When was the last time you looked at your business plan? Do you have one? All too often at Ozlop we meet small business owners who put their new ventures at risk simply because they fail to measure its success against a carefully considered business plan.
The other common problem is that having devised a plan which clearly sets out the business objectives and its sales and costs projections, many entrepreneurs simply ignore or forget the plan once the customers start arriving.
This puts your business at risk. After all, you may think that your new business is booming, and you’ve worked wonders by keeping costs down, but if you have nothing to benchmark this against how would you know?
One of the surest ways of creating a sustainable business with strong foundations is to keep a close eye on your business plan so it provides a clear framework and financial structure for you to work within.
If you haven’t got a plan, taking the time now to put your projections down on paper is time well spent. In fact, the more time you spend on your plan, the better prepared you’ll be for any unexpected bumps in the road.
In my view, there are some key items to include in your business plan:
- Revenue (sales) projections
- Costs projections
- Profit projections
- Contingency costs (because suppliers will often cost more than you think)
You should think hard about the cost of delivering the product or service and make sure you have your metrics for growth.
Once you have a solid business plan you will need to review it with your business finances. That means staying on top of the bookkeeping so that you have a clear picture of how much money is coming in and out of your business.
When comparing your books against the business plan to see how you are doing, ask yourself: How many sales did you forecast in your business plan? How well is your business performing against projections? What were the projected costs forecast in your business plan? Do your company books show that costs have strayed from projections?
Will you have to recruit more people ahead of more revenue so that you have the ability to cope with more business?
If your costs are straying too far from the business plan, take action by assessing where best to cut costs: changing suppliers, for instance, or renegotiating contracts. Also think about boosting your sales income, for instance by introducing a premium price product or looking for ways to sell new services to existing customers. Don’t forget about chasing unpaid invoices too… the longer you leave them, the less likely you are to be paid!
Remember, people are usually the biggest cost so you should think long and hard before you take on additional staff.
Developing good financial habits such as keeping your books and business plan up to date will give your company the best chance of success.
At Ozlop we understand that you may not have the time for weekly or even monthly bookkeeping, that is why we work in partnership with small businesses to do the bookkeeping so you have the information to help you spot troubles before they arise.
If you need help sorting out your books so that you know you are achieving the goals in your business plan, get in touch to find out how we can help you get your finances in order.
David Vine – small business specialist and Managing Director at Ozlop.