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This business presentation looks at the importance of strategically planning for business growth when effected by external forces or events.
Learning outcomes:
Hello, I'm Shaun Reeves and welcome to the Strategic Business Planning video.
Today in the strategic business planning video, I'll be taking you through a fairly simple process, but a well thought out one through which we'll see if we can put you together a one page business plan.
How am I qualified to talk about this? I'm Shaun Reeves, director of SRJ Walker Wayland - business advisors, accountants, auditors, and tax agents. And I've got about 34 years experience in accounting and 27 years in my own business. I'm also an accredited business facilitator, a father of five, a husband, a grandfather of two, and a passionate Moreton Bay Region community volunteer.
Over all of those years in business, I've thought long and hard about opportunities. I've thought long and hard about challenges, and, through the support of a network, have come up with what I think is reasonable sort of process for going through a strategic planning exercise, particularly in times of crisis. And I guess at the moment with the COVID-19 restrictions happening, we've got one of those moments where it's a, it's a tricky situation.
We've got businesses that are doing it tough on the financial distress. So I've got some other businesses doing it reasonably well because they're in an industry which has a sweet spot. This particular process will cover any sort of situation, regardless of whether it's a distress situation, or a success situation.
So, let's see how we go as we work through this process.
One of the important things I've found, particularly when we're feeling challenged, I like to talk about something I call a Locus of Control. Just imagine yourself in a situation where you're being pulled from all directions. You're concerned about where your business is headed because of the state of the economy; the attitude that banks are taking towards your business and finance; where your competition's at; and what your customers are thinking. And you're feeling a bit like you're out of control.
What I call a Locus of Control is, if you've got a good, strong, positive locus of control, then you have a far greater belief in your ability to have a positive impact on those things you can control, than you've got a fear of those things that you can't control. To put that into some words, if you're speaking to business people who might be in exactly the same situation, you might hear two different stories.
On the one hand, you speak to someone and say, how's it going? And they say, well, it's really tough. The economy's terrible. The pandemic's killing me, (in a business sense, hopefully) competition, everyone's trying to want to cut, to try to find whatever business there is. Customers are staying indoors. I don't know how I can reach them - I'm just really struggling.
On the other hand, you might have asked exactly the same question of a business next door, doing exactly the same thing. How's your business going? And they might say, look doing it really tough at the moment. I'm trying to get my head around what I can do to reach out to customers. And getting to know the technologies, the social media, and so forth has been challenging for me, but I'm working on it. Cashflow has been a challenge. I'm trying to get my head around where the stimulus is at, understand what my cashflow needs are, and reaching out to banks before I need them. The economy's very challenging. I'm working out how I might have to pivot in my business. Is there any other offering that I might be able to provide to the customer base.
What you're hearing, there is two very different stories. You're hearing somebody blaming something on everything else. And the other guy is not saying things are any easier, but he's pointing out that he is trying to control those things that he or she can control.
There's a big difference there. It's the locus of control. And the person that is talking about if they can control what's going on, if they can get their head around cash flow, if they can understand social media, they're making positive steps and taking positive initiative. And he, or she will be in a far better position to move and pivot more quickly than someone who is blaming it on somebody else. If you're blaming things on somebody else, then you are more likely to sit there and feel sorry for yourself, and not have a solid think about it, how you might need to pivot and adapt.
And those two words are starting to get used a fair bit, a little bit overused, but they're critical. Agility, pivoting, adapting to particular time. And I can only encourage all of you to have a think about where your locus of control lies. Look inside your head. What are your thought processes and where might you be able to adjust to take a more positive locus of control?
When we're doing business planning, we like to have a good think about (and these can be a bit cliche as well) where are we now? Where do we want to be? Before we start working out, how are we going to get there? The now, and the where, and the how. It's important to understand where we're heading, before we work out the how, because if we go straight to "the how", it is built in to most of us to say, well, okay, things are not what I want them to be. What am I going to do about fixing it, rather than saying things are not necessarily where I want to be. Where do I want to be before I start thinking about what's being fixed. So we don't go down the wrong track.
Importantly, though, when we're having a look at the time that we spend in planning, the now should be about 20% of planning time, the where should be about 20% of the planning time and the how, which is still the most important bit, but comes at the backend is where we put all the grant. And that's about 60% of the planning time that we should be spending.
So if we have a look at the moment - just at the now. And in relation to that, the current situation that we're going through, Where you're in a situation where we have a pandemic and some businesses are quite adversely affected, some are quite positively affected. In both those situations, we need to be aware of those things that we need to make really quick, immediate decisions about. No procrastination, trust the gut. What decisions do we need to make? What are the really critical issues that we need to deal with?
