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What is in a Name? Keyword and Color Essentials to Branding Your Small Business!

What is in a name? Plenty, if you plan to do business on the internet and want to generate traffic and link energy to your website or blog.

If you are looking to create a new business or re-brand an existing one, you can not underestimate the power of keywords, keyword phrases, color and your web presence, when naming and branding your organization.

Most businesses do not have the resources of a large corporation or a well funded start-up to spend the thousands, if not millions of dollars that it takes to establish a unique and recognizable brand name and image. You can take a shot as Bob Parsons, founder of GoDaddy did when he bet the farm (and his advertising budget) on a Super Bowl commercial that propelled his company from a virtual unknown entity to a domain and internet hosting market leader and household name.

If you are just starting out and looking to take an idea or vision and turn it into a business that you want to successfully market on the internet, consider these five simple, but essential guidelines as you develop a name, brand and an image for your company.

Essential 1 – Keywords Make the Name

Make sure that you identify and use keywords in your company name that best describe your core business and have strong internet search value. This can take some research and effort but you need to know which words are the most powerful when marketing yourself on the web.

You can get very sophisticated in your search and analysis, or you can just go and use the Google Keyword Tool and type in words that best describe your business and see which words people use when looking for what you are going to market. Remember, what you call your product or service and what a customer or searcher calls it, can be two very different things.

A simple example of the power of a single keyword is the difference between the words “plan” and “program”. Let us assume that I have started a website marketing a new diet that I have developed and want to name my new business and website. An easy example of the power of a keyword is that people will search the term “diet plan” 550,000 times per month on average, but will search the keyword phrase “diet program” 165,000 times per month. If given the choice I am calling my business and marketing my site as “Bill’s Diet Plan” over “Bill’s Diet Program”.

Now this is an over simplified example, but you need to understand the power and potential of the keywords you use in every facet of your business, even your business name. Many search engine spiders (it is documented and sometimes just speculated by the experts) give business and website name greater authority when indexing sites and listing them in keyword searches.

Essential 2 – Own Your Domain Name

There is nothing worse for any business owner than to develop a product or service, create a plan; spend the time and money to form a business, and register it with the state only to find out that some one else owns the domain name for your new business. It happens all of the time.

Never settle on a name, register a business or begin to develop a web presence without first controlling the domain that you will build your business around. That is essential. You can buy up a variety of domain names, but always strive to own your business name.

You can easily go to GoDaddy as we mentioned above, or a variety of domain name registration sites and see what what is taken and what is available. This is also why your initial keyword research is so important, in order to identify and register a business and domain name that will help generate traffic for your site.

Essential 3 – The Power of the Tag Line

Never underestimate the power of a tag line to re-enforce the core of your business as well as add keyword energy that can help set you apart in a search. You tag line is your slogan, theme and mantra wrapped up into a few select words. You want it to be simple, concise and keyword rich.

I am not talking about a mission statement. I am talking about 7-10 words that describe your business. An effective tag line is search critical, as it should contain the keywords that you want to be known and found for.

Take my diet plan example. A tag line might be “A Diet Plan That is Transforming Bodies and Changing Lives”. Now from this tag line I have a statement that uses my keyword phrase “diet plan” and gives a very clear picture of what my diet can do. I would definitely test and research my other two keyword phrases “transforming bodies and “changing lives”, to see if there are more popular keyword phrases that maintain my tag line theme, but have greater search value.

Essential 4 – Color Your World – But Not To Much

This section is literally the blind trying to lead the seeing, as I am not good with colors and completely color blind when it comes to certain colors. My wife and children have a field day with me some mornings when I appear in the kitchen wearing one black sock and one blue sock with my suit.

Color can be a great tool or a huge pain. When considering colors for your brand, logo and website, consider who your target customer is, the region of the world you are marketing into and finally keep in mind the phrase “less is more”.

First, check out other websites and products that target a similar age group or demographic. Big companies spends thousands of dollars on market research and testing to see which colors, themes, layouts and images work best for specific target markets. Why re-invent the wheel, use what works for others and add your style and theme to it.

Next, know where in the world you are marketing into. Certain colors can have very positive or very negative responses in different regions of the world. Some regions respond to bright colors, while others do not. If you are selling outside of the U.S., do some research and check out websites based in those regions to get a sense of what is popular and what is not.

Finally, “less is more”. The more colors you use in your logo, website and company theme the more complicated and costly you will make it for yourself. It costs more money every time you add a color to print a marketing piece or company letterhead, so keep this in mind.

Remember that not all monitors show colors the same and what people see on a website, is not what may get printed out. Consider how everything will look as black and white when developing your website, brand and logo. If you create something that you encourage people to print out, make sure the text will show up.

Essential 5 – Your Logo Can Speak Volumes

An effective logo can help you establish your brand and a bad logo can send the wrong message and turn off a prospect faster than a light switch.

Logos, like color, do not need to be overly complicated to be effective. You can easily outsource logo design. there are hundreds of graphic artists on the web that will do good work for $100. Make sure you are specific for what you want, how many colors and the theme of your logo.

When you get a logo designed make sure that you get high resolution images that you can work with and the specific RGB, Pantone or CMYK color codes used so you can match them up and see how it will look on your website.

When you are designing or considering a logo design consider three things:

Relevance to your brand and business image
Simple is better
No more than 2 colors

If you are a financial planner starting your own business, who has a passion for Harley Davidson and weekend biking, that does not mean you should develop a logo using the Harley font, a similar symbol or an image of a motorcycle in your logo. You may think it is funny, but I have seen stuff like this. You need to consider your target, not yourself when developing a logo and brand. I am not sure how big the financial planning market is for Harley enthusiasts, but you would be limiting your market and creating a brand image that is not in sync with your business.

The bottom line is that your vision will only go as far as your planning will take you and that a name represents more than it ever has in this competitive marketplace. Take the time and plan, it will make a huge difference.

How Small and Medium-Sized Businesses Can Plan For ERP Implementation

Introduction: Proper Planning to Reduce Risks of ERP Failure

In the first article, we discussed how a well-structured system assessment scorecard can help Small and Medium-sized Enterprises (SMEs) mitigate enterprise resource planning (ERP)[1] implementation failure risks at the system acquisition stage.

In this article, we outline certain steps SMEs can take to mitigate ERP implementation failure risks in the subsequent phase of implementation: the planning phase.

Briefly defined, the planning phase is the stage during which the organization prepares to “ERP-ize” its business. An ERP project requires much more than the mere installation of an IT software system. It requires organizational restructuring.

Generally, SMEs have to restructure their operations to satisfy the business flow parameters defined by the ERP software. These days, most ERP software packages are pre-customized to sectors according to certain industry best-practices.

The extent of organizational restructuring that is required depends on the structure of existing business processes, and on the technical and functional requirements imposed by the ERP software.

