The importance of planning can not be underestimated in driving small business success
Dr. Graeme Edwards once said its not the plan thats important, its the planning. Part one of a two part series.
Throughout the lifecycle of a company most will find themselves at a critical stage where they are in between that of survival and success. Privy to companies that successfully navigate their way through this stage is that of their ability to properly plan.
Why is planning such a critical requisite for a small company at this stage?
A major reason is that smaller companies at this stage tend to have limited access to capital along with a predisposed margin for error that is either little or non-existent. Unlike larger companies which have greater access to capital and can sometimes afford to make mistakes and/or operate with a greater level of inefficiency; smaller companies cant afford such mishaps and therefore must dedicate ample time towards developing a strong plan.
Proper planning forces companies to chart the future and develop acclimation strategies for potential negative anomalies. As a result, companies increase their ability to identify and correct mistakes and/or operational inefficiencies before endeavors go too far.
Planning facilitates strategies with realistic expectations
Planning allows for companies to establish realistic expectations and formulate strategies that fit their individual scope of reality. More often than not small companies will have an idea of what their goals are but fail to price in the realities associated. Classic examples of such behavior are over optimistic revenue forecasts, underestimation of capital requirements, failure to understand target markets, and the assumption that the company can take on more business and operate at the same level of efficiency, etc
Companies that properly plan will take into account all aspects of their business as well as the variables that pose the greatest risk. The key take away is that planning allows companies to become more adaptive and responsive when unforeseen problems arise.
Planning establishes accountability
Review and planning establishes accountability amongst owners and employees. For small companies, planning allows for owners and employees to get together and assign specific tasks and roles to each other. With accountability established employees not only have a clear understanding of what their responsibilities are, they also gain a sense of purpose within the company; which in turn can lead to increased morale. Neglecting to establish accountability can cause confusion amongst employees as to what their responsibilities really are, thereby resulting in a disorganized company without a clear vision.
About the author
Alexander J. Hart of Cuban American decent is principal and founder of Hart Vida Raffo. With over 25 years of experience, Alex specializes in the areas of tax strategy and planning, business process improvement, and capital consulting. Whether advising on capital and financing strategy or consulting for privately-held professional services firms, Alex has the expertise and practical know-how to help any company optimize their business processes and make tactical financial decisions. He began his career at IBM in sales operations and accounting. He was a Controller for the N.Y. Post, has been a CFO for a medical device company, and has written a tax column called “Ask the Tax Guys” for Micro-Cap Review. Alex is a professional member of A.L.T.A. (Affiliated Lawyers of the Americas), a member of the National Association of Tax Preparers, and is a contributing author and mentor at Latin Business Today. Alex graduated from St. John’s University with a B.A. in Spanish and his M.B.A. in Finance. He obtained his accounting degree from Pace University.Website