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Perform a simple exercise every month that will help you make the best of your business. The 5 Step Plan involves 5 easy and simple steps that you must commit yourself to execute every month.
You don’t need a consultant or a business analyst to do this for you – nobody can do it better than yourself – nobody knows your business better than yourself! Call it your monthly strategic planning session.
Make an appointment with yourself every month on the day after your income and expenditure statement has been completed, to do this exercise. Make this a fixed entry on your calendar – do not allow anything to interfere with this most important date you have with your business.
After you have started with this monthly exercise, you will realise that it is the best single action you can execute to improve the management and profitability of your business.
THE 5 STEPS:
1. Do an appraisal of the past month’s performance
A simple diagram (the Performance Wheel) is suggested for this purpose. Draw your diagram on an A4 sheet, to have it large enough.
Identify the most important elements of your business – those things that have the strongest influence on the profitability of your business. This is a random selection and the elements may vary from business to business.
The number of elements identified will depend on you, whether it be 8 or 10 or 12, etc. Evaluate each element on a scale of 1 – 10 (representing percentages) with zero at the centre and 10 on the circle, and make a dot on the line at that number /percentage – approximately.
Connect the lines, and wallah! You have a visual image of the performance of your business for the past month. The lines that you have connected form your Performance Wheel.
Example of a Performance Wheel:
A good Performance Wheel must have 2 features: it must be big and it must be round (the bigger and the rounder the better). You have now determined your businesses’ strong points and weak points (like in a SWOT analysis).
2. Set goals for the next month
There must be a goal for each of the elements in the Performance Wheel and these goals must envisage better performances in the weak areas and at least maintenance of good performances.
The goals (percentages) must also be dotted on the Performance Wheel and connected to each other to visually show what you want your Performance Wheel to look like for the next month.
The area between the previous performance and the new envisaged performance can be coloured in for effect and to emphasise the improvements that need to be realised.
A goal is always intended to attain better performances, but it must always be realistic; accounting for certain constraints that might be out of your control, such as the buying power or needs of your niche market.
A goal should not provide for dramatic increase in performances, but should be conservative – any improvement or growth is good – just as long as there is growth!
3. Determine action steps
A goal without a plan of action is no good – it is just an intention. Like New Year’s resolutions, nothing comes of it. There must always be a target date. In the business context your goals must provide for the following:
- Who will perform the specific action(s) that are needed to reach the goals?
- How will the action steps be performed (methods/techniques)?
- What are the time frames / target dates (when?)
- To whom must be reported – who should check/control? (remember, delegation without control caters for shoddy management)
4. Involve your staff in your planning
After you have done your initial appraisal and planning, as indicated above, have a staff meeting and secure their involvement and interaction.
It is suggested that the staff members be invited to do their own appraisals (Performance Wheels) without having seen yours, in order not to be influenced by you. Afterwards, consensus must be reached regarding the collective and final appraisal and goals.
But it is important that you as owner/manager must do your own appraisal and planning in advance, in order to be prepared for the staff meeting (a chairman must in any case always be well prepared for his meetings) in order to ensure an orderly and fruitful meeting.
5. Draw up a monthly budget
After all the preparation has been done and goals have been defined, the monthly budget must be drawn up. A monthly budget is a sine qua non for any business – it is concrete and certainly your best planning tool.
A simple planning budget will include the following items:
- Cost of sales
- Gross profit
- Gross profit (GP) percentage
- Expenses (overheads)
- Net profit
The monthly budget will provide the guidelines for the ensuing month’s business activities. It will also serve as an inspirational and motivational tool. Reaching the goals incorporated in the budget will provide an objective platform for determining incentives and allocating rewards.
Every month, a new 12-month cash flow projection should be drawn up, based on the performances and the growth patterns of the previous months and the budget for the next month (the first month of your adapted cash flow projection).
Based on your income and expenditure statements, you can draw up statistical diagrams showing the progress for the past financial year period at every monthly meeting.
Meticulously file all your planning documentation, including the minutes of your monthly staff meetings, for future references.
The recipe for success is to work hard and to work smart. By incorporating the 5 Step Plan in the operation of your business, you will account for the “smart” work. The “hard” work will be generated by your motivational level and your commitment to make a success of your business.
Endeavour to do both – you owe it to yourself, your family and your staff to make a success of your business!
Dr. Ben Cronjé has owned his own retail stores and has been involved in franchising for many years. He developed the Business Skills Assessment system, approved by FASA, for the assessment of prospective franchisees. Business owners and managers who are interested in implementing these meetings and getting the list of themes can contact me on firstname.lastname@example.org.