As with any complex restructuring project, ERP implementation is accompanied by certain risks of project failure. For example, failure can result from a runaway implementation that causes the project to become uneconomical. It can also result from organizational rejection of the restructured environment where such rejection impedes the achievement of the projected efficiencies.

In the following sections, we elaborate on these particular risks of implementation failure and how effective implementation planning can mitigate these risks.

Failure Risk 1: Run-Away Implementation

If an SME is planning to implement ERP, its primary reason for doing so is probably to achieve cost efficiencies. According to 2009 research by the Aberdeen Group, the need to reduce operating and administrative costs continues to be the main driver of ERP acquisition in the SME segment [2].

Since financial reasons drive the decision to implement ERP, it is critical that the implementation be completed within budget. A failure to deliver an economical implementation will mean project failure.

Since this section deals with ERP-related finance, it is important to briefly discuss some of the underlying principles.

The cost side of an ERP budget is based on a total cost of ERP ownership (TCO) calculation. TCO is the sum of the present values of system, maintenance and service costs. System and maintenance costs are fixed and largely determinable in advance.

In contrast, service costs are usually highly variable and difficult to project with accuracy. Further, service costs are proportionately significant. In 2007, service costs accounted for 45% of TCO for SMEs. Put another way, for every $100 an SME spent on ERP software, it spent an additional $81 on service [3]. As you will have probably guessed, service costs mainly reflect implementation costs.

Poor scheduling, improper resource allocation, project delays and scope creep (i.e. unplanned increases to the project’s scope) are the usual culprits for runaway implementation costs. The first three are generally well understood. Scope creep deserves a bit more attention.

During implementation, there is a holy-grail temptation to “ERP-ize” certain business processes that were not included in the original project plan. The rationale supporting a scope increase is that incremental efficiencies will be gained by “ERP-izing” the additional tasks. Implementation seems like the perfect time to widen the scope: the project is underway, consultants are on site and the teams are dedicated.

These temptations must be resisted. Implementation is seldom the right time to widen the scope (except for dealing with unforeseen items that must be addressed).

The reason the temptation must be resisted is because the argument favouring unplanned scope changes only accounts for the benefits side of the financial equation. Incremental costs must also be considered. These costs include direct service costs as well as the opportunity costs of delay. With respect to the latter, every unplanned day that the SME is unable to operate under the new system is a day of lost efficiencies.

It is fair to assume that an ERP project scope is designed to maximize the net ERP benefits (net benefits = cost efficiencies – costs). This means that all components of the project that yield a positive net benefit are accepted. It also means that all components that yield a negative net benefit (where the incremental costs exceed the incremental efficiencies) are rejected. Unplanned scope increases are typically components that would yield negative net benefits, i.e. they would be unprofitable. Since they diminish the return on ERP investment, these components should be rejected.

The following graph (omitted) depicts the relationship between a project’s gross costs, gross efficiencies and net benefits (net benefits = gross efficiencies – gross costs). As seen by the Net Benefits line, the ideal project plan is at Point A. At this point, all profitable components are accepted and all unprofitable components are rejected. Any project plan that lies to the left of Point A would mean that the plan could be profitably expanded. Any project plan to the right of Point A would mean that unprofitable components are being accepted. Scope increases are generally components that lie to the right of Point A.

The above profitability analysis explains why incremental scope changes are both unnecessary and unbeneficial to the project. As time passes, these incremental changes will either be ignored or implemented as part of a profitable optimization plan.

In summary, a well-structured plan can mitigate the financial risks associated with overly broad scope definition and scope creep. Such a plan will help keep the ERP project within budget and on time.

However, even if financial risks are mitigated, other types of failure risk still threaten the project’s success. One such risk is that certain key people will reject the new ERP system and/or the restructured business processes.

Failure Risk 2: Improperly Managed Change

Restructuring is a necessary evil. It causes the SME to undergo significant and disruptive changes. For example, the SME’s organizational and reporting structures will likely change as departments are shifted. Its operations will likely change as business processes are re-engineered. Daily tasks will likely change as manual tasks are automated. All of these changes mean that employees, management and executives will have to unlearn old habits and learn new ways of doing business.

Some people will embrace the challenges and opportunities presented by the change. These people will help move the project forward. However, there will be those who fear the uncertainties associated with change. These people may resist the project and may risk undermining its success.

Change resistors are powerful forces. Even relatively innocuous-seeming resistance can thwart success. Consider, for example, the case of a sales person at a manufacturer who decides not to input an order into the new ERP system. Instead, the employee calls the order into production – the way he had always performed the task under the old system. Although the order is now in the process queue, it was not registered in the ERP planning system.

This one omission can have severe and far-reaching consequences. Automated production planning, shop floor scheduling and material movements planning become inaccurate and unreliable. These inaccuracies will prevent sales people from providing accurate lead time quotations. As a result, sales relationships will become strained and customers will be lost. The unplanned production backlog will also cause an increase in inventory-related costs. Further, real-time performance reporting will become less accurate since the reports fail to include certain transactions. Unreliable reports will negatively impact management’s ability to make important and timely decisions.

In summary, a failure to buy-in to the new system and processes can cause the organization to fail to reap the efficiency and informational benefits of ERP. The result: an uneconomical ERP investment.

The above is but one example of a change resistor. Generally, an organization faces different groups that resist change for different reasons. Common examples of resisting forces include:

· A union that objects because its members’ job functions would change as a result of process re-engineering and automation.

· Employees who object because they have performed the same manual assembly tasks for 20 years and are afraid of or don’t want to learn new processes.

· Managers who object to donating their “A-players” to the implementation team. The loss of key performers would almost certainly have a negative impact on departmental performance.

· Executives who object to short-term business interruptions caused by the restructuring project, notwithstanding the long-term benefits. This moral hazard is caused by an incentive system that rewards the executives for short-term performance. Interruptions may cause the SME to miss compensation targets.

Fortunately, many of the various human capital forces that can sabotage an ERP-driven restructuring can be mitigated at the planning stage.

Good Planning Lessens Failure Risks

A good implementation plan accomplishes two goals:

1. It presents a clearly marked and easy-to-follow roadmap to implement the process changes and ERP system; and

2. It prepares the organization and all potentially affected stakeholders to adapt to the changed environment.

A plan that achieves these twin goals will significantly help the implementation project’s prospects for success.

Although each plan should be customized to meet the SME’s particular needs, there are certain fundamental principles that can frame the design of every project plan. These principles relate to project championship, project plan design and team formation.

Project Championship

Top management is ultimately responsible for allocating time, resources and money to the project. Its collective attitude towards the project filters down and impacts organizational commitment to the project. Consequently, top management support can make the project while its absence of support can break the project.

