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|Don's Diatribe: Revising your business plan|
There was a news report this week that local telecom giant Sprint was bringing back nearly 250 employees that had been outsourced to Ericsson a few years ago. A change in the company’s business model was cited as the reason behind the move. This reminded me of an old adage: “Change is the one constant in business.” Whether by evolution or revolution, change can cut both ways. When business reality doesn’t live up to your idealism, it may be time to revise your business plan. In other words, you may want to consider making a course correction.
As you know, a business plan is an essential roadmap for success. It identifies the who, what, where, when, and how of your proposed venture. The document describes your business and market, projects profit potential and costs, and discusses the goods and services you will offer. A well-thought-out business plan also helps you to step back and think objectively about the key elements of your business and its risk factors and informs your decision-making. Your ability to prepare one is a reflection of your ability to manage.
But no matter how much planning, pontificating, and preparing go into it, to a certain extent, every business plan is wrong. They are inherently about the future: pro forma financials, cost assumptions, and profit potential. It doesn’t take an MBA to realize that predicting the future, especially in business, can be risky and fraught with error. If you notice one or more of the following, it may be time to revise your business plan:
1) Costs are rising, but revenue is falling off. Too many business owners fail to see what’s happening because they don’t adequately monitor their financial margins.
2) Missed financial projections. Review the assumptions made in your original pro formas. What internal and external factors have caused the discrepancy? Change what you can and plan around what you can’t.
3) New competitors appear. Competition forces you to focus on what you do best and how to do it as efficiently as possible. This is a good thing.
4) Important customers defect. Customers come and go--that’s the nature of business. But if you notice a discernable trend, act quickly! Ask those customers why they are leaving. Also, get your employees’ perspective on this.
5) Unchecked growth. It may seem hard to believe, but unexpected growth can have negative consequences. You may be unable to keep up with product or service demand. As a result, customer service may suffer. You know what can happen from there.
Chinese philosopher Confucius once said, “Only the wisest and stupidest of men never change.” If things aren’t working out, don’t be afraid to try something different. There is no shame in revising your business plan and making a course correction.