Most owners of privately owned businesses ultimately come to realize two truths about managing small businesses:
First, that ‘To Do’ lists are seldom followed as interruptions and day-to-day events take precedence and longer-term items fall by the wayside.
Second, that virtually all small businesses operate on a crisis management basis rather than following an earlier preconceived and written business plan.
Almost inevitably this means that, as the end of the year rolls around, revenues and profitability are where they were in the prior year. If there was an increase in profitability, often it is accompanied by severe growing pains, as the corresponding cash flow needs are difficult to meet. Success and growth are not achieved by either accident or happenstance; they are almost invariably the end result of intelligent planning, skillful execution of the plan and a solid work ethic.
Year end is a great time to accept the fact that it is too late to change this year's results, and it is a perfect time to think through and plan to make next year the best they have ever had.
Objectives and Goals to Consider:
- How can I lower COGS (in a manufacturing or distribution) or operating costs (in a service business)?
- Do profits increase if I fire my low margin big customer and cut back on overhead?
- What expenses can be reduced or eliminated without negatively impacting operations?
- Do I have the right personnel in the right places doing the right things?
- Can I reduce the cost of rent, insurance, professional services through negotiation?
- What are the inherent risks in my business and am I adequately prepared and protected?
- How do I become more effective and productive in my time and efforts?
Most small businesses operate on intuition in decision making, and time is rarely dedicated to fact gathering, rethinking how the business operates and creating a written and detailed business plan with detailed budgets and financial objectives for the coming year. However, well planned businesses operating with continuously updated written business plans are far more successful than those that don’t go to those efforts.
While we all know that we should do the planning, the urgency of daily management decisions easily interferes. Consider briefly, however, the options: continue tackling problems as they arise and earn the same amount as in years past, or take some time to plan how to handle these crises in advance, freeing up time to focus on growing the bottom line.
The fruits of good planning can make it well worth the time. Who doesn't want a reduction in operating risks, increasing operating profits, focusing the owner's time to more productive activities, and increasing the value of the business when it comes time to transition ownership?