Given the importance of executive commitment, the project requires a top-level manager to convert the non-believing managers. This person must be both fully committed to the project and capable of influencing others’ commitment. In his capacity as project champion, this person will be responsible for ensuring that the project remains a top priority and is allocated the resources that are required. In other words, the project champion acts as an advocate who drives change, encourages perseverance and manages resistance. Ultimately, it is this person who legitimizes the project and the accompanying organizational change.

Project Plan

The project plan is a formal document that is instrumental in preventing runaway implementations and change resistance.

If done properly, the project plan helps prevent runaway implementations by memorializing the project deliverables on a timeline and allocating a specific budget to each deliverable. Each deliverable should be broken down into manageable and measurable tasks. A well conceived roadmap prevents scope creep, cost overruns and project delays.

The details of the project plan should be (to the extent necessary) transparent throughout the entire organization. Communicating the project plan will diffuse a portion of the organizational anxiety by eliminating ambiguity about the project and the future state of the organization.

In terms of its components, the main project plan should, at a minimum, include the following:

Project Charter:

This is an articulation of the project’s mission and vision. It clearly and unambiguously states the business rationale for the project.

Scope Statement

This defines the parameters of the project. The scope is broken down into measurable success factors and strategic business accomplishments that drive the intended results.

Target Dates and Costs

This sets out individual milestones. Identifiable, manageable and measurable goals are established. Target completion dates are set. Each individual milestone is valued. This step articulates the breakdown of the project into discrete sub-projects.

Project Structure and Staff Requirements

This sets out the project’s reporting structure, and how that reporting structure fits into the larger organizational structure.

The main project plan should be supported by whatever subsidiary plans are necessary. Common examples of subsidiary plans include: IT infrastructure and procurement plan, risk plan, cost and schedule plan, scope management plan, resource management plan, and communications plan. For present purposes, these last three subsidiary plans deserve a bit more attention.

Scope Management Plan

This is a contingency plan that defines the process for identifying, classifying and integrating scope changes into the project.

Resource Management Plan

This sets out individual assignments, project roles, responsibilities and reporting relationships. It also sets out the criteria for back-filling positions and modifying project teams. Further, this plan details human capital development and training plans. Finally, where necessary, it sets out the reward system used to incentivise project performance.

Communications Plan

A communications strategy is critical to manage change resistance. This plan codifies the procedures and responsibilities relating to the periodic dissemination of project-related information to the project teams and throughout the organization. Examples of common channels include email newsletters, press releases and team meetings.

A good project plan is only effective if the project teams are capable of executing the recommendations. For this reason, team formation and training are critical parts of the planning phase.

Team Formation

Successful execution requires an enabling structure. Like many well-structured organizations, an ERP project structure should contain a steering committee that has executive-level strategic responsibilities; a core team that has managerial-level delegation authority; and functional teams that are responsible for implementing the changes.

To facilitate communication and decision-making, each hierarchy level should have a member who is represented on the level below. For example, the ERP project manager should sit on both the steering committee and the core team, and certain key users should sit on both the core team and a given functional team.

The Steering Committee

The project steering committee should be comprised of the chief executive officer, the CIO, executive level business managers, and the ERP project manager. The committee has strategic-level responsibility for reviewing and approving the project plan, making changes to the plan and evaluating project progress.

The Core Team

The core team is responsible for managing the implementation project. It should be comprised of the ERP project manager, functional leads, the outside consultants and certain key end-users.

Functional leads should be top-performers who are reassigned to the implementation project on a full-time basis. They should be experts in their respective departments, should understand other departments’ business processes and should be knowledgeable about industry best practices. In many cases, functional leads will have to be backfilled in their day-to-day jobs.

During the planning phase, the core team is trained on the fundamentals of ERP theory and on the particulars of the ERP software. The purpose of the training is to ensure that the core team is capable of managing the development of the new business processes.

Functional Teams

These teams are responsible for implementing the business process changes in their respective functional departments. Each functional team is comprised of a core team key end-user, select end-users that cover all of the functional unit’s business processes, and a functional consultant with an understanding of the ERP software.

Organizing committed and capable teams is critical to the project’s success. The project teams will be responsible for managing the implementation and helping the organization adapt to the new business environment.

Conclusion

ERP implementation is a complex project that involves significant operational restructuring. The restructuring is accompanied by certain risks of project failure, including runaway implementation and resistance to change.

Fortunately, an SME can mitigate many of the ERP failure risks by properly planning for the project. At a minimum, proper planning requires a project champion to secure executive buy-in, the preparation and communication of a project plan that breaks the project down into manageable sub-projects, and the assembly of strong teams capable of executing the project.

[1] Briefly, an ERP system is intended to electronically integrate an organization’s functional areas, administrative areas, processes and systems.

[2] Jutras, C. (2009). ERP in the Midmarket 2009: Managing the Complexities of a Distributed Environment. Boston: Aberdeen Group.

[3] Jutras, C. (2007). The Total Cost of ERP Ownership in Mid-Sized Companies. Boston: Aberdeen Group.

Market Research Strategies For Small Businesses

Have you ever done any market research? If not, you may be missing some valuable marketing ideas and information that you could capture by doing some research. Market research is a vital part of the process that most small businesses or start-ups neglect to do. However, it could be the single most important thing a new business does prior to formulating their business plan, location or marketing strategy.

Marketing research is the process of gathering data and opinions from consumers, employees, or a specific subgroup within the public, to improve decision making and reducing the risk associated with those decisions. Individuals/businesses can use information gained from marketing research to assess awareness, attitudes, perceptions, or opinions on products, services, advertising, brands, and/or companies. The two types of research are qualitative (words) and quantitative (numbers).

Qualitative research is an in-depth analysis of relatively few respondents, which provides a holistic insight and understanding of the issue at hand. For example, if a company is interested in testing company logos, qualitative methods would provide rich data.

– Focus Groups are an “informal” gathering of 6-10 people from your “target group” to have an in-depth conversation of opinions on your product, brand, advertising, and other areas of your product and/or service.

– Face-to-face interviews typically involve a one-on-one conversation with your consumers or decision-makers. These methods can be more expensive than a traditional survey, but will provide a more comprehensive evaluation.

Quantitative research seeks to summarize data and typically applies some form of statistical analysis. Using this method, for example, a company could measure their customer’s level of satisfaction and then, in turn, make internal changes to increase that satisfaction.

– Researchers should use surveys or questionnaires when trying to measure an audience’s opinions more accurately.

*Telephone surveys are often the most expensive, but are the most effective at getting respondents to complete the survey.

*Mail surveys can be relatively inexpensive, but the response rate on a mail survey is typically 3-10% and takes more time to conduct. These cannot be used when results are needed quickly.

*Online surveys are relatively new, but growing fast in popularity. With online surveys, you can ask survey questions, but also get feedback on things such as logos (using picture files) or commercials (using streaming video).

