business plan to achieve the desired results for your company. Once you have in place all the components for success, it is critical that you monitor accurately what your company is accomplishing. This helps to assure that you are optimally using your resources. There are several management awareness tools you can use to evaluate your plan's success.

Personal observation and feel. There is no substitute for being a hands-on manager--meeting regularly with subordinates and keeping all channels of communications open.

Customer feedback. This is a very effective way to get a sense of whether you are performing properly. To get this feedback, you can use a formal survey or simply call or visit key customers.

Management Information System (MIS). This is the key component for measuring success, but it isn't the only one. For instance, it is very possible that without direct involvement one might not even be able to judge the accuracy of the financial reports.

Your MIS should include a monthly profit-and-loss statement plus a balance sheet and cash flow statements. These are your high-level score sheets, but they should be backed up with detailed information that breaks down these results by cost and profit centers. Strive for accuracy, timeliness, clarity, and simplicity in this information. It is too easy to end up with more information than you need or can absorb and a more elaborate system than is cost effective. An interesting dilemma with an MIS, particularly for family-owned companies, is how much information to share comfortably with managers. Just remember, your people can't do their jobs effectively without the right tools--and information is the most important tool.

I have attempted to cover only the fundamentals for any business plan. You need to take the next steps yourself. Here are a few suggestions.

In putting together your business plan consult all members of your top management team. Also, do not be reluctant to get outside help from professionals such as your accountant and lawyer. Don't struggle to create the plan alone. No one person or organization necessarily has all the information and skills needed to create a meaningful plan.

With your plan communicate to employees that your company is striving for a standard of excellence. Don't accept mediocrity. Constantly convey "stretch" goals that challenge you and your organization. As an example, a budget probably should be 70 percent doable and 30 percent stretch.

Remember, planning is a dynamic, not a fixed, process. The move from strategy to annual budget needs to be circular, and you must re-examine all components as you monitor and evaluate results. Good results encourage employees to strive for more aggressive goals and results. Poor achievement, on the other hand, forces a regrouping at the operational level for immediate problem solving. Your plan can't sit on a shelf to get the desired benefits--it must be used and revised.

Lastly and most importantly, remember why you needed to plan in the first place. Change is constant and inevitable, and managing it is a key to success. Planning is the tool that prepares you to look ahead and adapt. By understanding better your market, your competition, and your customer needs, you can be ready for that future.

Developing a Business Plan

New as well as established companies need to be governed by a solid business plan if they are to remain healthy and productive. Here are some invaluable tips for developing or strengthening your company’s plan.

Simply stated, a business plan is a written statement of your company's goals and objectives and how they will be achieved. There is not necessarily a best way to write a business plan, but there are many elements that you need to include. I have outlined these elements, and after you've considered them, the challenge is yours to create your own plan.

Thinking Strategically

There are two stages of the planning process that build upon each other. The underlying base is the strategic plan--the longer term goals that comprise your mission statement and define what your business is, its guiding principles, and your long-range objectives. Once you complete this, you can move into a more specific, short-term, one- to three-year operating plan. From this operating plan you should develop an annual budget that sets your financial goals for the current year, as well as define your non-financial objectives for the same period. Although you can approach the two plans separately, they obviously relate to each other, so you must reexamine the strategic plan as you monitor and review the shorter-term business plan.

Perhaps the biggest challenge to achieving our managerial goals is adjusting to the rapidly changing external environment in which we operate; managing change, if you will. In the broad sense, this environment includes elements such as changing technology, uncertain financial markets, and deregulation in industries like transportation and utilities. As an example within our industry, look at the recent importance environmental concerns have assumed in our operations. Identifying these kinds of issues and g through a response to them are parts of the strategic process you must work through when building a plan.

When you're ready to develop a strategic plan for your operations, follow these steps:

Assess the external environment in which you operate. Identify your competition and try to anticipate all the factors outside your control that might affect your business. This will help you minimize potentially troublesome surprises.

Evaluate internal resources. Take a good look at the people, finances, and intangibles such as motivation that are Part of your corporate culture. Evaluating your strengths and weaknesses in all these areas is an important part of assessing your ability to establish realistic goals and objectives.

Define your business--both products and markets. Know your boundaries by understanding what your company is and, just as importantly, what your company is not. No company can be all things to all people.

Write your mission statement. Spell out your vision for the company. It will clarify your own goals and communicate to employees what you want the company to be. Your statement also will build morale and help channel action for accomplishing the desired results.

Hammering Out Details

Stage number two in developing a business plan is moving from the lofty world of strategic planning to the real world of operations planning, which becomes the means by which you achieve the success you want for yourself and your company.

