As we enter a new year, it's a great time to reflect upon what we can do differently to improve results and to make adjustments in operations to respond to the changes in a very dynamic and recently tumultuous marketplace. Clearly that job is considerably easier if you have a written business plan for your business. Since we know that the majority of you do not have written business plans, perhaps now is a great time to consider the creation of a written document for your business.
Consider a business plan a road map; a guide for running your business. It should articulate your business purpose and your mission. Who are your customers? What is your value proposition? How will you grow your business? Will it still be profitable? And what resources will you need to make it all happen? These are some of the myriad of questions that need to be answered.
The very discipline of writing out the plan forces you to think through all the issues that are involved in managing your business and to succinctly articulate why your business matters. It forces you to put a stake in the ground and make some hard decisions. Putting your plan in writing makes it more definitive or permanent, and it will solidify your commitment to the plan. And it will be easier to clearly and effectively communicate your plan to internal and external audiences without any misinterpretation.
Business planning is a strategic exercise that will by its very nature be an iterative process. Consider starting with information gathering to establish the baseline for your business. Gather the key financial metrics for your business, and also put together information about your marketing positioning, service standards and any guarantees, client perceptions, etc. Engage key members of your staff to help you to gather the factual data about the current status of your business. Consider scheduling a strategy session (preferably off-site) where you can discuss the key issues surrounding your business. At a minimum, think about:
* Who does your business serve? Who are your target customers? Who should be interested in your services? Who are critical business relationships?
* What is your business? What products and services does your business sell? What will your firm sell in the future? Are there synergistic product and service offerings that will be of value to your clients?
* If health care reform further reduces compensation levels, how will you make up for that lost revenue? Will you evolve to a different business model, one perhaps more consultative and fee-based? If so, do you have the right human resources to transition your business?
* What is your value proposition? What is your competitive advantage? What strategies will you employ to grow your practice? What strategies will you employ to improve profitability? What role will technology play?
* Where will a prospect be likely to hear about your business? Where will your future clients come from? Where do your best leads come from? How will your business grow? How quickly? How much? How will you know when success is achieved?
* How will you recruit the talent that you need? Where will your future management talent come from? Do you have a business continuation plan? Is there a succession plan? What is your personal exit strategy?
These are important questions to be considered. For example, on the topic of business continuation, what plans have you made for the single largest asset that you own? What will be the disposition of your business if you are no longer there? Some of you are saying, "I'll sell my business for a big multiple." That may be, but realistically valuations peaked about three years ago and with more compensation compression on the horizon that will put additional downward pressure on the value of your business. Couple that trend with more "boomers" seeking retirement, and you have a very real scenario over the next five years (minimum) where the number of sellers will be increasing while the number of buyers will be diminishing.
On the other hand, some of you are saying, "My employees will take over my business operations." Well, that's likely a five- to 10-year transition period. First, do you have the right management talent in place to run the business operations in your absence? After all, your future income stream from any earn-out period will be contingent on your managers to successfully grow the business and maintain profitability. And that assumes that your key managers have the financial wherewithal to pay you a substantial amount of cash at closing and make any earn-out payments regardless of the market conditions going forward. Do your key managers have the ability to pay you 25%-40% of the value of your business in cash? Not likely. An employee stock option plan (ESOP) might be an option if you have a 10-year outlook (minimum) since it will take that long for employees to accumulate enough cash in the plan to substantially buy out your equity interest. Or have you already waited too long with no viable succession plan for the future? Read more at eba.benefitnews.com.
Reach Kwicien of Daymark Advisors at firstname.lastname@example.org.
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