RevResponse

Monday, May 14, 2018

Dimension Five: The Business Plan


When I facilitate business planning workshops, I am amazed by how much marketing or business development people don't know about their customers.

Worse is that you don't come across good documentation of customer profile.

Most of the customer profiles I come across describe their customers in so vague and generic terms they might as well describe a horse or any specimen of mammals considered our direct evolutionary cousins.

The really successful marketing organizations see customer information as a strategic tool, accumulate it like it was oil and guard it like it was gold.

You may say that nobody can possibly have that much information about a customer.

If you're saying that then you're one of the many who don't keep information about your customer.

Customer Data is the Key to Intimately Know Your Customer


You may not know it but you probably are accumulating a considerable amount of data about your customers.

Most business or organizations keep data about customers, suppliers or even competitors.

You can say you almost do this at a fairly regular rate.

You just do so without conscious or deliberate effort to use this data to your advantage.

What most businesses don't realize is that there is really a profile hidden in the cluttered paperwork that most sales and accounting people keep.

It's practically staring back at them like a large puzzle waiting to be piece together.

Most of the information we get about customers is either an effort to look back or to understand what is about to come to either correct an oversight or avoid past mistakes.

Unfortunately, the objective of most business planning is like that, correct an oversight or avoid past mistakes.

It's going to be a long way before small business will take business planning or identifying customers as a proactive strategy rather than a remedial reaction to competition or the environment.

The typical questions you should be able answer with your existing business information are as follows:

  • How much profit contribution value do you attribute to each customer in a year or a lifetime based on historical revenue and profit margin contribution?

  • Make a list of your customer constituting 80% of your revenue and net profits. Rank them according to net profitability.

  • Do you have a compelling reason why you should retain the account that is the most expensive to serve?

If you don't have the numbers from last year in a spreadsheet, you are going to need a crystal ball guessing the baseline projection.

There is really no empirical basis for you to guess what will be the starting point of the forecast.

You must be able to at least approximate the money value of each account from last year.

These are concerns better discussed during a business planning workshop or conference.

I know what you're thinking.

Strengths, Weaknesses, Opportunities and Threats (SWOT)


You're thinking that you are already doing SWOT every year. SWOT actually refers to Strengths, Weaknesses, Opportunities and Threats.

I don't know if you notice this yet, SWOT is not "the" business plan.

So much of the inputs in SWOT analysis are really collection of perceptions from stakeholders.

The end result of the SWOT exercise is made even more confusing because sometimes facilitators with not enough business sense mistake the exercise of SWOT analysis as the planning itself.

This is the reason why stakeholders, after all the cost and time spent doing SWOT analysis, come to realize that they have not moved forward to a new milestone in their planning process.

SWOT is what I refer to in my business planning workshop as the Pre-planning Information Gathering Phase.

Your customer profile is just one of many categories of information you should be getting during SWOT analysis.

This means that if you have completed your SWOT and proceeded immediately to business planning without a clear customer profile, you just undertook an expensive exercise in stupidity.

I am shocked that organizations used to doing SWOT come to the workshops bringing nothing.

In my workshops, I give each of the stakeholders who will be attending the SWOT analysis a diagnostic questionnaire and a checklist of data or information they should take with them during the SWOT sessions.

Without these data or hard facts, the whole SWOT session will be merely a gathering of perceptions.

I maybe moving too far from the subject but the bottom line is if you have a gathering of perceptions without the facts to validate them, your people's perception is really just that--perception.

When you do business planning, hard facts speak definitely and distinctly louder than perceptions.

You can act on facts better than you can on perceptions.

The only perception relevant to the planning process is your customers' perception of you and your offering.

Critical Aspect of Business Planning


The major aspects of business that must be factored in during a business planning workshop are as follows:

Goal Definition
Some organizations have very simple goals: separate the customer from his money and use every resource to make the money go their way.

Majority who don't really know who are their customers or why these customers even buy anything from them seem to have a simpler goal: Grab it and go!

For a very few they believe that serving the customer first is their goal.

These very few believe that somehow money will go to them more predictably this way.

The more experienced and savvy define their goal based on a certain customer base and revenue.

They set it this way because they believe that certain volume of satisfied customers have an equivalent potential in terms of present and future revenue.

Goals can be purely financial, partly altruistic but definitely formulated to reach a certain completion within a time frame.

Strategy

The general approach of organizations or enterprises to achieving goals is its strategy.

Strategy is a simple statement that defines what has to be done and how it is going to be done.

It is simple enough to provide everyone a direction and general enough to accommodate several tactical or operational maneuvers in the medium and long-term to achieve goals.

Structure

It is surprising that very few realize that structure follows strategy.

Usually, when you start an organization, you start with the structure and then work down on the functions of the people who will be in the structure.

We do this even before we know what exactly the different units in the structure will do in relation to business goals.

Organization is the creation of the necessary structure and processes to support your strategy.

Policy

A broad sets of guidelines for action or basis for decision. In strict corporate sense, it is the guidelines set by or approved by the board.

Policies maybe prepared by one person or by a group, but it will have to pass the scrutiny and nod of another level of authority in a corporation.

Usually this authority rests on the board of directors.

When somebody refers to an issue as a policy issue, it normally means it is a matter better left for the board of directors.

Procedure

Procedures are specific steps to complete a task or a routine. This brings the detailed and actionable reflection of policy at the operational level.

If your procedures are on paper that will normally constitute what you will refer to as SOP or standard operating procedure.

If it is in one compiled document, you can refer to it as your operating manual.

Financial Controls

The concept of financial management to most accounting department heads is not to allocate anything to anyone as much as possible.

In most small business, the accounting department will most likely be managed by a relative or even a wife.

This is typical of business without a plan.

Without a good business plan, cost management is really just cutting corners or not spending at all.

You must view cost management as a strategic tool.

The budget is the foundation of your financial controls.

Take time to study carefully what goes into the budget.

Getting the different business units involved will help a lot in preparing a realistic and sound budget.

You define goals and then formulate the structure that best enable you to harness resources to accomplish the goal.

You identify the resources you need and you pay for these resources with the confidence that each resource yields a certain level of profitability or helps you reach a certain milestone in your plan.

Get educated in financial management in general and financial controls in particular.

What you must decide on your own is to define what constitute investment and operating costs.


Business Alliances/Commitments
Alliances provide advantages not possible if you are doing it on your own. Some resources like experience, technology, goodwill and a host of others takes some years to build.

Business alliances make for acquiring these resources in the shortest possible time.

An organization must however know their organization well in order to be convincing to a prospective business partner what relevant advantage he is bringing to the table.

Advantages of selective or strategic alliances:

  • Access to technology or patents

  • Infusion of knowledge and skills

  • Adoption of better management approach and systems

  • Goodwill

  • Access to new or wider market

  • Access to better products or services

  • Adoption of cost-effective marketing strategy or system

  • Better service standards
You can probably add to this list with your own unique experiences based on cooperative ventures you have created in the course of your own growth.

Your business plan must take into consideration the advantages and limitations of your existing business alliances.

Small enterprises may not have the cash-flow to hire professionals to help them conduct business planning.

Most of the materials for business planning workshops have copyrights and consultants charge certain fees for the use of these materials.

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