*Intercept interviews are a tool a company uses when they do not have a list of their customer base, such as a restaurant or a sports team, but would still like to measure their customer’s satisfaction.

For the small business owner it might be helpful to hire a marketing company or market research firm to help with these types of in-depth research however it’s not to say that you couldn’t ask your current clients or contacts as well on your own. Just remember you do not have to do all of this yourself, it’s always good to consult with experts in areas that you are not familiar or experienced with so it’s the best use of your time and it gets done right.

Now what do you do with all that great qualitative and quantitative information when you receive it? It is imperative that you work it into your marketing materials, Web site, correspondence, sales presentations, advertising and many other areas of your marketing plan. When you find out what your target market wants or likes, it is important NOT to ignore those results.

Small Business Venture Capital Strategies

When launching a new small business, often the entrepreneur will consider venture capital as a source of funding. Here are 3 tips to ensure that venture capital funding can be secured when sending out your business plan:

Send your business plan to the right people

Venture capitalists tend to specialize in certain kinds of businesses. Some will specialize by industry, only investing in new energy companies, for instance, while others look for a certain size of company to invest in. It is worth doing the research to determine who the venture capital backers are for your industry, before you start sending out your business plan. Venture capitalists who are not specific to your industry can provide recommendations to make your plan more appealing to other venture capitalists. However, it would naturally be a mistake to send your plan to potential investors who will not even consider it.

Make sure your business has the potential to be profitable enough

Most venture capitalists look for a return of about 5-10 times their initial investment. For example, an investment in a company of $2 million should yield a return of $14-20 million after about five years. To satisfy these requirements, it is generally necessary to have a business which has the potential for a high rate of return on the amount invested. If the rate of return can reasonably be expected to be lower, such as for a clothing retailer, then it is probably better to look for an alternate source of funding, such as an investment or commercial bank.

Remember to include an exit strategy for your investor

Venture capitalists generally do not want to be involved with a new venture for an indefinite period of time. Most will plan to leave the new venture after about five years, so you should offer a clear explanation of how this may be achieved. There can be a variety of reasons for this; some venture capital managers require that the holdings periodically be sold off to acquire other offerings. Nonetheless, by demonstrating that you understand the limited time frame for many venture capitalists, you automatically make your plan more appealing than those which do not.

In summary, by sending your business plan to the right people, by recognizing what rate of return is necessary for venture capitalist involvement, and by including an exit strategy, you can improve your odds of securing venture capital funding for a new and growing business.

Modern Financial Management Theories & Small Businesses

The following are some examples of modern financial management theories formulated on principles considered as ‘a set of fundamental tenets that form the basis for financial theory and decision-making in finance’ (Emery et al.1991). An attempt would be made to relate the principles behind these concepts to small businesses’ financial management.

Agency Theory

Agency theory deals with the people who own a business enterprise and all others who have interests in it, for example managers, banks, creditors, family members, and employees. The agency theory postulates that the day to day running of a business enterprise is carried out by managers as agents who have been engaged by the owners of the business as principals who are also known as shareholders. The theory is on the notion of the principle of ‘two-sided transactions’ which holds that any financial transactions involve two parties, both acting in their own best interests, but with different expectations.

Problems usually identified with agency theory may include:

i. Information asymmetry- a situation in which agents have information on the financial circumstances and prospects of the enterprise that is not known to principals (Emery et al.1991). For example ‘The Business Roundtable’ emphasised that in planning communications with shareholders and investors, companies should consider never misleading or misinforming stockholders about the corporation’s operations or financial condition. In spite of this principle, there was lack of transparency from Enron’s management leading to its collapse;

ii. Moral hazard-a situation in which agents deliberately take advantage of information asymmetry to redistribute wealth to themselves in an unseen manner which is ultimately to the detriment of principals. A case in point is the failure of the Board of directors of Enron’s compensation committee to ask any question about the award of salaries, perks, annuities, life insurance and rewards to the executive members at a critical point in the life of Enron; with one executive on record to have received a share of ownership of a corporate jet as a reward and also a loan of $77m to the CEO even though the Sarbanes-Oxley Act in the US bans loans by companies to their executives; and

iii. Adverse selection-this concerns a situation in which agents misrepresent the skills or abilities they bring to an enterprise. As a result of that the principal’s wealth is not maximised (Emery et al.1991).

In response to the inherent risk posed by agents’ quest to make the most of their interests to the disadvantage of principals (i.e. all stakeholders), each stakeholder tries to increase the reward expected in return for participation in the enterprise. Creditors may increase the interest rates they get from the enterprise. Other responses are monitoring and bonding to improve principal’s access to reliable information and devising means to find a common ground for agents and principals respectively.

Emanating from the risks faced in agency theory, researchers on small business financial management contend that in many small enterprises the agency relationship between owners and managers may be absent because the owners are also managers; and that the predominantly nature of SMEs make the usual solutions to agency problems such as monitoring and bonding costly thereby increasing the cost of transactions between various stakeholders (Emery et al.1991).

Nevertheless, the theory provides useful knowledge into many matters in SMEs financial management and shows considerable avenues as to how SMEs financial management should be practiced and perceived. It also enables academic and practitioners to pursue strategies that could help sustain the growth of SMEs.

Signaling Theory

Signaling theory rests on the transfer and interpretation of information at hand about a business enterprise to the capital market, and the impounding of the resulting perceptions into the terms on which finance is made available to the enterprise. In other words, flows of funds between an enterprise and the capital market are dependent on the flow of information between them. (Emery et al, 1991). For example management’s decision to make an acquisition or divest; repurchase outstanding shares; as well as decisions by outsiders like for example an institutional investor deciding to withhold a certain amount of equity or debt finance. The emerging evidence on the relevance of signaling theory to small enterprise financial management is mixed. Until recently, there has been no substantial and reliable empirical evidence that signaling theory accurately represents particular situations in SME financial management, or that it adds insights that are not provided by modern theory (Emery et al.1991).

Keasey et al(1992) writes that of the ability of small enterprises to signal their value to potential investors, only the signal of the disclosure of an earnings forecast were found to be positively and significantly related to enterprise value amongst the following: percentage of equity retained by owners, the net proceeds raised by an equity issue, the choice of financial advisor to an issue (presuming that a more reputable accountant, banker or auditor may cause greater faith to be placed in the prospectus for the float), and the level of under pricing of an issue. Signaling theory is now considered to be more insightful for some aspects of small enterprise financial management than others (Emery et al 1991).

The Pecking-Order Theory or Framework (POF)

This is another financial theory, which is to be considered in relation to SMEs financial management. It is a finance theory which suggests that management prefers to finance first from retained earnings, then with debt, followed by hybrid forms of finance such as convertible loans, and last of all by using externally issued equity; with bankruptcy costs, agency costs, and information asymmetries playing little role in affecting the capital structure policy. A research study carried out by Norton (1991b) found out that 75% of the small enterprises used seemed to make financial structure decisions within a hierarchical or pecking order framework .Holmes et al. (1991) admitted that POF is consistent with small business sectors because they are owner-managed and do not want to dilute their ownership. Owner-managed businesses usually prefer retained profits because they want to maintain the control of assets and business operations.

