As I finish up this series, I want to talk about Business Plans and Annual Plans. As I mentioned last week, they are only useful if they are living documents. By that, I mean that you use the process to help manage your Business. Many people write plans or at least outline them. Most beyond that do not use them to manage their business.
I have often related the story of how AFC went through its business planning process that ultimately led to The win of the Verizon FiOS business, the purchase of the Marconi Access Business, and the Sale of AFC to Tellabs. It is this last that you must recognize as Vision. We had concluded that we were not going to thrive through the consolidation of the telecom carriers. Our vision was to sell the company before that and profit our shareholders as best we could. The other outcomes were steps along the path to making AFC more valuable to potential buyers.
So, how does this work? To start, there needs to be definable metrics along a plan defined. AFC was a public company and thus a quarterly review was quite natural. Smaller companies might want to do a monthly review, but quarterly is completely reasonable. These metrics were not strictly financial. What we are all looking for is Key Performance Indicators (KPIs). KPIs are business activities that companies do that lead to the bottom line. The simplest example is in Sales. How many prospects need to be contacted over what period of time to generate a certain amount of Revenue. It is easy then to verify that the correct number of contacts.
The idea being that if you are doing the things that drive business then you will get the business that you need. By measuring them you will find out how well your plan is working and be able to make adjustments. If you are not getting enough customers from those contacts in our example, then you have two choices. You can either make more contacts or adjust your strategy on who to contact. The goal does not change but the way to achieve it does. Without these metrics and plans, then you are unlikely to make adjustments to your business activity.
Now, you are likely sitting there saying that you are not sure what business activity drives the bottom line. I will point out that this is a problem and you probably will want to think about this over the upcoming holiday. Alternatively, you might want to hire a business coach or consultant to help you wrestle the problem.
Finally, I also suggest that you put these metrics in a Stop-and-Go format. Think of them as a traffic signal. Green is good. Red is a call for change. Yellow is caution, where it is okay but you are in danger of going Red. And keep these charts relatively small. I always suggest that the three common financial metrics (Revenue, Gross Margin, Net Margin) are always included. No more than two or three others should be included. Many more than that dilutes the process.
That should help you make your Business Plan come to life. If you have any questions, feel free to contact me. Have a great day!
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