It’s fair to say that most people spend more time planning their holidays than they do planning their business. It’s all relative, though. Business owners usually fail to plan because they are too busy doing other things. They often focus on the wrong things, such as running a tight ship rather than investing in the appropriate resource to enable the business to grow. OK, so I’m not here to talk about time management (let’s save that for another day), but we do all have a certain capacity and we can choose what we would like to allocate that capacity to. The upshot of this is that in many cases, the owners run out of hours in the day to hold regular board or management meetings. It is also extremely rare to find a small business with the discipline to hold an annual planning session for the year ahead.
A great analogy for a business is our years at high school. We can all remember the endless number of requirements that needed to be met throughout the year. Like actually attending school for a start. Preparing assignments and sitting exams, all of which needed to be reviewed and signed off by your teacher. If you didn’t meet a certain level of the requirements, then you would have to be held back to repeat that year. Simply put, these 3 business lessons we learned in high school can be used to strategise your financial growth: planning, setting targets and having accountability.
How many of you have received your year end financials which show yet another year of poor performance/results that don’t match your expectations? This can go on from year to year to year. Especially because there aren’t any enforced guidelines in place to keep you accountable and set targets like there were in high school. Worst of all, it is socially accepted which means tens of thousands of businesses perform like this year after year.
A planning session is something you, your key team members and stakeholders should undertake annually, facilitated by your accountant. At minimum, this should be the first step to improving and growing your business. When running a planning session, I follow a simple process which I am happy to share with you:
- revise profit improvement potential using accurate numbers;
- go through financial scenarios (low/medium/high growth);
- develop an action plan;
- discuss key points for attention that are relevant to the preferred scenario;
- Note: prior to the planning session I ask my clients to answer a series of questions that get them thinking about their performance in a range of different areas of their business. In the planning session we go through the responses and pay particular attention to those issues that need to be addressed to ensure the preferred financial scenario has the best outcome of being over-achieved.
This process will provide you with a massive amount of clarity into your business, especially where it is now and where you would like it to go. A lot of businesses operate on auto-pilot and never undertake an important process like a planning session, so it’s no coincidence that they achieve poor results year after year.
Following a planning session, I write up the planning session report which I then send to the client. Regardless of whether we decide to work on a business improvement plan to help you achieve your targets and areas of attention, your action plan will provide you with what needs to happen next, and the responsibility is on you as the business owner to take action.