Why Not Having a Business Plan is Like Driving in Circles

I find it amazing that many small businesses do not or have ever had a business plan; to me this is like getting in your car but not knowing how to get where you’re going and just driving in circles.  In order to successfully grow your business, you should have a business plan; quite honestly a business should not open its doors until it has one.  Many small businesses mistakenly think that a business plan has to be elaborate with lots of charts and spreadsheets, and this is not necessarily the case.   A business plan can be a simple two or three page document that simply out lines where you are, where you are going, and how you are going to get there.  Now most businesses do know where they want to go, they just don’t have a plan on how to get there. Think of your company as a car, and think of your business plan as your GPS.  If you take the GPS out of the car, you may have an address, but no idea how to get to it. Continue reading

Business Impossible! Why small businesses fail and what to do about it.

I was in my home town just outside of Philadelphia last week on my way back from a business trip in India and I was hanging out at my cousin’s house one night watching a Flyers hockey game and after the game the subject of different T.V. shows came up;   Tony and I watch a lot of the same programs so it is a topic that we discuss often.  He told me about this show he started watching called Restaurant Impossible which is a show about a Master Chef who goes around the country to failing restaurants and completely redoes the restaurant, everything from the items on the menu to the interior design and sometimes even the chef.  It sounded interesting and he happened to have a couple of episodes recorded on his DVR so we watched one and I liked it, the next day I watched another and since then I have watched a few more.

 

Here’s the thing; after watching these shows it became clear to me that what I have been saying for years is a fact, just because you own a business doesn’t mean you know what you are doing.  The restaurant owners in this show from what I have seen so far had no idea how to run a business, and I find this to be true across the board in small businesses.  Sometimes people get lucky and somehow are able to survive for years, but all in all many small business owners have no clue about what they are doing. Continue reading

Not having a business strategy is recipe for failure.

Being in the marketing industry I have experience dealing with just about every type of client there is and one of the biggest problems that I have seen with small businesses is that they are often unorganized, they are not goal oriented and they went into business without any solid goals.  It doesn’t matter what size your business is it is absolutely imperative that you have a strategy, a strategy that should be created prior to opening your doors for business.  I have seen too many people decide they were going to go into business and let’s be frank, anyone with a hundred bucks and a ball point pen can start a business; you go down to the county recorder’s office, you fill out the paper work for a fictitious name, you pay the fee, you go to your bank and open up a bank account and Ta Da you’re in business.  If only it was that easy, it’s not.  Below are the statistics of small businesses that started and businesses that closed between 2000 and 2004.  These were years prior to the recession when the economy was in decent shape.  As you can see nearly as many businesses close their doors each year as new businesses open their doors.

Starts and Closures of Employer Firms, 2000-2004
Category 2000 2001 2002 2003 2004
New Firms 574,300 585,140 569,750 553,500e 580,900e
Firm Closures 542,831 553,291 586,890 572,300e 576,200e
Bankruptcies 35,472 40,099 38,540 35,037 34,317

e = Estimate.

Sources: U.S. Bureau of the Census; Administrative Office of the U.S. Courts; U.S. Department of Labor, Employment and Training Administration.

I have dealt with hundreds of small businesses over the years who want to advertise and when asked what their marketing budget is they answer that they don’t have one, or ask what their quarterly or yearly sales goal is and you get the deer in the headlights look like I suddenly started speaking Latin. If you do not have a strategy you will very likely fail. Period. Having a business without a strategy and aimlessly spending money without any structured goals is like buying a car without an engine.  It won’t work.  Think of your business as a large piece of machinery with many different parts, all those parts need to be oiled, tuned, and maintained and before plugging it in and flipping the switch; engineers need to calibrate it and make sure everything’s been done right.   The biggest mistake that I see from small businesses is the lack of a strategy, including a marketing plan and budget.  Regardless of the size of your business it is important to create a roadmap of where you are, where you are going and where you want to end up and then to create a plan for getting there.  Without this you are just bouncing around without any direction hoping that something works, and don’t get me wrong sometimes people get lucky, sometimes, but the majority fail because they did not plan ahead.  In business, planning is everything.