Most resellers don't have a business plan

Resellers are like most Australian small businesses.

A National Australia Bank business planning survey found 80 percent of Victorian small businesses and 66 percent of those in New South Wales did not have a business plan.

The most alarming revelation was the data for South Australia. There, only 3 percent of small businesses there had a plan. Some of the worst cases were in the information technology industries.

There are several reasons why most resellers don't sit down to write a plan. Many believe they don't need it and many more wouldn't have the time.

Nothing could be further from the truth. Business plans force the organisation to confront reality and ask hard questions and, unfortunately, many companies are not up to that.

For them, it's just a lot easier to move along without planning. As the famous baseball player and manager Yogi Berra once said "If you don't set goals, you can't regret not reaching them".

Business plans are important for five reasons

For the owner of any business, regardless of size, the plan helps clarify whether the business is heading in the right direction or whether it makes sense.

When you write a plan it forces you to look at critical issues. Maybe the market isn't growing as fast; maybe the products are wrong; maybe you don't have staff with the right skills; or maybe the margins aren't as wide as expected. In that case, you might work out plans to tackle those issues.

Or you might decide to do something else and move on. In either case, the business plan has done you a favour.

Second, the plan sells others on the business.

Plans are important for obtaining bank finance, attracting investors, arranging strategic alliances, completing mergers and acquisitions, attracting key employees and obtaining big jobs and contracts.

In that sense, a business plan is similar to preparing a marketing campaign.

Think of the advertising, direct mail, public relations, and other promotions a company uses to sell itself to potential customers, financiers, suppliers and vendors.

Business plans also ensure everyone on staff is working to the same agenda.

Business plans also give the owner confidence to move ahead.

It provides a greater sense of control because the owner knows where the business stands and where it's going. The owners have also identified criteria to compare their performance each year.

And finally, a good plan keeps the business up to date and helps it weather economic storms, recessions and slowdowns.

What should go in a plan? Rigorous plans, developed with shareholders, key staff and managers, have several parts: executive summary, market analysis, company description, organisation and management, strategic analysis, marketing and sales management, service or product line, the amount of funding to start or expand the business, financials and an appendix.

It could include a summary explaining the business concept, the current situation, the key success factors and financial needs.

There could be a vision statement identifying what the business is about and setting out milestones.

The plan should also detail products and services, look at how they are competitively positioned and identify future products and services.

There would be a market analysis looking at customer characteristics, their needs and buying decisions.

That would be followed up by a competitive analysis looking at primary competitors, their products and services and identifying the opportunities, threats and risks.

There also needs to be a section on strategy looking at key competitive capabilities, key competitive weaknesses and how the company plans to implement strategy.

Good business plans also have a section on marketing, covering such things as sales tactics, advertising, promotions, incentives and publicity.

Another critical component is personnel. Who are the key people? How do they deliver products and customer service or support? Are there any gaps? Does the organisation have the skills to meet future demand, particularly if new products or services are introduced?

Finally there are the financials. That means a balance sheet analysis, with projections of profit and loss and cash flow. The future state of the balance sheet should also be examined.

As well, look at what funds might be required to grow the business.

This is a totally clinical exercise but it can be difficult in a small business where there is so much emotional attachment.

What about skills? How does a reseller who has never done this go about it? If you can afford it, hire someone to help you do it.

Finally, the most important part is to ensure the plan stays flexible. Nothing should be set in stone.

A vendor might change, a new customer might come in, and that changes everything. It is important to update the plan regularly, which means at least once a quarter.