Growing a Business

A blog for businesses with 20 or fewer employees or for people planning on starting one. There are two threads. One for Starting a Business and a second for Growing a Business. Author: Henry McCabe.

Goals- An example of a strategic plan

In my last few blogs  I have written about creating Someday Goals for your business. These have been part of planned series on goal setting. So far I have demonstrated ways to collect data useful in setting goals.  This blog presents Someday Goals, aka a Strategic Plan, for a fictional women's clothing store. Refer back to earlier blogs for the research that underpinned setting of the goals. Such a plan for a small business need not be complicated and long.  The one presented here is only one page. It consists of a tabular presentation of some SMART goals and a summary of the expected results.

Achieve the primary goal of increasing owner's draw from $18,000 to $125,000 by:
Increasing Sales from $251,000 to $750,000 by:
	Growing  sales 11.5% year over year, by:
		Increasing sales per square foot  to at least $400 from the present $209 and
		Increasing sales per Full Time Equivalent Employee to $125,000, by
			Increasing the lines of clothing offered by one each year, net
			Increasing customer visits by 11.5% year over year, by:
				Increasing advertising as a percent of sales from 1.5% of sales to 2.5%, immediately
		Relocating to a larger better located space in 5 years  at the end of the current lease.
Improve net cash flow from operations as a percent of sales from 12% to 20% by:
		Reducing cost of sales 0.4% year over year to attain an improvement  from 54% to 50%, by:
			Replacing present lines with higher margin lines while still increasing by one line a year
			Reducing inventory wastage from 3.5% to 2.0%, by:
				Tightening return policies gradually over the next three years
				Installing at least one security camera to intimidate thieves, immediately
				Asking each vendor for better return allowances when placing orders
				Selling overstock via consignment shops four times annually
		Reducing Expenses from 34% of sales to 30% of sales, by:
			Reducing labor cost from 7% to 5% of sales by employing mostly part timers,
			Reducing in bound freight costs by minimizing overnight shipping. immediately
			Reducing heating and cooling expense by  1° changes in thermostat settings, now
			Reducing lighting cost by keeping lights off in work areas when not in use, now
			Replacing the current credit card service with Square , now
Achieve a second goal by reducing the owner's work hours, by:
	Hiring a full time store manager once sales rebound to $300 per sq ft after the move

Ten Year Plan
Item	Present		Goal		Industry Benchmarks
Revenue	100%	$251,000	100%	$750,000	100%	$750,000
Cost of Sales	54%	$135,540	50%	$375,000	53%	$397,500
Gross Profit	46%	$115,460	50%	$375,000	47%	$352,500
Expenses Net of Depreciation	34%	$85,340	30%	$225,000	32%	$240,000
Net Cash Flow	12%	$30,120	20%	$150,000	15%	$112,500
Debt Service & Working Capital	22%	$12,120	10%	$75,000	-	-
Owner's Draw	7%	$18,000	17%	$125,000	-	<$112,500
Owner's Weekly Work Hours	-	70	-	40	-	-
Sales per Square Foot	1,200	$209	1,800	$417	-	$400
Sales per Square Foot	1.5	$90,360	6.0	$125,000	-	$116,000
Inventory Turnover / Inventory	3.5	$38,500	4.0	$93,750	3.9	$101,923
Inventory Wastage % sales	3.5%	$8,785	2.0%	$15,000	1.8%	$13,500

In the next blog I will begin a thread on Starting a new business.In the meantime checkout SCORE's free services.

Planning. The only thing we know for sure about any plan we make is that actual events will turn out to be different. We must not let the attempt to create a perfect plan get in the way of completing one. An imperfect plan is better than none at all. 

Running a Business

Growing a Business

A blog for businesses with 20 or fewer employees or for people planning on starting one. There are two threads. One for Starting a Business and a second for Growing a Business. Author: Henry McCabe.

Goals- A Useful Acronym

In my last few blogs  I have written about creating Someday Goals as a prelude to setting long term goals for your business. In effect a ten year Strategic Plan.  These have been part of planned series on goal setting. So far I have demonstrated ways to collect data useful in setting goals.

It is useful to have a structure around which to build the planning process. The acronym SMART provides that. Goals should be: Specific, Measurable, Attainable, Realistic, Relevant and Timely. SMART goals can be set as part of a Strategic Plan, a plan for the far future, or for a Tactical Plan, a plan for the near future.  Obviously a tactical plan should support a strategic plan.

Specific

Goals should be specific. Saying “I want to grow my business” or "I want to increase my profits" are not specific goals. Saying "I want my business to provide me with an income of $125,000 a year by the end of ten years" is. Saying "In order to provide that much income I must increase the sales of my business to $750,000 by the end of ten years" is. These can be fleshed out with specific sub goals for the actions that must be taken to make the primary goals happen.

Measurable

 Goals should be measurable. If your goal is as stated above, saying "I must increase sales 11.5% each year over the prior year starting from this year's $251,000" is measurable. If a sub goal is that "To do that my sales per square foot must grow from the current $209 to $400" you have another measurable goal. Further, saying that "I must plan for a move to a larger space 5 to 7 years from now because sales growth above $480,000 will be restricted by my current  1,200 square feet" provides another specific goal.

 Attainable

Goals should be attainable. Saying " I must achieve sales of $750,000" after you have concluded on the basis of research that stores in your industry can and do achieve that level of sales is an attainable one. Similarly, saying "I want personal income of $125,000 from the business" is attainable if your research has demonstrated that stores in your industry can and do throw off personal income at that level.

Relevant

 Goals should be relevant. Saying "As one means of achieving sales growth I will identify and add to my offerings one new line of higher margin women's clothing each year for the next five years" is relevant as well as specific, measurable and attainable. Saying "I will sacrifice personal income growth for the next two years by spending twice the national average on advertising as a percent of sales in order to build my client base" is also relevant. Saying "I will investigate adding a line of men's clothing in each of the next three years as a way of building sales " is not relevant because it is likely to be a distraction from the core business.

Timely

Goals should be timely. That is, goals should be set to specific time frames. Saying "I want to increase sales from $251,000 to $750,000 someday" is not timely. Saying I want to increase sales year over year by 11.5% until I reach $750,000 in ten years is timely. Saying "I must find a new 1,800 square foot four years from now so that I am ready to move when my lease ends five years from now" is timely.  Putting your goals within a specific time frame provides a way for you  measure results and stay on track.

The next blog will provide an illustration of a simple strategic plan for the fictional women's clothing store.

Planning. The only thing we know for sure about any plan we make is that actual events will turn out to be different. We must not let the attempt to create a perfect plan get in the way of completing one. An imperfect plan is better than none at all.