Yaneek Page Best practices for small-business planning for 2023
QUESTION: I have been operating my small business since the pandemic, and I think it is time to do some planning on how to make more money next year. I haven’t done any kind of major planning since I started 2020 because I am not a business expert, and it was a friend of mine who is an accountant that helped me with the first business plan. My questions are: When is the best time to plan? Do I need to create a new business plan for 2023? What is the best practice?
— Alli, Kingston
BUSINESSWISE: The best practice in business is to conduct planning and budgeting activities a few weeks before the start of the new fiscal year. Your fiscal year, also called the financial year, is the 12-month accounting period that you have selected for financial and tax-reporting purposes.
Therefore, if your fiscal year begins in November, for example, then you should have started your planning and preliminary budgeting activities from as early as August 2022. If the financial year has already started, then you can still make a plan right away, but try to follow the best practice for the next financial cycle.
In more established companies, the practice is to prepare a new business plan for each financial year, which would fall under the umbrella of a five-year or 10-year strategic plan.
However, the preparation of detailed business plans takes considerable resources and time and, therefore, although it may be desirable, it may not be possible for you to create a new business plan every year. If you do have the resources to do it, then this will serve you well. Until then, you could tweak the previous year’s business plan to create a road map for the next 12 months that will drive the business in the direction of its long-term objectives.
One of the best practices for planning and growth of your small business is to ensure that it has either an effective board of directors, or advisory board, to maximise the growth and profitability of the business, improve governance to drive good management, ensure compliance, and enhance leadership.
A good board maintains robust and effective business-planning policies. If you don’t already have a board, then assembling one should be a priority for your business if you want to expand sustainably, profitably, and enjoy longevity.
To be clear, I am not suggesting that having an oversight group guarantees the success of your business, however, it will certainly improve the odds, especially as you navigate this delicate period as a relatively new company.
As a small business with a limited budget, a simple business planning strategy is to create a 12-month action plan to achieve your business goals. I can’t stress enough the importance of having SMART business goals as a prerequisite to creating an action plan.
SMART is the acronym for goals that are ‘specific, measurable, attainable, relevant to your business mission and vision, and time-bound’. Many entrepreneurs make the mistake of creating too many goals. Sometimes they will have as many as eight or 10 objectives for a particular year, which is far too many. Ideally, given your size and stage in the business life cycle, you shouldn’t have more than three or four business goals. Those goals could be aligned to customer acquisition and retention, market penetration and position, profitability and operations, and innovation.
Doing a SWOT analysis, which is another popular business acronym that stands for strengths, weaknesses, opportunities and threats, is a best practice that will serve your business well in this phase.
For SWOT to be effective, you will need to conduct a detailed analysis of the opportunities and threats, doing a research and data-driven deep dive into the external environment/factors that could impact your business goals positively and negatively. Equally important for the SWOT to be effective is applying a similar research and data-driven approach to determining your internal capacity to mitigate the risks, using existing strengths, and improving your areas of weakness.
In my experience as a business trainer, entrepreneurs take a very superficial approach to SWOT analysis, which waters down its effectiveness. For example, businesses commonly list one of their major strengths as “customer service”, yet they have no data from their existing customers that would confirm this as a strength. They are not benchmarking against any standard, nor is there a baseline for assessment. In fact, very often, the company hasn’t even tracked or measured customer satisfaction with their service.
Another example of a superficial treatment of the SWOT analysis is that entrepreneurs commonly list “global expansion” as an opportunity, yet there is no data that supports that belief, or a list of countries they could expand to, in order of priority, based on the markets that are most attractive.
To sum up best practices in business planning: it is applying business savvy in making strategic decisions so as to create a road map for achieving short-, medium-, and long-term goals after careful consideration of the key external factors and determining how you will develop the internal capacity to thrive in the business environment.
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Yaneek Page is the programme lead for Market Entry USA, a certified trainer in entrepreneurship, and creator and executive producer of The Innovators and Let’s Make Peace TV series. Email: yaneek.page@gmail.com