Often when you mention a business plan, family business owners think of a document that takes up a lot of time and is just a “chore” for their banker. But statistics tell a different story.
The failure rate for new businesses in the first 10 years of operation is 80%. Of the failures, 90% are due to poor management: poor initial planning, failure to monitor financial position, failure to plan cash flow, failure to manage growth, failure to structure debt properly, and poor bank relationships.
Business planning should be an ongoing process, not an occasional event for your banker.
Mission statements help you clarify why you’re in business. Obviously, you’re there for profit, but there’s more to it than that. What does your business do? Who do you do it for? What’s the benefit to your employees and customers?
After identifying your mission, what’s your strategy to achieve your mission? To quote a successful personal financial planner, “Unclear strategy and ineffective operations have equaled failure in the past and will in the future. Your day to day business may run smoothly, …, but if you’re headed in the wrong direction, the last thing you want to do is get there more efficiently.” External factors, not under any of your control, can dictate the direction of your businesses.
Diversification and realignments may be a necessity in the changing marketplace. Managing and monitoring the results of new projects such as environmental equipment and services, CNG, etc. will be critical to future success. Developing a plan is only the beginning of the process; you have to implement your strategy and continue to measure your results.
There is a clear link between how you run your business and what you want your business to be. You must value the planning process as an important element of running your business if you want to be in the business 10 years from now.
