ARE YOU AN INVENTOR OR AN ENTREPRENEUR
Ask any successful venture capitalist and they'll tell you that
there's a lot more to a profitable business than a great idea. If
all it took was a great idea, my husband would have cashed in a
decade ago with his idea of a heated toilet seat (not that I would
have minded). But the way I see it, inventors have great ideas….entrepreneurs,
if they know how, make great ideas into great businesses.
Now we all know this isn't an easy thing to do. But one way to
increase the likelihood of turning a great idea into a great
business is by focusing energy on the areas that have the biggest
impact on success or failure. And if you've read my other
articles, you know that I swear by my formula, PS2.
PS2 = Personnel
Productivity * Strategic Planning * Sales
Performance
So let's talk about one element of this formula that changes an
idea into a profitable business and separates inventors from
entrepreneurs….Strategic Planning.
Simply stated, Strategic Planning is the roadmap of how to get
your company from where you are to where you want to go. It helps
you assess the current state of your business, where you need to
and have the ability to take the company and it monitors how you
are doing along the way.
Why Some Entrepreneurs Don't Create a Strategic Plan
Although many entrepreneurs know that planning can mean the
difference between success and failure, many are reluctant to plan
because it is so time consuming. For many entrepreneurs, the
process of planning is limited to figuring out where to get the
cash to meet next week's payroll. Others many understand the need
to plan and have the time, but not know how to plan, lack the
skills, or feel the future is just too unpredictable. Finally,
there are those that plan, but in a theoretical or academic
manner. These entrepreneurs will make the plan but fail to use and
measure against the plan and make adjustments and decisions along
the way. But one thing is certain - failing to plan might mean
that you are unknowingly planning to fail.
Why is Strategic Planning Important?
Beyond the fact that lack of planning may mean that your idea
never turns into a successful business, planning is important
because it can help you answer important questions about your
business. Answer to questions which will give you the information
you need to make meaningful and profitable decisions. Some
questions that strategic planning can help you answer are:
What trends are occurring in your industry?
- Which of the products that the company sells are most
profitable and why?
- How can the company achieve higher profitability?
- Will there be enough cash to meet the company's
current and future obligations?
- Is the company a good candidate for additional
financing?
- How can the company coordinate and communicate goals
and objectives?
- When might additional people be necessary and what
skills sets should they have?
How to Construct a Strategic Plan
Well if you're one of the entrepreneurs who knows that strategic
planning is important but don't know how to plan, here are a few
steps to get you started.
- Review Financial and Operational Data - Thorough financial
analysis, objectively examine the company's financial and
operational information to determine the current condition,
the affects of the past and the quantifiable goals for the
future. Some methods are:
- Ratio Analysis
- Benchmarking
- Break-Even Analysis
- Make Objective Decisions -Try to remove the subjective
element from decision making by using the objective data
obtained. Make decisions and set goals that are attainable and
realistic for the company and document assumptions used in
making those decisions.
- Plan Actions Based on Those Decisions - Create budgets, cash
flow projections, sales plans and marketing plans based on the
objective decisions and goals.
- Communicate Your Plan - The plan isn't very useful if
everyone isn't aware of the goals of the company and how they
can contribute to them. Make sure the plan is communicated and
people are evaluated and compensated based on their
contribution to the goals.
- Monitor and Measure Your Results Along the Way - Test your
plan and your assumptions and make modifications to the plan
as necessary. Learn from variances and use the information for
future planning.
Like I said, making great ideas into great businesses isn't an
easy thing to do. Planning can be time consuming and difficult to
perform. And it's okay to get help or do it in stages. After all,
realizing that planning is a necessary function for a successful
business is the first step. And soon planning will help you
progress from a great inventor to a great entrepreneur.
Sue Parker and Debbie Ferlic are the
founders of PS2 Engage, LLC, a consulting firm focused on
helping entrepreneurs and small businesses succeed through
objective decision making. Through the startup, growth and sale
of their previous businesses, Paragon Solutions, Inc. and OPSoft
Technologies, Inc., Sue and Debbie have gained unique and
invaluable experiences and the front-line knowledge necessary to
help their clients succeed. Sue and Debbie have been recognized
as business leaders through Entrepreneur of the Year Finalists
in 1997 and 1998, the Pittsburgh Technology Council Technology
50, Pittsburgh Business Times 100 Fastest Growing Companies and
the Small Business News "Who to Watch".
Contact Sue Parker at (412) 979-2491 or
visit us at www.PS2Engage.com
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