Business mentor: Thinking ahead is way to get things on track

I started out in business last year. The Christmas break has been the first opportunity I have had to reflect on the direction I would like my business to take and consider the great ideas I would now like to implement. What is the best way to go about recording and implementing these?
* Small business sector specialist Sarah Trotman spoke to Angela Fisher, associate at Grant Thornton, accountants and business advisers, for some advice:

This is a good time of year to reflect on what you have achieved in 2005 and where you want to take your business over the next 12 months. The first step is to prepare a business plan. Every business, no matter its size, should have one, and update it regularly.

* Do you understand your marketplace?

* Do you have the vision and skills to take your business forward?

* Have you evaluated the risks you face and taken steps to minimise them?

The benefits of having a business plan include providing:

* A framework for cohesive decision-making.

* Identification of actions that will improve profitability and cashflow.

* A benchmark by which to monitor actual performance against set targets.

* The process of preparation concentrates the mind of the business owner on where the business is going - an issue which is often overlooked in the day-to-day management of a business.

* A basis to raise finance through a professional document.

Thus, in preparing a business plan, these fundamental points should be addressed:

* The strategic aims of your business.

* How your business intends to achieve its strategy.

* The financial consequences of these actions.

* How these initiatives are to be financed.

* Setting targets, such as financial projections to measure achievements.

* How to monitor the results of implementing these strategies.

* What the timeframes are to achieve the different initiatives.

As a tool, the business plan should be a living document used first and foremost by management. In addition to having a business plan, you should also develop a good strategy development plan.

This is a streamlined process which puts the business plan into action and encourages good ideas out in the open to start to make them part of the day-to-day process.

There are four basic steps in a strategy development process:

* Develop a strategy plan. This plan should be driven from the business plan and your ideas.

* Convert this plan into detailed actions and targets that represent the first steps towards your goals.

* Align business systems and processes to support and assist achieving those targets.

* Execute the plan by tracking the action plans and targets and modifying the plan as circumstances change.

If implementing strategy was easy, everyone would be doing it and doing it well. Unfortunately, it's not; research shows that only 10 per cent of formulated strategies actually get implemented.

When it comes to executing strategy, most organisations simply convert the desired outcomes of the plan into a financial budget and then use the normal monthly reporting cycle to monitor whether the plan is actually happening. This is only part of the answer.

Two things are needed to ensure your plans gain traction and start becoming reality:

* A clear action plan - with responsibilities, milestones and deadlines.

* Key performance indicators that focus management action on critical measures.

Much of this sounds like common sense but it is amazing how many businesses do not have a business plan or strategy to assist in developing their business.

* For more information on business plans and successful strategy implementation you can contact Angela Fisher on 09 308-2570.

www.grantthornton.co.nz