Don't deal with all your issues that way, because we absolutely need to have proper process in decision making around most of what we do. But there may be things that pop up that need an answer right here, right now. Deal with those don't put your head in the sand. If it turns out that we've pivoted the wrong way, then we can fix that later on as we go through this process.
Have a look at the key issues that are affecting us at the moment. Try to mind map these key issues. And what I mean by mind map is get a big shade of paper with with a circle in the middle that says key issues, and then start branching out. What are my key issues? One of the key issues might be sales. What is it about sales that's a problem? Branch that out into a lack of demand. I might have another branch that talks about can't get supply, because we've had boarders shut. What is it about that supply? Have we got particular suppliers that we've always dealt with and we always want to deal with? Have we perhaps looked around to say, well, what other suppliers might we have?
Without getting into the how, let's just expand where we are on the now and say, what are those issues I've got to deal with? What are the key challenges? What are the ones jumping out at me that are readily identifiable? Let's have a look at specific urgent concerns and whack those up on the mind map as well.
And then, where are the opportunities, because this isn't necessarily all negative. Some of those opportunities might be the opportunities to build business and grow business through the restrictive times we're having at the moment, but it might also be opportunities to not necessarily to bound ahead, but to adjust what we're doing to look at different markets and maybe adjusting the business. And those adjustments may be temporary, and might not be required once restrictions ease. And we get back to hopefully, what is some sort of semblance of normal. Or they might be fundamentally permanent changes that, that are forced upon us.
I know for example, a number of businesses decided to go digital - working from home. Those changes are not likely to revert back to all that they were. There's probably an element of those that are going to stick and stay in place. So what are those opportunities for us to be able to take those changes and turn them into positive outcomes for the business?
Once we've had a look at the now, and have a look at all of the issues that we've come up with. We move ahead to the 'where'.
We have a look at what our current vision of the business is. 'Why did we get into this business in the first place?' is a really critical question that I ask a lot of clients.
What is it that you're trying to get out of this? Why did you go into it in the first place? What do you think this looks like in five years or ten years for you? All of those thoughts should be captured. I've even had clients draw pictures to explain what they life, and week, and month, and year might look like in five or ten years. Some people are a lot more visual than wordy about these sort of things.
We should then try to address what the impact is of the current restrictive environment, and the pandemic on the vision. Has it affected our vision? Is it likely to affect it significantly? Is it a temporary impact? What are we thinking? We need to capture those words as well.
In the current situation, I take a slightly different approach to my strategic planning than I would if things are just rolling along economically as usual, if I can put it that way. I like to use scenario planning. And what I do there is I'll get three more big sheets of paper and on one sheet, I'll say, "what is it that I understand about my environment, and where do I think things are going? If the current situation has a mild impact on my business".
On the next sheet of paper, write down a bunch of things about what it might look like if the business has a medium sort of impact imposed upon it.
And then finally, what if the impact on my businesses is going to be severe? For example, I might say in a low severity sort of situation, we've got minimal disruption, it's business as usual. I might have to do a little bit of work from home or so forth, but we'll just keep on moving the way we're going. In some manufacturing businesses where they've been supplying to industries who have had little effect are in that sort of situation, where, in Queensland we've been lucky to be able to still go to work if we couldn't work from home. So we've been at work machines have been moving along. Supply chain hasn't necessarily been affected and we can still trade on as we have done in the past.
Medium severity, you might've had impacts maybe 10, 20% drop in revenue or 10%, 10 or 20% increase in revenue. What is the impact on cash? With that drop in revenue, what does our cashflow look like with the increase in revenue? If it's us then, how do we find that increase in business and how do we deal with our capacities and so forth?
High severity is something like a 50% revenue or, in the case of hospitality, a hundred percent revenue drop, what does that look like? What are those key critical decisions we've got to make? How might that impact on our vision?
So let's take those three big sheets of paper and make assumptions about what things look like under each of those different scenarios.
When we're doing that, in order that we can get a full range of thought, I like to use the acronym, PESTEL. So we, we take into account, what's the political situation around us? What is the government policy? How is that affecting my vision of my business? And some of that will be around JobKeeper. Some of that is going to be around tax incentives. Some of it's also going to be trying to get a read on what sort of industries are being supported and what sort of industry support is dropping away from. So we know which industry horses are the best ones to ride going forward.
The E, economic. So where do we sit and what are the prevailing economic conditions and how might that impact on our vision going forward?
The S for social. Social is quite important and social is around mental health. It's around our ability to get around and about, and to move around. So we have had restrictions in that regard, and we still have restrictions on gatherings and social distancing. Obviously, there are critical issues in relation to having a look, at what our business looks like in the next six months, but possibly going past that as well. I know a number of businesses who are making significant changes to their workplaces because of what's happened.
