Small Business Planning: How to Stop Spinning Your Wheels and Kickstart Business Growth
Have you reached a point in your business where you're just not sure what to do next? Do you lay awake at night thinking worrying about money? Are you full of great ideas but just not sure where to start?
It’s easy to lose sight of where you going when you get bogged down in the day to day running of your business.
You need to remember why you started your business.
What was the end game? Surely you didn’t want to be working yourself into an early grave through stress. You must have had a dream for success.
Follow this guide to:
- Reconnecting with your business and why you started it
- Developing an actionable business plan to kickstart your growth
- Set clear business goals
- Develop KPI's and strategies to achieve your business goals
- Improve your financial awareness and understand cash flow
- Improve accountability in your business and stay on track
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Your old business habits have come back to haunt you
Does this sound familiar?
When you first started out in business, you'd say "yes" to whoever wanted to give you money, remember?. My husband refers to it as financial anxiety; you can get lost day to day operating and managing, saying yes when you should decline - just to feed the cash flow monster.
When you finally get home, the kids are in bed, your dinner is cold and you look for solace in front of the TV.
Eat, sleep, work, repeat! It can be a real downer and you can quickly spiral into a black hole when you become reactive rather than proactive.
Time to take a good look at your business
Self-assess how far you’ve come on your journey and adjust, where necessary, to get yourself back on track.
The reason we say ‘how high’ when a client asks us to jump is usually a result of poor planning and anxiety surrounding cash flow. Take a breather and start your business planning.
Business Planning and reconnecting with your "Why?"
Reconnecting with why you started your business will help you refocus on what you wanted to get out of the business, and start planning for future growth.
Remember, business exists to sever the needs of the business owner. You own the business, the business doesn't (or shouldn't) own you!
Reconnecting with your why can reinvigorate your passion for what you do, rediscover your personal life goals and get you back to running your small business successfully (and not feel like it's a ball and chain weighing you down).
Use business planning to make yourself unstoppable
Reconnecting with the why of your business gives you clarity.
When you have a clear purpose and clarity you are driven to make changes in your business.
- You won't be wasting your time on futile things that have no reward and contribute to the overwhelming stress of running a small business.
- You will find a growing sense of gratification, yes, you can pat yourself on the shoulder if no one else does it for you, even give yourself a high 5 and a toot toot!
- You'll be able to enjoy (and celebrate) the small wins and rebuild your build confidence.
- Clarity helps keep your morale high and creates positivity because you'll know what you need to do, you'll have a path to follow.
- Clarity creates a better understanding of what your business does, why it exists, and builds business integrity.
- You become focused on building a specialist business for your target customer, not trying to serve everyone (which never works).
- Clarity helps you connect your business with your life goals.
Reconnecting with you why builds trust. Trust in your own ability to deliver on your own expectations. No one else is going to be there cracking the whip, you need to back yourself 100%.
Set the vision and trust in your own abilities to get the job done.
How to create your business plan
Doing a business plan helps map your purpose, vision and goals. This is the first step to gain control over your business.
A business plan does not have to be 10 pages long, a simple 2 pager that is clear and succinct is just fine.
Get all of your planning out of your head. Write it down, brainstorm, and let ideas flow without censoring yourself every minute. I like to use a whiteboard to start jotting everything down in my business planning.
1. Purpose and Vision: The two key elements of your business plan
The key elements to a short form business plan include a few short sentences outlining your Purpose and Vision.
Your business purpose is your "why?"
Why are you in business and what do you want to achieve.
Your business vision is how you're perceived by your customers.
Your vision is reflective of your reputation, how do you want the outside world to see your business.
2. List the top 4 things you want to achieve
Think about what’s important to you, go back to your why. It could be
- more time with family
- you want to hit $1 million in sales
- you want to automate and streamline your business processes
- have more flexibility in your working schedule.
Don't be scared, this is just the surface, think big goals.
