The Plan-for-Planning Process – Step 5

Step 5 – Asset Management

The fifth chapter/section in the business plan is the financial section. It should contain the projected Profit & Loss Statement, the Balance Sheet, Cash Flow projections, and key financial ratios for the business plan.

All of these financial statements should contain commentary where required to explain and clarify any specific numbers.

Additionally, any substantial capital expenditures over the business plan period should be noted and explained in the Asset Management section.

Summary level examples of these statements are:

                                                Projected Profit & Loss

                                                Operating Plan Period

                                                20XX     20XX    20XX

     Sales

     Cost of Sales

     Gross Profit

     Expenses

     Net Profit

                                                   Estimated Balance Sheets

                                                   As at:  20XX   20XX   20XX

        Assets

        Liabilities

        Equity/Net Worth

 

                                                    Estimated Cash Flows

       Opening Cash 1/01/20XX

       Incoming cash

       Outgoing cash

       Closing cash  12/31/20XX

 

                                                   Estimated Significant Financial Data/Ratios

                                                    20XX     20XX     20XX

      Working Capital

      Inventory Turns

      Receivables Collection Periods

      Debt to Equity

      Return on Assets

 

                                                    Projected Capital Expenditures

                                                    20XX     20XX     20XX

     Asset Replacements

     Expenditures on

          Strategy 1

          Strategy 2

          Strategy 3

Reviewing the Asset Management will give any reader a clear picture of the projected financial situation of the company over the business plan period.

GET OUT OF THE FAST LANE

In the last week of the year, my son and I took off down I-75 towards Tampa, Florida for a Lacrosse tournament.  Just a few hours into the trip, I noticed a common trend that lasted the whole 8 hour trip.  I looked over to my son and asked him to tell me what he saw.  He stated “everyone is in the far left lane.”  I reminded him that the far left lane is the fast lane and designated for the drivers going a little faster than everyone else.  But why would almost everyone flock to the fast lane?  As we moved over into the fast lane, we quickly noticed that traffic was actually slower.  The cars in the other lanes were traveling faster, with the exception of a few cars that forced drivers to work their way around them.  But they had two lanes to maneuver in so they didn’t have any problems getting around the slower cars.  The fast lane was a different story.  The only way to move forward was if someone moved out of the way.  Even though we were all going slower, we were in the fast lane and drivers remained there despite our speed.  Sound familiar?

fastlane

So many of us do this with our career.  It’s a sick version of the herd mentality.  We do everything people tell us to do but only seem to get the same results most everyone else gets.  That is, we are stuck in line waiting for the person ahead of us to retire, transfer, quite, get promoted or simply kill over before we get a chance to move up.  “Get out of the fast lane,” my son said.  “We’ll get there faster.”

Many people stay in the fast lane because it’s easy, doesn’t require any thought and you always know where you are (i.e. stuck behind the person ahead of you).  It’s like being on autopilot.  You’re moving but you aren’t sure if you’re getting there because you can only see taillights ahead of you.  Still, it doesn’t require much effort, so we drive on.

Scientists at the University of Leeds discovered that it takes a small minority (just 5%) to influence a crowd’s direction – and that the other 95% follow without even knowing it.  I know, moving over to the slower lanes would require you to make decisions constantly because there are slower cars that you will have to move around.  It gets to be a lot of work moving in and out of the lanes.

Staying in the fast lane may just be your problem with achieving the success you desire.  Research led by the University of Exeter has shown that individuals have evolved to be overly influenced by those around them, rather than rely on their own instinct. As the fast lane slows down, so do you.  As it speeds up, you speed up.  You do what they do.  As a result, groups become less responsive to changes in their natural environment.  Let’s say that the fast lane is full of MBA aspirants.  They haven’t noticed that the corporate world is full of them already and many of them have gained no flexibility in their career by earning the MBA.  It does little to improve their upward mobility.  If only a few people in the fast lane aren’t paying attention to the population of MBAs in their industry, they’ll stay in their lane to earn the degree and fall into the same situation as the others.  Everyone else will follow.  While the fast lane population may have dreams of getting into management, the MBA isn’t the only way to get there.  Get out of the fast lane.

So why do so many think the MBA is the only way to get there?  Social learning may be the reason.  It is likely that many aspirants are surrounded by a few people who believe it’s the answer.  Of course, once you go on campus, everyone will tell you it is the answer.  With so much bias towards the degree, aspirants will forego any analytical processing and go directly to the analytical response.  This does happen and was proven in a study published in the Journal of the Royal Society Interface, which found that a strong social bias may very well decrease the frequency of analytical reasoning by making it easy and commonplace to accept without thinking.  Well, I do remember something about us all thinking the world was flat, until that 5% of scientists convinced us it wasn’t.

What are other ways to get into management?  You can always start a company or join a startup.  Small companies offer the opportunity to learn more about management, since there is less of it.  Outside of these options, you might find yourself waiting in line for a long time.  Of course, you might occupy that time by building a nice list of credentials that you can put on your resume. Then, when somebody moves over, you can hit the gas and move into a new position.  Or….you can get out of the fast lane!  Some say “success is a choice.” Well…this is one of those choices.

If you’re considering taking the entrepreneurial route, let us know.  We’ve got plenty of folks who can help you with your idea.  Contact us at info@blitzteamconsulting.com.

The Plan-for-Planning Process – Step 4

Step 4 – How are we going to get there?

Typically called – “Strategies” – this section/chapter lays out the strategies that the company has developed to grow revenues and profits for implementation during this business planning period. You’ll want to answer all of the questions for each strategy to ensure full consideration.

The format for this section is (for every strategy):

  1. What the strategy is (a description of the strategy)?

2.  What the rationale is for the strategy (why we are implementing this strategy)?

3.  Who is responsible for implementation (a specific manager)?

4.  How long is the implementation going to take and what is going to be accomplished quarter-by-quarter (specific activities by quarter)?

5.  How much is going to be spent on each activity each quarter (a quarter-by-quarter listing of expenditures)?

6.  What is the expected return on the successful implementation of each strategy (the ROI for the strategy)?

When completed, this section should present a clear picture of what the management team plans to accomplish to continue to grow the revenues and profits for the company, and how much that will cost.

This section is particularly important because it lays out the quarterly strategic milestones that have to be reviewed on a quarterly basis, so that depending upon the success or failure of the expectations for each strategy for that quarter, decisions can be made as to how to continue to proceed strategy-by-strategy. And how to continue to allocate investments based upon these results.

This way management can better control the investments in the company’s future depending upon the levels of success or failure of each strategy on a quarterly basis.