No planning + no direction = reactive management

Posted: May 12, 2013 in Family Businesses, Up-and-running Business

Most small businesses do not have a business plan. I guess their feeling is that they are already in business or, still in business, so why the need? This is a moot point at best. Most businesses plod on year-after-year trying to make a profit or plan on grow without any idea how they will grow and, the results are predictable.

There is the oft repeated definition of ‘insanity’ – “…. doing the same thing over and over again and expecting different results.” This is a pithy phrase but it is very true.  So why do any planning? Here are a couple of examples:

  1. The president of a family owned and operated business is 58 years old. He has a son who works in the business, has no shares and has had little experience in any type of management. He was parachuted into management when he joined the business but he collects a salary but adds little else to the business. This business needs succession planning in a big way and second-generation management training at the very least.
  2. A business has been operating for 50 years. This business has been handed down from ‘generation-to-generation’. The results haven’t been stellar over the past 5 years but the business still manages to eke out a profit. There are now two new local competitors in the market and they must be having an impact since revenue has declined 15% from the same period last year. This business has a revolving credit facility with its lender and the lender has expressed concern that the credit line over the past 3 months has been “tapped out” (constantly at the overdraft limit). The president of the company is at a loss to explain this drop in sales. However, he tells his loans officer not to worry because “the customers will come back to us.” This response would not mollify any banker.

There will constantly be obstacles as a business moves forward. A good planning process will identify the obstacles, categorize them and have a fall back position or alternative plan of action. A good plan will also identify systemic changes to the market; customer preferences change as one market ages or retires and a newer demographic replaces them. Is your business prepared for this?

These two examples are cases of reactive management (at best) or crisis management in the worst case scenario.

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