Business Planning, turning Information into Actions!
Business Planning should be about improving business performance. To improve performance a business must identify opportunities and undertake actions to develop them. This is true for all businesses, online or off. Traditionally businesses have been encouraged to invest substantial resources (time, money, effort) to identify opportunities. The results often confirm what is already intuitively known. Is there a better way (less resource demanding) to clarify opportunities and establish actions? One innovative means of articulating your intuitive knowledge or "gut feel" is through the use of quantitative models. Quantitative models use numbers to represent real life situations. They do not have to be complex to provide value. Try this:
On a piece of paper draw a table with 4 columns and 6 rows. Head the first column Customer Segment. Break your customers (or potential customers) into 5 segments and list them in this column. The customer segments can be defined by any attribute you choose such as buying habits, sales volume/value, location, or interests. Head the second column Segment Potential. In this column apply a rating from 1 to 5 (where 1 is low and 5 is high) to indicate each segments potential. Consider factors such as size, profitability, or level of competition. Head the third column Business Ability. In this column apply a rating 1 to 5 (where 1 is low and 5 is high) to indicate your businesses ability to service and develop each segment. Consider factors such as your expertise, market share, distribution and marketing. Head the last column Value. For each segment multiply the Segment Potential rating by the Business Ability rating and record it in this column.
The number in the Value column indicates the level of potential for your business in the customer segment. High numbers indicate more value.
- Are you directing your resources into the segments offering the most value?
- Are there segments that add little value to your business? What else does it indicate?
This simple process allows you articulate your knowledge and identify opportunities for improvement. By combining a range of quantitative models an overall picture can be presented of the business and it’s operating environment highlighting opportunities and potential. This structure is applied in Bizpep's (www.bizpeponline.com) Profit Contribution Breakdown software.
Identifying opportunities is not enough. You must act. Quantitative models can provide support in this area also. In fact they can be used to “value” decisions and actions. The value of a decision is determined by the likelihood of all the possible outcomes. This can be estimated based on a couple of “best guesses”. It is a little difficult to demonstrated on a piece of paper. However a Decision Assistant model can be reviewed and used at www.bizpeponline.com. Valuing a decision or action allows you to select actions that provide the best outcome for your business. It also establishes quantifiable outcomes against which you can review the effectiveness of your actions. If outcomes are not inline with expectations your actions must be refined.
Regardless of how you approach the task there are three basic steps.
- Identify opportunities.
- Establish and implement actions to develop the opportunities.
- Review outcomes and refine actions.
This simple process will result in continuous improvement for your business. Remember business planning is about acting on information to improve business performance. If there is no action, there is no value, and there may as well be no plan.
The author David Morcom is the founder of Bizpep, providers of innovative software and practical business solutions. If you would like to learn more visit www.bizpeponline.com where an extensive range of software is available for free download and evaluation.