The data you'll need to bring planning down to the operating level you will derive from the work that went into establishing the mission statement; however, you'll need to expand this data and be much more specific. It is most helpful to develop a three-year projection of key financial data as an overview and then construct an annual operating budget. To accomplish this you need to expand the thought process begun in the strategic planning effort. You need to understand your product or service, your market, your competition, your marketing strategy, your operational strengths and weaknesses, and the quality of management. Ultimately, you have the capacity to translate all this information into the financial plan. Let's examine each of these elements more closely.

Product or service. We have discussed previously the need for understanding what your business is, and that this may not be as obvious as it seems. Are you in the scrap metal business, the recycling business, or the waste products business? Are you a manufacturer or a service operation? How you answer these and similar questions will determine what direction your company takes.

Market. Who are your customers? Are they the people you want to serve? Do you have a choice in whom you serve? In our businesses we need to ask the same set of questions about the customer from whom we buy and those firms to whom we sell. Consider segmenting your market by doing simple research to understand trends. If you're considering moving into new markets--either new territories or different market segments in existing territories--ask the necessary questions to evaluate your potential success in these areas. Target your markets, analyze them, and then tailor your business to those specific market types.

Competition. Look at competitive factors in the marketplace and try to evaluate your market share and its potential. Understand as best you can your competition, its strategy, and its strong and weak points. We all need some sort of competitive advantage, and the only way to define this advantage is by understanding the competition.

Marketing. This becomes the strategy for implementing the trading plan you have established. A marketing plan should include answers to myriad questions and issues: how, when, where, and at what price do you buy and sell? How do you compensate your traders? What should be your pricing policy? Can you justify higher or lower prices than a competitor by differentiating yourself?

Operations. Efficient production is a major factor in a recycling company's success, unless you are only a broker. Your production abilities become an important link to financial projections.

Management. Evaluate or re-evaluate the people who perform the major functions for your business: accounting and finance, sales and marketing, and operations. Be certain you understand the make up of these key functions, the responsibilities of the people involved, and their capabilities. Put an organizational chart down on paper, and share it with all employees.

Financial Projections. Take a two-tiered approach. First make some broad projections that look at an educated guess of your financial picture for a three-year period, and then develop a specific budget for the current operating year. This budget is your working plan for the short ten-n and should be the standard by which you measure your monthly financial performance.

Measuring Your Success

You design your business plan to achieve the desired results for your company. Once you have in place all the components for success, it is critical that you monitor accurately what your company is accomplishing. This helps to assure that you are optimally using your resources. There are several management awareness tools you can use to evaluate your plan's success.

Personal observation and feel. There is no substitute for being a hands-on manager--meeting regularly with subordinates and keeping all channels of communications open.

Customer feedback. This is a very effective way to get a sense of whether you are performing properly. To get this feedback, you can use a formal survey or simply call or visit key customers.

Management Information System (MIS). This is the key component for measuring success, but it isn't the only one. For instance, it is very possible that without direct involvement one might not even be able to judge the accuracy of the financial reports.

Your MIS should include a monthly profit-and-loss statement plus a balance sheet and cash flow statements. These are your high-level score sheets, but they should be backed up with detailed information that breaks down these results by cost and profit centers. Strive for accuracy, timeliness, clarity, and simplicity in this information. It is too easy to end up with more information than you need or can absorb and a more elaborate system than is cost effective. An interesting dilemma with an MIS, particularly for family-owned companies, is how much information to share comfortably with managers. Just remember, your people can't do their jobs effectively without the right tools--and information is the most important tool.

I have attempted to cover only the fundamentals for any business plan. You need to take the next steps yourself. Here are a few suggestions.

In putting together your business plan consult all members of your top management team. Also, do not be reluctant to get outside help from professionals such as your accountant and lawyer. Don't struggle to create the plan alone. No one person or organization necessarily has all the information and skills needed to create a meaningful plan.

With your plan communicate to employees that your company is striving for a standard of excellence. Don't accept mediocrity. Constantly convey "stretch" goals that challenge you and your organization. As an example, a budget probably should be 70 percent doable and 30 percent stretch.

Remember, planning is a dynamic, not a fixed, process. The move from strategy to annual budget needs to be circular, and you must re-examine all components as you monitor and evaluate results. Good results encourage employees to strive for more aggressive goals and results. Poor achievement, on the other hand, forces a regrouping at the operational level for immediate problem solving. Your plan can't sit on a shelf to get the desired benefits--it must be used and revised.

Lastly and most importantly, remember why you needed to plan in the first place. Change is constant and inevitable, and managing it is a key to success. Planning is the tool that prepares you to look ahead and adapt. By understanding better your market, your competition, and your customer needs, you can be ready for that future.