It's useful to think about your values in determining your Top 4. Go back to your why. What's most important to you?
3. Create KPI's to achieve your Top 4
Looks back at the 4 things you want to achieve and set yourself KPI’s which will help you stay on this path of clear purpose. Track and measure your business performance against these KPI’s, reward yourself when you're doing great, and take corrective action when needed to improve the outcome.
Your KPI's might be:
- Gross Profit targets
- Turn over targets
- Customer communication reply rate targets
- Leaving work on time targets
Hold yourself accountable to these KPI’s, no one else will be there holding you accountable, you need to be self-driven.
4. Set an annual business budget
Set yourself an annual budget, what total turnover do you want to achieve for the year?
If the goal is $1Mil, then that's the starting point.
Now work towards your bottom line profit. What’s the estimated total of your direct costs?
Turnover – Direct costs = Gross Profit
Gross Profit / Turnover = Gross profit %
How much will you need to allocate to overhead expenses like telephone, electricity, rent?
And finally, what’s you Net Profit position?
Gross Profit – Overhead Expenses = Net Profit
Once you have established your rough numbers for the year, compare how you're actually tracking with the financial information you have at hand, what are your actual results YTD?
5. Identify your ideal customers
Who does your business serve?
Who do you want to serve?
It could be mum and dad domestic clients, small jobs, it could be commercial clients who want regular maintenance contracts.
What’s your value proposition to your ideal client?
Why should this ideal client choose you over the next guy? Become confident in your value proposition, so when you're asked “so what do you do?” you can blow them away with a confident account of what you do, how your different and why you’re the best.
6. Identify your business's opportunities and vulnerabilities
Brainstorm the five biggest opportunities existing in your business right now. They could be introducing a new service, or expanding into a new geographic area.
Do the same for your top five vulnerabilities. Common vulnerabilities are capacity, cash flow, and internal processes.
Think about what keeps you awake at night and what’s happening in your industry right now. How can you get ahead of the game?
Identify your most critical challenge
Out of the above-mentioned vulnerabilities, what do you believe to be your most critical challenge? Which of these vulnerabilities need to be addressed immediately and pose the most risk to the business?
Record this most critical challenge on the business plan, this will be the basis for your goal setting.
7. Set clear business goals
List 4 goals, these could be 3 months, 6 months or 1-year timeframes.
I say list 4 because any more is just putting unrealistic expectations on yourself. Set yourself the task of ticking these initial goals off. Small wins encourage motivation.
Next to each goal, write down your 90-day goal. The step's you'll take in the next 90 days towards achieving the larger goal. This is all about breaking goals down into smaller achievable parts.
It might be that you:
- meet with a digital marketing specialist to get your marketing plan sorted out.
- audit a few past jobs to make sure costs were captured correctly.
- talk to a bookkeeper or accountant about improving your financial awareness.
Record what actions you are going to take to achieve these 90 days goals, set time frames and hold yourself accountable to those time frames. No more excuses, just get it done in bite-sized pieces.
Great, you've got your business plan
You have an established, easy to follow, plan of your purpose and vision, goals, and the steps you'll take in the next 90 days to achieve them. Now what?
It's time to get a handle on your cash flow.
Cash flow management is the secret to your business growth
It’s no good just crossing your fingers and hoping for the best, cash flow planning is best practice and critical to the survival and growth of small business.
Setting targets and monitoring against a forecast budget will help you predict and manage the cash in and outflows and respond to changes in your business more effectively.
Inadequate cash flow is a symptom of management problems in a business, not the cause, by rediscovering our why and having a solid business plan we can identify management misses and put corrective action in place to help boost cash flow.
A profitable business also experiences cash flow issues. You should understand the correlation between net profit and cash in the bank, these are very different measures which are equally important to the overall success of small business.
Top 7 causes of poor cash flow
Improving your financial awareness and maintaining and managing your business cash flow is key to survivability, growth, and business success. Below are my top 7 reasons why businesses run into cash flow problems.