This is not strange considering the fact that in Ghana, according to empirical evidence, SMEs funding is made up of about 86% of own equity as well as loans from family and friends(See Table 1). Losing this money is like losing one’s own reputation which is considered very serious customarily in Ghana.

Access to capital

The 1971 Bolton report on small firms outlined issues underlying the concept of ‘finance gap’ (this has two components-knowledge gap-debt is restricted due to lack of awareness of appropriate sources, advantages and disadvantages of finance; and supply gap-unavailability of funds or cost of debt to small enterprises exceeds the cost of debt for larger enterprises.) that: there are a set of difficulties which face a small company. Small companies are hit harder by taxation, face higher investigation costs for loans, are generally less well informed of sources of finance and are less able to satisfy loan requirements. Small firms have limited access to the capital and money markets and therefore suffer from chronic undercapitalization. As a result; they are likely to have excessive recourse to expensive funds which act as a brake on their economic development.

Leverage

This is the term used to describe the converse of gearing which is the proportion of total assets financed by equity and may be called equity to assets ratio. The studies under review in this section on leverage are focused on total debt as a percentage of equity or total assets. There are however, some studies on the relative proportions of different types of debt held by small and large enterprises.

Equity Funds

Equity is also known as owners’ equity, capital, or net worth.

Costand et al (1990) suggests that ‘larger firms will use greater levels of debt financing than small firms. This implies that larger firms will rely relatively less on equity financing than do smaller firms.’ According to the pecking order framework, the small enterprises have two problems when it comes to equity funding [McMahon et al. (1993, pp153)]:

1) Small enterprises usually do not have the option of issuing additional equity to the public.

2) Owner-managers are strongly averse to any dilution of their ownership interest and control. This way they are unlike the managers of large concerns who usually have only a limited degree of control and limited, if any, ownership interest, and are therefore prepared to recognise a broader range of funding options.

Financial Management in SME

With high spate of financial problems contributing to the high rate of failures in small medium enterprises, what do the literature on small business say on financial management in small businesses to combat such failures?

Osteryoung et al (1997) writes that “while financial management is a critical element of the management of a business as a whole, within this function the management of its assets is perhaps the most important. In the long term, the purchase of assets directs the course that the business will take during the life of these assets, but the business will never see the long term if it cannot plan an appropriate policy to effectively manage its working capital.” In effect the poor financial management of owner-managers or lack of financial management altogether is the main cause underlying the problems in SME financial management.

Hall and Young(1991) in a study in the UK of 3 samples of 100 small enterprises that were subject to involuntary liquidation in 1973,1978,and 1983 found out that the reasons given for failure,49.8% were of financial nature. On the perceptions of official receivers interviewed for the same small enterprises, 86.6% of the 247 reasons given were of a financial nature. The positive correlation between poor or nil financial management (including basic accounting) and business failure has well been documented in western countries according to Peacock (1985a).

It is gainsaying the fact that despite the need to manage every aspect of their small enterprises with very little internal and external support, it is often the case that owner-managers only have experience or training in some functional areas.

There is a school of thought that believes “a well-run business enterprise should be as unconscious of its finances as healthy a fit person is of his or her breathing”. It must be possible to undertake production, marketing, distribution and the like, without repeatedly causing, or being hindered by, financial pressures and strains. It does not mean, however, that financial management can be ignored by a small enterprise owner-manager; or as is often done, given to an accountant to take care of. Whether it is obvious or not to the casual observer, in prosperous small enterprises the owner-managers themselves have a firm grasp of the principles of financial management and are actively involved in applying them to their own situation.” McMahon et al. (1993).

Some researchers tried to predict small enterprise failure to mitigate the collapse of small businesses. McNamara et al (1988) developed a model to predict small enterprise failures giving the following four reasons:

– To enable management to respond quickly to changing conditions

– To train lenders in recognising the important factors involved in determining an enterprise’s likelihood of failing

– To assist lending organisations in their marketing by identifying their customer’s financial needs more effectively

– To act as a filter in the credit evaluation process.

They went on to argue that small enterprises are very different from large ones in the area of borrowing by small enterprises, lack of long-term debt finance and different taxation provisions.

For small private companies, these measures are unreliable and textbook methods for judging investment opportunities are not always useful in organisations that are privately owned to give a true and fair view of events taking place in the company.

Thus,modern financial management is not the ultimate answer to every business problem including both large and small businesses.However,it could be argued that there is some food for thought for SMEs concerning every concept considered in this study. For example it could be seen (from the literature reviewed )that, financial records are meant to examine and analyse corporate operations. Return on equity, return on assets, return on investment, and debt to equity ratios are useful yardsticks for measuring the performance of big business and SMEs as well.

3 Keys To Starting A Small Business

Since the majority of startup small businesses fail, how can you succeed?

Before we answer this, who am I? I have set up and sold 4 small businesses over the last few years, all of which continue to be successful, so I know a few things about the subject.

Now, let’s get to the main points:

Planning

It is important to know what, when, why, where and how you are going to start your business. Unless you have clear focus, don’t even try, it will just be a waste of your time and energy.

In addition, you will want to do whatever courses are available that might help you achieve your goals. For instance, in my case, before starting my most recent venture, I completed a Certificate 3 in Business Studies, a Diploma in Digital Marketing, a Diploma in Sales, and, a Diploma in Project Management.

Practice

What I mean by practice is not to just dive straight in and learn on the job, no, what will really help you is to observe how SUCCESSFUL people have started the same kind of business that you are attempting to start. How can you do this? One effective way is by getting a job in the industry where you intend to work. Once you have done this, observe the process. If it truly is a successful business, they will have a highly organized and effective process.

Another possibility is actually starting the business. I know, I know, I said don’t do this, however, this suggestion has a little difference. Start the business with no expectations. Become the marketing director, accounts manager, sales director etc… do everything yourself. The problem with this approach is that it will take up huge amounts of time, amounts of time that will be saved, if you are able to work in a successful business that someone else has started. Yes, this suggestion is the harder of the two routes, however what it does do is go from theory to a complete practical knowledge of the industry, to become fully immersed in it.

Pursue

There is a reason why 4 out of 5 small business start ups fail, the rewards are hard to achieve and take inordinate amounts of time to achieve. How can you get over this obstacle?

The key is to Pursue. You need to be focused on your goal, and, never to look away or be distracted from this purpose. How long can you focus on your goal? Only you can answer that! However, realistically, it will take you some years to truly progress in your endeavor. If you are someone who gives up easily, you should really not try to start a business. Instead, look for a well paying job.

