Why Failing to Plan Means Planning to Fail

As a small business owner, you likely only have a finite amount of resources that you can use to serve your customers. For example, if you run a small cupcake bakery (Petite Sweets) that offers catering services it is important to have enough cash on hand to purchase the raw materials needed to fill a catering order. But how do you know how much cash you need if that order has not yet come in? This is like planning a shopping list for a dinner party without knowing how many guests will show up or what foods to prepare!  Alas, this is a dilemma that many small business owners face.

I don't know what I don't know!

Unfortunately after uttering the above phrase, many business owners still dive in with both feet determined to bring their products and / or services to market. They believe that hard work and passion for what they do will be enough to survive and even thrive.
While survival is not entirely out of the question here, the business owner is lacking critical components of a successful business strategy - sales projections and cash flow forecasting.  Establishing an effective methodology for projecting your sales will provide a logical basis for how to use limited resources such as cash. Taking a stab in the dark and stocking your shelves hoping that "demand will meet supply" is quite a gamble. While there will always be a blind spot in terms of how your business will actually perform within any given period, there are efforts that you can undertake that will help you make informed decisions as to how you can allocate your precious resources more effectively.

How Can I Predict How Many "Cupcakes" I Will Sell In a Given Month?

If the owner of Petite Sweets asked this question, I would make an inherent assumption that she has a "reactive" perspective with regard to how she runs her business. If she has unlimited resources and she has the ability to supply the demand for her cupcakes at any volume, great!  However, this is not the case for many of us.  So given this scenario (limited resources), my response to this question would be with a question - actually two questions:

1. How many cupcakes CAN you sell this month given your resources, which include: Cash, Time, Space and Labor?
2. How many cupcakes MUST you sell given your income needs / goals?

Instead of scrambling to serve "whatever" demand might be "out there", it is important to establish a basis from which to plan.  Answers to the above two questions will allow the business owner to establish boundaries and limitations within which they can operate and still be successful.  In this case, the words boundaries and limitations are good and give you a context within which to operate. Isn't it comforting to know that you don't have to "chase" a phantom target, but that you can set goals that are realistic based on your situation, needs and abilities?

Wait! So You're Telling Me That I Shouldn't Try to Sell As Many Cupcakes as I Can?

Ah, but to the contrary, I am telling you that you need to know how many cupcakes YOU CAN (and MUST) sell before you start mixing that batter!  This involves planning in the area of marketing, which is another component of a comprehensive business plan and include the following steps:

Identify your target market(s). For example:

1. Children between the ages of 5 - 12.
2. Brides-to-be and or Wedding Planners.
3. Local restaurants.
4. Local business establishments.

Consider what might appeal to each of these market groups. For example:

1. Children might be drawn to the latest cartoon characters captured on cupcakes.
2. Brides might consider serving cupcakes to their guests instead of the traditional wedding cake.
3. Local restaurants might be interested in outsourcing their desert preparation.
4. Local business establishments might consider offering cupcakes to employees in their brake rooms or to customers who visit them frequently.  

Establish concise marketing strategies based on information gathered about what might appeal to each group. For example:

1. Appeal to local businesses and groups that already serve and or engage with children such as brownie troops, schools, child care centers, gaming locations, etc. Attempt to engage in a partnership with these businesses whereby they are incentivized to allow you access to their customers for advertising and sales purposes.
2. Participate in bridal tradeshows as a vendor.
3. Connect with restaurants as part of the local chamber of commerce to arrange a sales meeting where the cupcakes can be sampled.
4. As in #3 above, connect with local businesses and schedule sales calls with the intent of allowing employees to sample the products in order to create demand.

If I Have to Do All of That, When Will I Make the Cupcakes?!?

This is a reasonable question for a small business owner to ask.  Especially us "solopreneurs". The fact is, we have to strike a balance between working IN the business and ON the business.  Being out of balance in either of these areas can prove disastrous.  We can spend too much time on efforts to create demand and then not be able to provide the requisite products or services based on that demand. Or we can work hard to supply or serve our existing customers, and not allow time to promote additional demand that is necessary for long term sustainability.
So my response to the above listed question is - it depends. The amount of time we should allocate to the various areas of our business is based on many factors such as our ability to outsource some of the marketing strategy work in order to focus on "cupcake production", the number of sales we need to make to in order to earn our desired profit, the price we set for our products (or services), whether we provide our products or services on credit (meaning we don't get the cash right away), the time it takes to supply the predicted monthly demand that will be generated by our marketing efforts, etc. etc.

The Bottom Line

To ensure that your efforts to provide a product or service to customers will yield the results necessary to sustain your business, it is critical to consider EACH effort within the context of a comprehensive business plan.  Here are some of the questions you can answer after going completing the business planning process:

• Who are my customers?
• Who is my competition?
• How can I appeal to each customer group?
• What sets me aside from my competition?
• In what areas of business operations am I weak?
• In what areas of business operations am I strong?
• How much cash do I need each month to operate my business?
• How much should I charge for my products or services?
• Should I hire employees or use independent contractors?
• What standards and best practices are established for my business?

Whether you are a start-up, or a growing business it is important to have a plan in place to help you assess how you will react to factors directly impacting your operations over which you have no control.

A Business Plan is a Static Document, But Business Planning is a Dynamic Process

It is a critical starting point, but it is just not enough to develop a comprehensive business plan and go about your business. You must also develop a strategic perspective with regard to your business and engage in business planning on a smaller targeted scale on a periodic (monthly or quarterly) basis.
You can do this by implementing a continuous improvement process whereby you:

1. Assess the results of a recent period,
2. Compare the results to planned outcomes,
3. Identify opportunities for improvement (where actual results did not match planned outcomes),
4. Implement strategies to take advantage of opportunities for improvement,
5. Repeat 1 through 4 above.

Working with a small business consultant on a periodic basis to guide you through this process and to serve as an objective voice to avoid emotional business decision making is suggested but not required. This is one of the services that I provide to small business owners (including solopreneurs and nonprofits).

Those who engage in the continuous business planning  process report feeling more empowered and more in control of their business operations and future success.

I certainly hope that you have found this blog entry useful as you go about the business of running your business.  If you are interested in learning how I can help you  in your efforts to sustain and / or grow your business, contact me for a free one (1) hour consultation. 

Please check in on my blog periodically for helpful business related tidbits and other insightful information.  In the meantime, be well and prosper!

Angeline