Mistake #1: Not Having a Business Plan and Budget
Every Fortune 1000 company—and every division of a Fortune 1000 company—has a business plan and budget. These companies understand the critical importance of knowing where they want to go and establishing clear objectives and action plans to get there. Most small businesses, however, don’t have a business plan and budget; they sometimes feel that such structure “holds them back”. Or some feel they opened their own business to get away from such corporate “formality”. In my 30 years of working with owners of small businesses, I have seen a direct correlation between having a business plan and ending the year with higher sales growth and greater profitability. If you can muster the self-discipline to create a written business plan—and then review it regularly and measure your progress against it—you will experience markedly better business results.
Many small business owners don’t know how to create a business plan and budget. A well thought out business plan for a company doing under $5,000,000 in annual sales does not have to be long. In fact, some of the best plans I have seen for small companies are just a few pages. At a minimum, I think the business plan should contain the following:
- Mission and Vision Statement
- SWOT Analysis
- Key Objectives
- Action Plan
The Mission and Vision Statement are aspirational and describe what you would like the business to be and accomplish over the next few years.
The SWOT Analysis lists the company’s strengths, weaknesses, opportunities and threats. Typically these are bullet point lists that outline the areas where the company excels and outperforms the competition; areas that need improvement and where the competition may out-perform them; areas or markets or new products that offer great opportunity for growth; and those significant areas of concern that could limit the company’s ability to grow and thrive.
The key objectives are the four to eight key goals you would like the business to accomplish in the coming year. Typically, if a plan has more than six to eight key objectives, the likelihood of achieving those objectives can be lower; small businesses generally do not have the uncommitted manpower to achieve a large list of key objectives. These objectives should be “SMART” objectives: specific, measureable, achievable, realistic, and time-based.
The action plan outlines how the objectives will be achieved. They cover what activities will be implemented, by whom, and how often. The best action plans include deadlines and timetables to complete tasks and activities.
The budget estimates sales volume by month as well as expenses. Assuming you and your team implement the action plans, you estimate how sales volume will grow as well as what those activities will cost, along with all of the other expenses necessary to operate your business. If you are unhappy with the bottom line that your budget shows, you go back and modify that action plan to improve the results.
The best business plans are developed with the involvement of key staff. Not only do you benefit from their knowledge of the customers, production challenges, and front-line issues, you also develop their “buy in”. The plan becomes “their plan”, not “your plan”.
The best organizations regularly review their plan and compare their actual results against their plan, both from an activity standpoint as well as the financial results. I recommend posting goals and progress in a visible area of the company, sharing this important information with your team.
Mistake #2: Lack of Commitment of Getting and Reviewing Financial Statements Monthly
Just as every Fortune 1000 company has a business plan, they measure their results via the ultimate yardstick: the financial statement. Every month, the business’ financial results are reviewed via the financial statements. Some small business owners only have financial statements prepared annually—for their tax return—or quarterly, to “save money”. This is a foolish way to cut costs. Even more for a small company than a large one, knowing what is occurring within the business from a cost, margin and sales standpoint is critical. While a large company may be able to easily afford a $10,000 mistake, few small companies can.
Financial statements should be prepared using the accrual method (rather than cash method) of accounting, so that costs are matched with sales.
Optimally, the financial statements will compare actual results against your budget, allowing you to quickly review the variance column. Key ratios, such as Costs of Goods Sold, Payroll and Related Costs, and G&A will also be shown as a percentage of sales and tracked and monitored monthly. Once you get in to the habit of reviewing your financial statements monthly, you will find you can do so in 15 to 20 minutes and glean important information about your business and be able to take corrective action timely, if it is needed.
Mistake #3: Not Scheduling Time to Focus on Business Development
Very often, small business owners can fall in to the trap of doing what is urgent, rather than what is important. In the sign and graphics business, this can cover getting jobs in and getting jobs out, dealing with equipment or employee issues, and getting waylaid by vendor’s sales people. The day speeds by, but no proactive business development activities get addressed. The owners of growing businesses have the same number of hours in a day as everyone else. How do they achieve what they do: they make time for important business development activities. Essentially, they schedule the time. They create the time by planning ahead and scheduling the time, in advance, on their calendar.
I group proactive business development activities into two categories: marketing and selling. Both are important. Marketing methods that work well for sign and graphics businesses include targeted direct mail, leveraging and using social media, search engine optimization of the company’s web site, pay-per-click campaigns, PR, and authoring articles for business publications. Selling activities include prospecting, sales calls, networking, holding an open house (for a group or an individual company), and presenting seminars at networking events.
Mistake #4: Keeping Unproductive or Below Average Employees
Sometimes small business owners feel the need to fill a vacant position quickly; in a five person business, being down one head count is being down 20% of your work force. Rushing to hire someone rather than ensuring you hire the right person for the job can lead to morale problems, poor productivity, or re-producing orders. When you have a poor performer on staff, it lowers the morale of the better performers and can lead to them becoming less productive. I recall hearing the advice “buy low, sell high, collect early and pay late”. I think we should add to that “hire slowly and fire quickly”. No one enjoys terminating a poor performer; once you do, however, the rest of your team will appreciate it. No one likes to carry someone else’s load.
Many small business owners treat their employees as family and are reluctant to terminate a poor performer. Hold yourself accountable to focus on coaching and counseling for improvement. Don’t put off holding the uncomfortable conversation about performance. Include written counseling, written warnings and an improvement plan that needs to be achieved by a certain date. If the performance improvement occurs, you have a better employee; if not, you must terminate in the interest of the business.
Mistake #5: Not Making the Company a Learning Organization
The best organizations—even small companies—have developed a culture of learning. There is ongoing training, cross-training and employee development taking place consistently. When something goes wrong, in addition to fixing it, in the learning organization, conversation and coaching takes place to ensure everyone learned from the mistake so that it is far less likely to occur again.
At FASTSIGNS, we work together with our franchise partners in developing their business plan and budget and review their financial statements, bringing the value and understanding we gain by reviewing hundreds of financial statements. We have a robust marketing program consisting of integrated direct marketing, sales and marketing collateral, SEO, pay per click, email marketing, PR, association marketing and more. Our outside sales program teaches franchise partners to be effective sales managers and teaches selling skills to their outside sales people. In addition to our annual convention and regional training meetings, we have a complete online learning program for every position within a FASTSIGNS center. If you are interested in evaluating becoming a FASTSIGNS franchise partner, contact us. We are focused on increasing the number of FASTSIGNS locations and are converting select, appropriate existing sign and graphics businesses to our brand.