Use them to identify vulnerabilities in your business and get ahead of them before they become unmanageable cash flow problems.
Accounts receivable process
A poor accounts receivable process will result in debtor days (the time between billing and banking) being too high.
This will stifle your cash flow. There are many strategies to minimise debtor days including tightening your Terms of Trade, offering prompt payment discounts and streamlining your billing process.
Accounts payable process
A review of all suppliers’ terms may identify ways to improve cash flow and potentially achieve better Terms of Trade. Implementing budgets, streamlining your payments process to maximise prompt payment discounts and avoid late payment penalties is just the start.
Carrying stock for too long means full shelves but an empty bank account. This is no different if you’re a service provider with work in progress that is yet to be billed.
Reviewing your stock ordering systems and stock control processes (to name a few) will identify strategies to ensure cash hits the bank sooner.
Inappropriate debt/capital structure
Significant cash flow and interest charge improvements can be achieved with a regular review of existing debt.
Maybe your debt/capital structure could be improved, or perhaps your debt should be consolidated and paid off over a longer term.
Maybe you need to review and adjust what you’re drawing from the business, or perhaps the business needs a capital injection to fund its growth.
Overheads are too high
Every business should do a thorough review of its overheads each year. Reviewing the effectiveness of your marketing spend, going paperless, putting expense budgets in place and changing your technology platform are some simple ways to reduce overheads.
Gross profit margins are too low
Our gross profit margin is what is left from sales value after variable costs are deducted. There are a large number of strategies that you can implement to increase your margin, such as focusing on rework and wastage, reducing stock shrinkage and improving team productivity, just to name a few.
Sales levels are too low
If the current sales levels don’t support overheads and other cash demands on the business, then the business is not currently viable.
If you're in "high growth mode", a financing plan will be necessary. If not, we need to consider how we will grow sales. To grow sales we need to focus on customer retention, generating leads, improving sales conversion, customer transaction frequency and pricing strategies.
How to develop strategies to achieve your business goals
Your business plan includes your goals and KPI's. Developing good strategies and habits to stay on track is a core part of running your small business.
The best strategies to achieve your business goals are:
- Develop SMARTER goals
- Create a business goal action plan
- Eliminate bad habits and develop self discipline
- Manage your time effectively
- Work with a mentor
- Track your progress and assess yourself
1. Develop SMARTER goals
You need to set SMARTER goals (Specific, Measurable, Achievable, Relevant, Time-Bound, Evaluated, and Re-Adjusted).
Be specific about the goals, describe it down to the last detail and why the goal is so important to you. The goal needs to be in line with your values that you listed on your business plan, set a time frame and evaluate yourself along the way.
2. Create a business goal action plan
The single most important strategy associated with goal achievement. Obsess over your plan and work on it daily to keep yourself on track. Review your 90-day goals and set out the individual steps you'll take to achieve them. Meeting small requirements consistently adds up to large gains.
3. Eliminate bad habits and develop self-discipline
Eliminate bad habits that get in the way of you achieving all your hopes and dreams. Kicking bad habits to the curb can be tough, but the overall reason to remove these bad habits will be more powerful. Commit to your goal and don’t let bad habits stand in your way.
Get a bit of self-discipline, this will set your path on cruise control. Staying focused will mitigate your distractions, cancel out the noise and avoid procrastination.
4. Manage your time effectively
Manage your time effectively, create time in your day to work on your goals.
As Mark Twain said, "If it's your job to eat a frog, it's best to do it first thing in the morning. And If it's your job to eat two frogs, it's best to eat the biggest one first".
He’s referring to items on your to-do list, get the onerous tasks done and dusted first up, this will set the tone for the rest of your day and increase productivity.
5. Work with a business mentor
Find a business planning mentor to help you along the journey if you are having trouble holding yourself accountable to the goals you have set.
Mentors can provide navigation beacons and help you on your pathway towards success. These mentors have generally been there and done that, they come with a wealth of knowledge and can identify turbulent waters ahead.
