Is Your Business Plan Working?
So here you are, almost half way through the year and you can see you are not where you thought you were going to be. It doesn’t matter if you are the business development person or the owner of your company, the issue is you are being judged based on the company’s performance or lack thereof. The issue is the company may not be where it needs to be and you may need to decide what Plan B is, and soon! The bad news is changing a company’s direction takes a lot of effort and skin in the game, if you want to be successful. Good employees and good owners are always in demand. The issue here is you may not want to continue working at the same company, if the company and its people are not willing to pitch in and help make things work together better for a profit. Without a profit, there is no way for any person in the company to achieve their desired goals with the company.
Actually, the issue of knowing whether your business plan is working or not working is pretty straight forward. You can job cost your plan by comparing what the plan was meant to do with what the plan has actually achieved to date. The difference of the two issues will be what you wanted to achieve or what you didn’t want to achieve. I’ve found people in this industry to be very smart, but their decisions must be based on correct information in order to make correct decisions.
So how do you know when your plan is working? It’s actually very simple to get answers, but you must set up key indicators that show you where you started from and where you want to go. The reason this needs to done before your plan kicks into action is that a lot of people (maybe not you) will try to justify their position instead of taking responsibility for what was planned and what resulted, especially if the results are not very positive. A lot of people will tell you they cannot really know if their plan is working or not working. The way to know is to keep track of the plan and results, then compare the results against the plan using your key indicators. Let me give you an example:
You decide that you want to do a sales volume of $1.825 million for the year. You start by working backwards after you check last year’s data and determine your average sale size was $5,000. You then do the math and realize you need 365 sales at $5,000 each to achieve your planned sales goal of $1.825 million. Once you set the basic premise as to what the company is going to achieve, you can start putting together all of the things it will take to achieve this goal. Let’s say you had a close rate of 50 percent on all of the leads you received and got the opportunity to try to close. As a result, you immediately know you must have 730 leads to whom to try to sell your services. So what does this mean to an owner, a business development person, an estimator and a water tech?
- The owner must manage and lead the team to setting the plan in place from which the company will operate.
- The business development person (formerly called a donut dropper/marketing person) will need 730 leads that will generate a sale size of an average amount of $5,000.
- The estimator must estimate the leads and sign up 365 jobs averaging $5,000.
- The water tech must produce the 365 jobs at the numbers the estimator bid.
Sounds easy when you break it down this way doesn’t it? But you know it’s tough to produce the numbers efficiently and effectively. The key is the entire company must keep track of the results on a daily basis and the four key players (and others within the company) must review the results on a weekly basis. At that weekly meeting, you compare your estimate to your actual numbers, then adjust efforts for the next week based on where they are with the plan.
The company goal must be, “if it’s not in the software, it never happened.” The only way I’ve seen companies be able to do this is by using some type of software that the daily data is entered in to by all members of the company. I can guarantee you the use of the software must be driven by the owner. This means on a scale of 1-10, 10 being the best, the owner must be a 9, working on becoming a 10. If this is not done, most of the company will take the same path the owner takes, i.e.: using the software if and when they feel like it. This leads to a database that is garbage-in and garbage-out. The conclusion will then be reached in the company that:
- The software doesn’t work.
- It is not good software.
- The company should change to another software or better yet, go back to the way things were done in the past. Consider this as people saying: “take me back to the old way, so I cannot be held accountable”.
Once you have the daily information in the software, it becomes very easy to run a report and compare what was supposed to happen and what actually happened. I also need to warn you in advance that the information you receive out of these reports may change your thoughts as to who is doing their job and who is not. When you run the reports on individuals, you begin to see how well each is doing or not doing. The best part is the individual can also see how they are doing or not doing; this will allow them to see what they have to do and how to do it better.
Once you have correct data, you can start to make correct decisions. I’ve found it takes a minimum of nine months to make a change. It usually breaks down to three steps:
- It takes the owner a minimum of three months to realize they have a problem.
- It takes the owner a minimum of three months to decide what to do about the problem.
- It takes the owner a minimum of three months to take the action to resolve the problem.
As a result of the time it takes to make a change, you can see how this can affect a company and its profitability or lack thereof.
Let’s go back to the key indicators I talked about in the beginning of this column and suggest some key indicators for each of the four company members:
- The owner must be both the manager and the leader of the company. The owner is responsible for the entire company meeting its goals. If the goals are not being met, the owner must decide how they can help the individual(s) reach their goal(s). The owner has total skin in the game, i.e.: their residence, their assets, their kids’ advanced education, and their retirement.
- The business development person is able to clearly see how their efforts are generating leads to the company. They also have skin in the game, but not like the owner does, i.e: their job is at risk, but if they are achieving their promised goals, they are solid in their job or any future job.
- The estimator is able to clearly see the results of whether or not jobs are being generated at the needed volume and profitability. Their jobs should be coming in as they were bid, if they are not, it is fairly straight forward to determine why. The estimator has skin in the game, but not like the owner does, i.e.: their job is at risk, but if they are achieving their promised goals, they are solid in their job or any future job.
- The water tech is able to see if they are producing the job as promised by comparing the estimated scope with the actual scope produced. The water tech has skin in the game, but not like the owner does, i.e.: their job is at risk, but if they are achieving their promised goals, they are solid in their job or any future job.
I hope you can see that people need to know and agree to what is expected of them. If they take their job seriously, they will achieve what they agreed to, especially when they have skin in the game.
Wishing you good luck in achieving your proposed Business Plan!