Monthly Archives: September 2016

Resolutions for Entrepreneurs

The New Year is synonymous with resolutions and promises of making changes. If you are an entrepreneur, this time of year offers you a perfect opportunity to take stock of your business, as emails are probably at an all-time low over the holiday period. Here is my checklist of priority resolutions for all entrepreneurs for the New Year:

1. Review your business plan
One of the most important requirements for any entrepreneur is a business plan; not one that lives in their head or one that is consigned to an office cupboard- but a living business plan. If you have never written one, now is the perfect time to do so. If your business plan is in a drawer, take it out, read it and update it accordingly. Without a business plan, your business is essentially rudderless and you run the risk of not focusing on the key activities that need to be undertaken to bring you success.

2. Run through the numbers
For many people, numbers are not necessarily their strong suit and in small companies without dedicated in-house accounting departments this can result in serious problems. There is an old saying that what gets measured gets managed. So if you are starting a business, it is worth revisiting some of the fundamentals that are vital to your business. If you do not have any metrics in place, now is a perfect time to set them. These can include key financial ratios as well as customer and Web based metrics, e.g. £ value per customer, conversion rates, etc.

Topics to brush up on include:

  • Break-even Point
  • Profit Margins (Gross and Net)
  • Cash Flow Forecasts
  • Profit and Loss
  • Sales Forecasts
  • Cost of Sales
  • Creditor and Debtor Days

It is tempting to delegate the maths to others. However, you need to understand these concepts so you can manage your business effectively. For example Insolvency is one of the biggest threats to companies in the UK, yet cash flow management is an area which many entrepreneurs neglect. By understanding the numbers that are relevant to your business you can ensure that you are giving yourself every opportunity to grow and prosper.

3. Optimise your website
Most businesses set up a website when they start, but many entrepreneurs then ignore it. It is essential that websites are maintained and are mined for information. Where are your customers coming from? What are they looking at? What is the conversion level for visitors? All of these questions, and more, are easily answered using free tools such as Google Analytics. If you have not done anything with your website for some time, you should implement Google Analytics so you can understand more about your customers. Armed with this knowledge you can then tailor your website for the audience you attract and help achieve the objectives that the website was designed for in the first place.

Use text to explain the forecast

Although the charts and tables are great, you still need to explain them. A complete business plan should normally include some detailed text discussion of your sales forecast, sales strategy, sales programs, and related information. Ideally, you use the text, tables, and charts in your plan to provide some visual variety and ease of use. Put the tables and charts near the text covering the related topics.

In my standard business plan text outline, the discussion of sales goes into Chapter 5.0, Strategy and Implementation. You can change that to fit whichever logic and structure you use. In practical terms, you’ll probably prepare these text topics as separate items, to be gathered into the plan as it is finished.

Sales strategy
Somewhere near the sales forecast you should describe your sales strategy. Sales strategies deal with how and when to close sales prospects, how to compensate sales people, how to optimise order processing and database management, how to manoeuvre price, delivery, and conditions.

How do you sell? Do you sell through retail, wholesale, discount, mail order, phone order? Do you maintain a sales force? How are sales people trained, and how are they compensated? Don’t confuse sales strategy with your marketing strategy, which goes elsewhere. Sales should close the deals that marketing opens.

To help differentiate between marketing strategy and sales strategy, think of marketing as the broader effort of generating sales leads on a large scale, and sales as the efforts to bring those sales leads into the system as individual sales transactions. Marketing might affect image and awareness and propensity to buy, while sales involves getting the order.

Forecast details
Your business plan text should summarise and highlight the numbers you have entered in the Sales Forecast table. Make sure you discuss important assumptions in enough detail, and that you explain the background sufficiently. Try to anticipate the questions your readers will ask. Include whatever information you think will be relevant, that your readers will need.

Sales programs
Details are critical to implementation. Use this topic to list the specific information related to sales programs in your milestones table, with the specific persons responsible, deadlines, and budgets. How is this strategy to be implemented? Do you have concrete and specific plans? How will implementation be measured?

Business plans are about results, and generating results depends in part on how specific you are in the plan. For anything related to sales that is supposed to happen, include it here and list the person responsible, dates required, and budgets. All of that will make your business plan more real.

How many years?
I believe a business plan should normally project sales by month for the next 12 months, and annual sales for the following three years. This doesn’t mean businesses shouldn’t plan for a longer term than just three years, not by any means. It does mean, however, that the detail of monthly forecasts doesn’t pay off beyond a year, except in special cases. It also means that the detail in the yearly forecasts probably doesn’t make sense beyond three years. It does mean, of course, that you still plan your business for five, 10, and even 15-year time frames; just don’t do it within the detailed context of business plan financials.