Small businesses – those with a few million in revenue to approximately $50 million in revenue – are often run by their founders. And because these founders were generally experts in their fields before they were tasked with running an enterprise they tend to incorporate less planning in their businesses. Rather, these owners often set the strategic directions of their businesses in an ad hoc manner, incorporating various techniques to drive their businesses while mostly setting the direction of the business with their instincts. The purpose of this newsletter is to emphasize the importance of seeing into the future with your planning – particularly with your exit planning.
The Planning Process, Generally Speaking
Generally speaking, the process of planning for a business’ future is all about setting the direction for the enterprise with the best knowledge and inputs available today. The planning process is not only about forecasting the future, it is also about gaining focus and consensus amongst the team that assists the owner. Done properly and consistently, the planning process for a business provides direction, communication, alignment of resources, and a plan for executing on the initiatives set forth in the plan.
The Six and Twelve Month Plans
While the planning process is about looking into the future, it is a matter of how far into the future any owner can see that is the greatest challenge. While the visibility of a business’ future is often difficult to see beyond the immediate 24 to 36 months, it is important to look beyond these more obvious planning dates when planning an exit. For example, an owner may be accustomed to hold planning meetings for the next three (3) to six (6) months for their business. At a tactical level, this three (3) to six (6) month plan provides immediate direction to the managers and allows the momentum to carry forward with the businesses’ current initiatives.
From time to time the planning process will complete a vision for the entire next year (i.e. 12 months). For companies and owners who conduct annual business planning sessions, they usually occur in the fall or winter seasons, prior to the expiration of the existing calendar year. The planning process is usually started with a projection or a goal for desired revenues for the next year. This target goal is often agreed to by the management team and, once set, the ‘process goals’ are discussed and agreed upon to focus the team.
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