T for technology. How might the change and take up of technology effect the vision for the business.
Environmental impacts, which is around the business environment, the social environment. And I know I've dealt with social under the S, but I'm talking more about the broader environment. Where are we headed in relation to green policy? What is the environment like? Is it a healthy environment around the workplace? What might we have to do to adapt to that?
And the L of course is legal. What are the legal restraints I've got in relation to where my business looks like heading? Have I got to shore up the protection of intellectual property? Have I got to shore up asset protection? What have I got to do around that?
So when we're having a look at collecting our thoughts as to where we're going to be, we have to have consideration to the six factors in that PESTEL analysis to make sure we're having a really good look at what we're doing.
Then we get to the 'how'. So we get to the 60%. By now we should have sheets of paper up on walls. I find just a little practical tip is to have a look at those 3m sheets - the big, big post it notes. Write up all of your ideas on that. You're now, mind maps, your where visions, your three assumptions under scenario planning. Stick it all up around the walls so it's visual. It's there. You can have a look around and refer to them when you're having a look at what your, how needs to be.
These sort of times I use probably four main tools to take me to the 'how'. I'll look at what's called a failure mode effect analysis. And I'll explain that in a little bit more detail.
I look at, seven wastes, which has also, can be called profit improvement or waste reduction exercise. I have a look at four ways to grow, and a force field analysis. And I'll talk you through those in just a second.
From there, i'll try to capture all of my thoughts in a one page plan, and also then stop and have a think about what my capacity to achieve effective change is going to be. So I'll walk you through those.
First of all, the failure mode effect analysis. What I do here is I have a look at some of those things I've identified in the 'now'. Perhaps the drop in sales, the shortage of cash flow, the inability to get supply (if it looks like I can increase sales, but I've got to be able to create supply), the social restriction issues, and the ability of my workers to be able to get to work, and things like available childcare and so forth, quite topical in that regard.
So I have a look at the potential failure, for example, the cashflow issue. What are the effects of that failure? So I like to then document what is it about the shortage of cash flow that is going to be a problem for me? What is the effect? Not being able to pay my suppliers on time? Some people are really struggling in the JobKeeper arrangements, for example, to be able to make those payment of wages upfront in order to be able to receive the Jobkeeper allowance back in.
After I've have had a look at the potential effects of that failure is I have a look at what the causes are. What is it about what's going on that's causing my cashflow to be challenged. Is it my management of cash flow? Is it debt dragging out? Is it this Jobkeeper arrangement, where I've got to make all of these payments up front before I get the money in to reimburse it. So what are those causes of failure? And then have a look at what are the control mechanisms I've got in place to be able to, as far as possible, (and I'll go back to my positive locus of control) to control the things that I have the ability to control, and not worry so much about the things I can't.
I'll have a look at each of those of those factors. I'll have a look at, you know, if there is a cashflow issue, what is the likely severity of that cash flow issue going to be? Then what is the likelihood that it's going to occur? And what is my ability to detect these things early? And if I have a look at all of those, the severity, the occurrence and the detection, and in my positive locus of control mindset, start thinking about what I can do to increase my ability to detect these early, to minimize the likelihood of occurrence and to minimize the severity of it. Then I can bring my risk factor down a significant level.
All of these tools I use at first glance might seem a bit technical. But all they're doing is taking what can be a very subjective thought process discussions around the table, stressing in your head. What they do is they try to take all of that subjective noise out of this thought process and create an objective process to capture thoughts.
And at this stage, it's about quantity, not quality. In our 'How' we want to identify as many possible actions as we can in dealing with some of these potential failure modes that pop up.
If I then move forward to seven wastes or profit improvement, or cost control, or waste reduction, whatever you want to call it. Again, just an objective process to try to work out what I can do to minimize cost. Whether that cost is in motion, time, or in real dollars, ultimately they all have an impact on real dollars.
What we do here is we try to identify wastes in seven different areas. And I'll have a screenshot come up for you to show you what those seven different areas are.
But over production, that means we're working things too hard. We're reworking them too hard, or too much. Our processing is sort of more than it needs to be. Sometimes to get a product 95% there is good enough. We don't need to do by nature what we want to do and make sure the product is 110% right. So where, what might we be getting stuck in overproduction?
Where is their waiting? And waiting can be in a number of areas. It can be waiting on supplies, waiting on processing, waiting on machines to be ready, waiting on people being available to do work, waiting on transport for goods to go out, waiting on getting paid. It can be a bunch of different things. Where are our waists in those areas? And can we refine and minimize waiting times.
Transporting. Do we move things around inside the factory too much? Do we move them around outside the factory too much? Have we got better ways of creating distribution networks? Is there inappropriate processing? Is there stuff that we just don't need to do that we get caught doing because it's the way we've always done it. Do we carry unnecessary inventory? Because inventory can be a great waste of cost with stuffsitting on benches that don't need doesn't need to sit there for, for as long as it does.