The Benefits

If it is all such hard work, why bother? The rewards can be huge. Consider just a few:

*Time – Have a flexible schedule, spend more time with your family or other priorities.

*Passive Income – Depending on the type of business you intend to start, it may keep paying you even when you are not working.

*Capital Gains – You have the possibility of achieving significant R.O.I on the outlay involved in starting your business.

Want to start a business? Go for it! But, remember to Plan, Practice and Pursue!

Cost Effective Small Business Marketing Strategies and Tips – Part Two

In my previous article (part 1), I discussed Marketing Keys, Marketing Plan Components and Creative Marketing. Now I will get into specific, cost effective marketing methods and strategies you can use today to increase your company’s exposure and profits.

MARKETING METHODS

Internet

-Highly targeted and extremely economical

-Extremely Interactive

Magazines

-Targets your niche

-Creates credibility

-Establishes Identity & Brand

TV

-Can be very cost effective

-Great for demonstrations

Direct Mail

-Highly targeted

-Medium that allows you to go through the entire sales process.

-Augmented with Follow-up Mailing and Telemarketing is very effective

Canvassing

-Provides personal contact, which can be the most effective

-Backed by targeted mailings and TV advertising increases its conversion ratio

Outdoor Billboards

-Constant Reminder

-Especially good for “Next Exit” Location traffic targeting

Indoor Signs

-Capitalizing on your marketing’s momentum

-Can be the most important sign – even more crucial than outdoor signage

-Signs don’t have to be static: i.e. Video Message, Slide Show, etc.

Online Marketing

-Absolutely the best medium which economically blends high interactivity with action

-Examples: Email, video & audio postcards, forums, blogs, websites, texting

-Very effective when content based

-Prospective customers are not constrained by time

-Good, targeted, updated content means repeat customer visits

-Great Follow up, Resale, Cross-sale and Up sell medium

-Exponential results when augmented by offline marketing

Classified Ads

-Very cost effective for a broad customer base

-Targets the very hottest prospects

-Confronts your competition head on

Brochures

-Only effective if combined with online and offline marketing

-Always a good after sale piece to keep the customer thinking of you

-Code the brochure, ask the customer to pass it out and provide discounts or referral fees back

Phone

-Telemarketing only effective if part of an Opt In Marketing Campaign, whether online or offline or both.

Reminder Tools

-Refrigerator magnet is the most effective

-Double sided or folded business card which provides mini-brochure capabilities

Trade Shows

-Targeted and motivated prospects

-Consider online versions

Publicity

-Public Relations driven marketing can be cost effective. Establish reputation and credibility

Community Relations & Sponsorship

-Establish powerful contacts and connections

-Great for image

-Great constant reminder

-Create an edge over the competition

-Needs to be sincere

COMBINE MARKETING TOOLS & METHODS

Creative Strategic Marketing is based on developing multiple Marketing Tools in concert to achieve an out-of-the box, competitively advantaged Creative Strategy. Marketing Methods should be integrated together for each cohesive Marketing Strategy, and then adjusted as the campaign proceeds and develops. Personally, I believe one of the most lethal combinations of Marketing Platforms are:

–Developing a Content Rich Internet Presence

–Online Marketing through Opt In

–Advertise free Articles, Newsletter, Guides, Webinar, etc. in a targeted Magazine Ad

This combination of print and online marketing is very cost effective, yet lucrative. Explore the possibilities.

The important thing to keep in mind when executing multiple Marketing Tools, Forums and Methods in a synergetic strategy is to carefully track and monitor the results, making Key changes as the initiative develops. This is where an online / internet marketing platform is so valuable because it can adeptly track results (i.e. conversion rate, response rate) in real time.

ONLINE MARKETING CALENDAR

A good Marketing Calendar is based on a 52 week year and helps considerably in planning and budgeting a Marketing Strategy. At any point in time, you can determine the best ads to run, what needs to be in inventory for the anticipated sales, the project costs and projected sales. The calendar should be an online platform for maximum interactivity, utility, access, flexibility and integration. The Marketing Calendar should be fully integrated with the Marketing Strategy, Strategic Plan and Budgeting Process for maximum utility. The calendar should be in an expandable spreadsheet format to reveal all necessary details for each marketing method within an overall strategy.

COST EFFECTIVE MARKETING STRATEGIES

Profitable Marketing does not have to be expensive! Some cost saving tips:

Cooperative Advertising

-Can save upwards of 50%. Partner up with a larger company, mention their name and get paid for the promotion. Spread the ad cost among fellow advertisers.

Per Order or Inquiry Payment Method

-Advertising costs subtracted after a sale or defined event.

Survey your Current Customers

-Costs pennies to do, yet gives you the most up to the minute market trends. Plus gives you an opportunity to Cross or Up Sell the customer at the same time.

Backend Products & Services

-Bundle your offerings to minimize your marketing cost per sale.

Code your Ads

-Codes allow you to track and measure your marketing strategy’s results. By keeping ahead of the campaign roll out you can adjust for maximum cost effectiveness.

-Online tracking is the most beneficial and cost effective means of keeping your marketing costs in line with your budget, while providing you where the most profits can be made per marketing dollar spent.

Don’t Use a Rate Card

-Make an offer for all your advertising – rates are always negotiable.

-A 30 second TV spot can be as effective as the more expensive 60 second one.

-Tap into Remnant Magazine Space

-Extra, unused ad space sells at substantial discounts.

TV Ad Tips

-Tight scripts and excellent prior planning cuts down the time costs.

-Do your Ad in 3-4 renditions move session.

-Use a production studio during off-peak times.

Concentrate Efforts on Established Customers

-Customers are 85% cheaper to market; Keep a good balance between Customer and Prospect marketing efforts.

-Exponentially expand your sales, cost effectively, through a Customer Referral Program.

-Up sell, Cross Sell, Cross Promote

Combination Marketing

A very cost-effective and successful combination is pairing a Magazine Ad with a Website. Offer a FREE Newsletter, Guide, E-book, etc and set yourself up as an Expert; mine the prospects data in a permission based, Opt In; Follow up free offering with product and service offerings. All your marketing efforts, mediums, tools and campaigns should be done in concert and combination as the results are exponential and the means cost-effective.

Website Design

-Web Design, Development and Optimization is very important, crucial in fact, but can be very expensive. –To cut Web design costs:

–Create your own content

–Write articles on areas you have Expert status or Knowledge

–Look at the web and decide what you want your site to look like and sketch it out, as well as, organize the link structure. Then have a designer lay out the website in a user friendly Content Management System, and you input all the content. Have the designer / developer review the site after your inputs for Search Engine Optimization tips.

Tip: Consider hiring a Web Designer / Developer overseas, such as from China or India, etc. They charge about $30 per hour (or less) verses $75 – 100 per hour. Make sure to carefully review a Designer / Developer’s credentials, referrals and past projects, to ensure credibility and reliability.