6. Track your progress and assess yourself
Track your progress towards your goals by having regular self-assessment sessions, refer back to your business plan and remind yourself of what needs to be done. Also, reminded yourself why this goal is so important to you.
If you don’t track your progress you'll have no idea where your at or how far you have come.
Without meticulously tracking your goals you're wasting your time. If you cannot measure, you cannot improve.
Developing business KPI's to track your progress
The number of KPI’s you monitor should be limited to those that will make the most powerful difference to your business, and these should align to your business plan. The better you understand your business, the easier it will be to increase your profits and free up cash flow.
Establish what the key drivers are in your business. These may be:
- financial (e.g. gross profit margin or average annual customer spend), or
- non-financial (e.g. customer satisfaction ratings).
Identifying which levers in your business need to be tweaked to get on your path for success.
Examples of developing KPI's to meet your goals
If your goal is to reduce overall debt within your business, you need more cash in the business to direct towards the debt.
So, we look at the top line revenue of the business, set some monthly revenue targets and track the performance against the forecast budget amounts.
Another example might be that your debtor days are blowing out beyond your credit terms and you want to speed up the time it takes for clients to pay you.
The KPI will be to meet standard credit terms (7 days, 14 days or 30 days) so you'd implement strategies to improve credit control and payment processing. E.g. reminders and follow up processes.
Developing your financial awareness as a business owner
The better you understand your business, the easier it will be to make more money.
Management decisions rely on a sound understanding of the financial implications. You need to be able to fully understand and interpret the numbers, so you have a strong foundation on which to grow your business.
Developing your financial awareness will help you answer questions like:
- How much profit have I made this year?
- Why has my profit increased but I have no cash?
- Is my cash level decreasing?
- What is affecting my cash level?
The first thing a small business struggling with no cash flow should do
For those of us who struggle with the ‘no cash’ scenario, the first thing you need to do is arrest that cash!
Not $1 gets spent without a fully justifiable reason. Stop with the $50 here and there, stop drawing cash out of your business for personal reasons. Put your “Big Boy” pants on and hold yourself accountable for every precious dollar.
You have to set your own strict rules and essentially call yourself into the proverbial office for the dreaded ‘serious’ chat if things aren’t looking great.
Cash flow and tax strategies for cash flow positive small businesses
For those rolling in cash, but have the dreaded tax man looking over their shoulder, there are several tax planning strategies which can be implemented to help reduce your tax liability.
The trick is to maintain up-to-date books and have regular contact with your tax professional. You need to be proactive when it comes to managing income tax estimates. Be sure to understand the numbers and start the conversations with your tax professional early.
Your awareness and understanding of cash flow is crucial. When we start our businesses we walk into a world of numbers, balancing books, and tax. we must strive to put one foot in front of the other, recognise our weaknesses and (instead of ignoring them) take stock, speak to professionals and work out what to do next.
Developing accountability in your business and staying on track
As a small business owner, you can feel alone and unsupported and it’s easy to get caught up working in the business and not on the business. If you find yourself wandering from your 90days action plans and strategies then look for support from a business coach or mentor.
Accountability can take the form of weekly checking with yourself, or monthly catch-ups’ with a mentor. Either way, boxes need to be ticked and you need to make progress towards achieving your goals.
Find what works for you, your leadership style, and the values you outlined in your business plan.
Running your small business can be challenging, especially when you hit the stage of feeling like you're spinning your wheels, going through the motions, and not achieving your goals. Getting back on track means:
- Reconnecting with the "Why?" of your business
- Developing an actionable business plan
- Setting clear goals
- Tracking progress towards those goals through clear KPI's.
- Developing business strategies to meet goals and stay on track
- Improving your financial awareness and understanding cash flow
- Developing accountability in your business
Set yourself up for success by having a great plan and strategy in place to guide you along the journey to grow your dream business.
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