Small Business Planning, Business Strategies and Postage Stamps.

Small Business Planning Pillar #3: Mini Business Strategies And Postage Stamps

With core strategy in place, it is time to fill in some gaps in our small business planning process.

Keep this simple as you break the business down into its natural component parts and apply a strategy to each section. This is what I call the “mini business strategies”.

Mini business strategies follow the same rules as core strategy except that they are applied to sub-sections of the business. It is important that you build your plan in a uniquely relevant way to your business. However, here are a few pointers as to what those mini business strategies might look like:

Sales strategy – How are you going to sell your product? Where?

Marketing strategy – who are your core customers? Premium brand or commodity?

Production strategy – how are you going to make your product, will you manufacture in-house or sub contract?

Distribution/ logistics strategy – how are you going to deliver your product, perhaps it has specialist requirements ie frozen goods?

Exit strategy – what are your long term plans for exiting the business?

Market research strategy – how much information are you going to gather to make a viable case for your product?

Human resources strategy – what does your intrapreneurial team look like, where are you going to find it?

Easy isn’t it. By the end of this process you will have built a near complete map of your new business.

However, there is one critical element in your small business planning process that needs to be addressed now. It will either give you the confidence to go on or prove that you must stop now and go to work on your next big idea.

What is it?

Guesstimate Financials are the basic numbers that will expose the true potential of your business.

Yes, you might have a great idea, yes consumers might love it and yes they might even want to buy it, lots of it. BUT can you make any money out of it?

By now you have spent some time gathering a whole range of thoughts and facts about your new venture. This knowledge has come in the form of hundreds of snippets of information from various sources. You haven’t yet gone into time consuming financial detail and don’t need to at this stage.

All you need to do now is to knit together these snippets, do a few sums on the back of a postage stamp and answer these two questions:

1. Is it possible to make a gross profit from this product?

2. Roughly how many would I need to make to give me a reasonable net profit?

Your guesstimate financials will not guarantee you can make a profit. However, more often than not they will confirm that you can’t.

A great safety valve before you proceed to spend lots of your children’s inheritance. Or someone else’s.

If you’re worried that this seems a bit rough and ready, actually these calculations can be surprisingly accurate. I remember a while back coming out of a presentation meeting of a recently formed business venture. I was the commercial consultant charged with helping the company with its business planning process and we had just been introduced to the full extent of the business’s core strategy.

As we walked out of the meeting room I turned to the company’s soon-to-be-appointed production director and quietly asked “what working capital do you reckon we’re going to need on this one then?”. Tony hesitated for just a moment, looked up at the ceiling and then casually answered “£3 million”.

Four weeks later, once I had completed a full commercial evaluation, the business plan’s financial strategy showed a total working capital requirement of £2.97 million”.

If your postage stamp sums look favourable then you’re ready to complete the small business planning jigsaw and construct your final mini-strategy.

Financial strategy – can you afford to fund the project yourself. If not, how will you source the remainder; investors, banks, friends etc

Don’t forget that business strategies don’t like to be messed with. So, before we share our small business planning, we have one final chance to tweak our strategies through a rigorous process of interrogation. At the end of this process, your core strategy and – to a lesser extent – your mini business strategies must be near water tight. No leaks, no signs of weakness or uncertainty.

Ten Pillars Of Small Business Planning – Introduction

Small Business Planning Pillar #1: How To Start A Business Plan – Mindset

Small Business Planning Pillar #2: Strategy

Small Business Planning Pillar #3: Mini Business Strategies And Postage Stamps

Small Business Planning Pillar #4: Changing Gear: Seed Money & Intrapreneurs

Small Business Planning Pillar #5: Rapid Content Building

Small Business Planning Pillar #6.0: The Four Financial Statements

……Small Business Planning Pillar #6.1: Profit And Loss Statement (P&L)

……Small Business Planning Pillar #6.2: Cash Flow Statement (Forecast)

……Small Business Planning Pillar #6.3: Balance Sheet Statement (Forecast)

……Small Business Planning Pillar #6.4: Financial Assumptions

Small Business Planning Pillar #7: Business Metrics