In the next article on Cost Effective Small Business Marketing, I will discuss Marketing Research and Targeted Marketing. Stay tuned!

The Importance of Your Concept in Writing a Business Plan for Your Small Business

What is a concept? Good question. I answer it this way: What you are trying to do and how you are trying to do it. People start with a good idea and sometimes begin the process of opening a business without properly developing the idea to the point where it makes sense to start. You need a business plan and the business plan is based on the concept. Development of your concept is an exercise that you have to go through. By doing so you are ensuring that your idea has ‘legs’.

Close your eyes and explain what is happening in your small business a year from now. “What the?” you may ask; but hold on here. This is what I am asking you to do. Answer questions like these ones. It is a Tuesday in February of next year:

What are you doing at 10 in the morning?

How about 5 in the evening?

What color is on the walls?

How many workers are on the floor?

What are they wearing?

How many customers do you have?

What are they buying?

How much are they paying?

By going through this exercise you will fully develop your concept to the point where you will eventually be able to know how many people you have to hire, how big a space you need to rent, what products you need and in what amount, and who you want to attract as customers. Think for a minute. You cannot write a business plan unless you have all the answers before you begin.

You can then take this valuable information and build your financial forecast with it. Once you have your concept worked out, go and try it on for size with some people who will give you objective feedback. Don’t go to your neighbour or brother-in-law because they may say things like: “I knew a guy who tried that and it failed.” It may be that they are jealous and are scared that you might succeed in your venture and they are terrified. Instead go and search out people who are entrepreneurs with loads of experience. Look for the white hair and wrinkles. They’ve made the mistakes you’ll make if you don’t listen to them. Got it?

After getting solid feedback go back and tweak your concept and then give it a go again. By going through this process you’ll be able to clearly define your concept and get closer to turning your idea into an actual business. People who have clearly defined concepts usually succeed more than those who just “wing it”. The difference? The ones that succeed have a business plan and the business plan is based around a well thought-out concept.

And remember, if your idea is not well received – lingerie and bait shop? – abandon it and look at something new. Never and I mean never ever go ahead without having received positive feedback about your idea. Listen, please.

The Value of Awards For Small Businesses

As a public relations consultant I have often nominated my clients for awards – and even helped them write their award submissions – but I’ve never put myself forward. Until now.

In 2009 I entered my business in two awards programs and was named a finalist in one. In the process of entering and making submissions for these awards, I learnt a lot about myself as a business person and a woman with aspirations. Without being forced to put my goals, achievements and plans for my business into words I might not have realised how far I have come in the four years I have been a soloist.

As hard as it is to admit, especially to a potential audience of so many, I had to Google myself (does that make me a Meegler?) to find out everything I have done. The process jogged my memory and helped me clarify my successes.

So, even though it took many hours of my time and I wondered several times why I had agreed to enter these awards, here is what I gained from the process:

o I clarified my short- and long-term business and personal goals

o I looked back at my achievements over the past four years

o I can now explain with conviction why I am worthy of receiving an award

o I am very clear on my point of difference from my competitors

o I can relate examples of where I, as a business owner, have excelled in customer service, leadership and communication

o I have a better understanding of the relationships I have built with clients and the media

o I revisited the system I use to retain existing clients and attract new ones

o I looked closer at my financial position to see how the business has improved year-on-year

o I isolated areas of my business that needed work

o I discovered the process is a good excuse to market my business because these awards recognise its value and add credibility to my brand.

Can you say you have the same clarity about these areas in your business? It might be worth spending some time looking at your business goals, unique selling proposition (USP), past achievements and areas in your business that could do with some extra focus. It is a valuable exercise.

Four Reasons Why Small Business Fail To Plan and Why They Need To Think Again

It is so widely acknowledged that a robust business plan is one of the key ingredients in small business success, it seems remarkable that anyone serious about their business could considerable it optional. For example, Business Link say, “It is essential to have a realistic, working business plan when you’re starting up a business”. A recent survey showed that small businesses were twice as likely to be successful with a written business plan as compared with those without one. The Times in their annual round up of 100 up and coming UK businesses suggest that “poor business planning” is a key reason for failure. Indeed, it’s almost impossible to find an authority that would advocate the opposite idea, a clear signal that this idea is accepted wisdom. Despite this, a recent survey shows that two thirds of small business owners run their businesses on gut instinct alone.

I had a very interesting discussion about this a couple of days ago with a good friend of mine who has run several successful small businesses in which he posited the idea of a “planning gene”. He felt that the only possible explanation for the lack of proper planning in small business was genetic.

According to his theory, the majority of people are born without the “planning gene” and this explains why so many people don’t have any written business plan, despite the overwhelming evidence of a high correlation between a robust and vigorously implemented business plan and business success. The majority of us are simply not biologically and genetically wired to plan.

This is certainly one explanation, although I have to say I have a few reservations as to the validity of his theory. I talk with small business owners about planning every day. I’m part of a small business myself. I’ve owned several small businesses over the last ten years each with varying degrees of success. In all those conversations and all that experience, this was the first (semi) serious discussion I’d had about the planning gene.

If I was to aggregate the results of the conversations I have had with actual and prospective customers on this topic, four distinctive strands emerge explaining why small business owners fail to plan. Whilst I have heard a few other explanations for the lack of effective small business planning, I am treating these as outliers and focusing on the most significant.

I’m Too Busy To Plan – More often than not, the small business owners we talk to tell us that proper planning is a luxury that only big business can afford. For them, business planning, if done at all, was a one-time event that produced a document for a bank manager or investor which is now gathering dust in the furthest recesses of some rarely opened filing cabinet. There just aren’t enough hours in the day and if forced to choose, they would do the real, physical work and leave the mental work undone, which seems to be the poor relation at best, if it is even dignified with the status of work at all.

Traditional Planning Doesn’t Work – The “I’m too busy to plan” excuse is often supplemented with this one. I’ve heard the stories of the most legendary construction overrun of all time, The Sydney Opera House, originally estimated to be completed in 1963 for $7 million, and finally completed in 1973 for $102 million, more times than I can remember. Sometimes, this idea is backed up with some actual research, such as the fascinating study by several eminent psychologists of what has been called the “planning fallacy”. It seems that some small business owners genuinely believe that mental work and planning is a bit of a con with no traction on physical reality.

My Business Is Doing Fine Without Detailed Planning – A minority of small business owners we speak to are in the privileged position of being able to say they’ve done pretty well without a plan. Why should they invest time and resources into something they don’t appear to have missed?