Just as there might be overproduction, transporting, and so forth. Are there motions that are unnecessary, moving stuff around factories? Do we have too much waste in defects? Are there ways that we can reduce defects, and wastage, and obsolete stock, or whatever? So let's capture all of these thoughts.
What we then do with these waste is we try to track. What is the particular waste? How much might that cost us to fix? How much is it going to save us? And then you get a really good idea of, ease and impact. How easy is it to fix this? And what is the impact of fixing it going to be?
In these times, we want to try to grow. And some people are growing and are struggling with that growth.
So four ways to grow. Have a look at selling more of your existing product into existing markets. How can I sell more existing product into new markets? How can I sell new products into existing markets? And how can I sell new products into new markets? That in itself is a field really clunky exercise, or time consuming exercise, but it's something to have a think about.
Try to broaden your mind, and it's not just about what you've got in front of you and who you've always dealt with. If we can pivot and adapt here with new products or new markets, how might we go about that? Let's have a think about what some of the actions might be in relation to that.
If we are looking to grow, inevitably, there are going to be barriers to growth. If I can identify a barrier, and a barrier might be cash availability, to go back to the whole cash is king thing.
I use a force field analysis. And in the centre of the force field analysis, i'll identify the particular issue that I'm having trouble with. Again, on a big sheet of paper, write down 'cash' in the middle.
On the left hand side, I'll write all of the positive forces that are working in my favor to help create cash. And it might be equity in the home. We don't want to necessarily use equity in the home if you don't have to, but it might be there as one of those things. It might be, I've got a reasonable sort of cash flow, and I haven't paid attention to debtors as much as I could, maybe I could pull a bit more cash in there.
On the other side, I'll put things that are going against me for cash flow. In the current situation debtors might be slow to pay. So there are slow to pay. There might be the investment in inventory that I've got to make etc.
Then I've got to come up with a bunch of ideas. What can I do about increasing the positive effect of those things that I've set up working in my favor? And what are the things I can do to decrease the effect of the negative? Again, this is about quantity, not quality just at this stage. Come up with as many ideas as we can.
Then we get to talking about quality over quantity. And I do that by having a look at a Pareto Analysis and it's called the 80/20 rule. What is the 20% of things that I can do that will give me 80% of the result?
Inevitably, what you do during the day is you do a couple of things and you go, wow, that was really effective. And then the rest of the day, you get caught doing a whole bunch of other things, which is the 80% of things that give you 20% of the result. And you scratch your head saying, why did I waste my time on that? If you have a look at all of those things that you've got written up around the wall, all of those key strategic actions, then you can say, okay, what are the 20% of things that are going to give me 80% of the result. So it's the ease and impact what is going to be easiest list of things to do that is going to give me maximum impact, and they should be the things that you prioritise to work on straightaway.
I then would put all of those key strategic actions in a one page plan, and that's a working document. Make sure that it's visual and a strategic plan is something you work on all the time, and you need to make sure that you're scrubbing things out. When you scrub something out, it's empowering. Yes. I've done that. As you scrub things out, have a look at the list. Have you had more ideas pop up? Are there other things that you can now do?
It's really important to remember that you've got to have a really solid ability to be able to change here. You've got to have positive forces around you. You've got to have a positive mindset. You've got to have capability. If you decide something's going to be a really good idea, you've got to have capability in yourself in your workforce, in your plant, in your systems to be able to achieve that change. So it's really important that those things are also up there as far as actions go.
Next steps though, if I'm looking to where we head from here. I like to create a war room. I've said, stick all these things up around your walls. I call that the war room. We need to have a situation where it's very visual. It's a place where I can go to, and I can get very quickly into the mindset of this growth focus. I can have a look at what's there. I can bring people into that space. We can focus on what it is that we need to do to achieve positive growth. So get your war room.
Look after yourself. You cannot make positive change without having mental, and physical energy to do so. So let's make sure we're looking after ourselves. We've got that war room that we're focused on. We don't lose track of the process, trust the process. It's a simple process. Other than that, it's all about making sure that you work as hard as you can to maintain that positive locus of control.
We're here in a very positive region. We have a number of very positive forces supporting us, whether it be Federal government initiatives through State government grants, through Local government initiatives, like these videos to help support you. You've got network works around you, that you need to reach out and connect with to create those positive energies. Look after yourself. And if you do all that, that you won't need good luck because you'll be creating your own luck. So in these times, I'd suggest you go out, work hard, reach out and in the Morton Bay Region, stay Moreton Bay Tough in business. Thanks for listening.