Planning Is Futile In A Chaotic World – Every once in a while, we hear how deluded we are to believe that the world can be shaped by our hopes and actions. This philosophical objection to planning is perhaps my favourite. It takes ammunition from a serious debate about the fundamental nature of the universe and uses it to defend what almost always is either uncertainty about how to plan effectively or simple pessimism. This is different from the idea that planning doesn’t work as these business owners have never even tried to form a coherent plan, but have just decided to do the best they can and hope that they get lucky as they are knocked hither and thither like a steel ball in the pinball machine of life.

As with all of the most dangerous excuses, there is a kernel of truth in each of these ideas and I sympathise with those who have allowed themselves to be seduced into either abandoning or failing to adopt the habit of business planning. Most small business owners feel the same dread in relation to business planning as they do to visits to the dentist, so it’s unsurprising that so many simply don’t bother. However, by turning their backs completely on planning, they are in danger of throwing the baby out with the bathwater. Taking each idea outlined above in turn, I’ll attempt to show why business planning is critical, not just despite that reason but precisely because of that reason.

I’m Too Busy Not To Plan – Time is the scarcest resource we have and it is natural that we would want to spend it doing those things that we believe will have the greatest impact. Of course, we want to spend most of our time producing, but we should also invest at least some time into developing our productive capacity. As Stephen Covey pointed out in his seminal work, “The Seven Habits of Highly Effective People”, we should never be too busy sawing to sharpen a blunted saw. Planning is one of the highest leverage activities we can engage in, as when done effectively it enhances the productive capacity of small businesses, enabling them to do more with less. Nothing could be a bigger waste of precious time than to find out too late that we have been using blunt tools in pursuit of our business goals.

If we as small business owners weren’t so busy and time wasn’t so scarce, then we wouldn’t have to make choices about what we did with our time and resources. We could simply pursue every opportunity which presented itself. However, for the busy entrepreneur, the decision to do one thing always has the opportunity cost of not being able to do something else. How can we be certain that our business is going where we want it to go without pausing regularly, scanning the horizon and making sure not only that we are on track but also making sure that we still want to get to where we are heading? I believe more time is wasted in the single-minded pursuit of opportunities that are not right than is wasted by over thinking the opportunity of a lifetime.

In short, small business owners are extremely busy and their time is precious. So much so that to waste it doing the wrong things with the wrong tools would be tragic. Small business owners that cannot afford the luxury of making expensive mistakes simply must regularly sharpen the saw through continuous business planning.

Traditional Planning Doesn’t Work, So We Need a New Approach That Does – There are some fairly large question marks over the effectiveness of traditional business planning techniques. In an age where business models are becoming obsolete in months rather than years, a business plan projecting five years into the future cannot be viewed as gospel. Nobody has a crystal ball and if they did, they probably wouldn’t be writing business plans but using their remarkable predictive powers to some more profitable end.

Dwight D Eisenhower said “plans are useless, but planning is essential”. Whilst producing a document called a business plan is far from useless, the real value lies in the process by which the plan is created in the first place. If this process can be kept alive in a business then the dangers associated with traditional planning can be minimised or avoided all together. In an environment of continuous business planning, small businesses can be flexible and adaptive to the inevitable changes and challenges they will face. Rather than quickly becoming obsolete, their plan will simply evolve with the changing circumstances.

Accepting that the plan is a living thing that will evolve necessitates a change of approach to business planning. An effective business plan is the response to the repeated asking of the questions what, why, how, who and how much. It is not a 20 – 30 page form to fill in for the benefit of a bank manager or some venture capitalist, who will probably never fully read it. A business plan should help you, not hinder you, in doing business. If traditional business planning doesn’t work for you, it’s time to embrace the new paradigm of continuous business planning.

My Business Could Do Even Better With Effective Planning – If you are one of the lucky few whose business has thrived despite an absence of traditional business planning, then I say a sincere well done. I hope that you can say the same thing in five years time.

Business life expectancy in Britain and across Europe and indeed the world are in rapid decline. A study done at the end of the eighties and then again as we marched into the new Millennium showed that life expectancy had more than halved for British businesses in those ten years, from an average of 9.7 years to 4.1 years. Just because a company once enjoyed market leadership does not mean that its future is assured. Many high street institutions have fallen victim to the recent recession. Five years ago it was inconceivable that UK retail institutions like Clinton Cards, Game, Borders, Barratts, T J Hughes, Habitat, Focus DIY, Oddbins, Ethel Austin, Principles, Allied Carpets, Woolworths, MFI and Zavvi/Virgin Megastore would all be either out of business or teetering on the brink of oblivion in 2012. Yet that is exactly what has transpired.

Any business from the smallest to the greatest is not impervious to the winds of change. A new competitor, a technological breakthrough, new laws or simply changes in fashion and consumer preference can all re-write the future of a company regardless of how bright that future once seemed. It is precisely because these risks exist that business planning is critical. To survive in business is extremely hard, but failing to effectively plan for the future or adapt to current realities surely makes it impossible and failure inevitable.

Of course, it is not necessarily the absence of plans that did for these companies but the quality of their plans and most especially the quality of their implementation. Even a poor plan vigorously executed is preferable to the finest planning and research left to rot in a drawer. Continuous business planning is effective business planning because it emphasizes implementation and regular reviews of real results as part of what should be a continual process of improving company performance rather than simply attempting to predict the future and wringing our hands when our prophecy fails to come true. We believe, like Peter Drucker, that the best way to predict the future is to create it.

Planning Is Essential In A Chaotic World – We sometimes feel small and insignificant as we try against all odds to translate our dreams into business reality. It’s easy to feel all at sea when we consider some of the challenges we face. However, whilst it is true that we cannot control the direction of the wind, we can adjust our sails and change the direction of the rudder. Difficult and challenging circumstances may come in our lives, but we can control the outcome of these circumstances by choosing which path to take.

The truth is that we are fundamentally achievement orientated as human beings. When this is taken away, we lose much of the energy and motivation that propels us forward. There have been numerous studies carried out on life expectancy rates after retirement, which show that when clearly defined goals and daily action moving in the direction of those goals are removed from our lives, the result is literally fatal. The individuals studied who failed to replace their career goals with a new focus for their retirement simply shriveled up and died. The implications for small business owners are clear. Those business owners with clear goals who take action daily that propels them in the direction of their goals are far more likely to thrive and survive than those who take any old goal that comes along or move from day to day with no defined objective other than survival.

It seems to me that precisely because life is so chaotic and challenging that effective planning is essential. Without continuous business planning, our businesses and the small business owners that work in them may find that bit by bit they are atrophying and on their way to becoming another business failure statistic.

There undoubtedly exists an antipathy for business planning felt by many small business owners. Clearly, this cannot be fully explained by the lack of a “planning gene”, but it equally cannot be fully justified by the reasons most commonly put forward by small business owners to not engage in the business planning process. These reasons must be critically re-evaluated and a commitment made to a continual and never ending process of improving the condition of their small businesses. Without such a commitment, the future for small businesses in the UK is uncertain.