Working on your business is as critical as working in your business.
“No Planning, No Budget, No Income.”
I was speaking with one of my clients this week and we were discussing increasing her pricing structure so that she could increase her income and hire more staff. She was looking for a way to fund her company’s’ growth. This was a logical concept until I asked her if she had a business plan for 2024 and a budget. She looked at me and said, “it’s in my head”.
I understood her comment because for the first five years of running my business it was in “my head” and we made many mistakes as a result.
The urge to grow.
Almost all business owners have the urge to grow their businesses. Growth seems to translate into “making more money”, but in fact that is not always the truth. Business growth is not a surefire way to become rich, because as you grow your marketing, equipment and employment expenses seem to increase as well and chew up the new cash flow. That is where my mantra comes in: “No Planning, No Budget, No Income.”
Taking time to plan –
Most business owners of small businesses in particular are so caught up doing the accounting, communicating with clients and working in their business, that they don’t take time to step back. It’s hard to see the forest for the trees when you are working 10 hours a day and getting to kid’s ball games and other events and still managing to play your role in a family.
It takes extra effort to find a quiet place to think, without the Cell phone ringing. Sometimes you have to turn it off, and take quiet time out of the office, maybe at Starbucks or in the city library. Taking the time to write down your plans for the next 12 to 24 months makes it easier to crystalize where you are going and how you are going to get there. Most challenging is setting realistic plans to grow.
How do you set realistic plans?
First of all, you have to establish if you have the money to fund your growth. The best way to do this is to review your last 24 months’ income and expenses, possibly with your CPA. I am assuming you prepare monthly financials for your business. If you are not, get started on that immediately. If you can’t see your dollars on a financial statement, you can’t tell if you are making or losing money. You need to make money to grow. If you are losing money, then your plan needs to have you making money before you plan for any growth.
Once you have established a direction for your business that is in line with your current mission you can set goals for annual income and expenses.
Consider the following as part of your planning process.
Set customer service goals.
Set staffing goals.
Plan on capital expenses.
Plan on marketing expenses.
Think through the workload.
Plan on subbing out some of the work so you don’t have to do it.
Plan a detailed twelve-month operating budget.
Think through the details of a reasonable growth plan.
Discuss all your ideas with someone you trust, your CPA, a business coach, your significant other, your best friend.
If your plan is cash intense and you don’t have enough money you may have a few options:
Scale back your plans.
Borrow money.
Invest more equity from your savings.
Change your plans to generate more cash (of course only if the marketplace allows it)
If you borrow money from yourself or from a financial institution your financial plan should include the additional costs of paying the loan back say over three years. Bank lines of credit are typically revolving and need to be renewed every year. If your financial model does not generate enough cash to pay the lender back, don’t do it.
If you are like many business owners and not financially savvy, spend the money on having someone help you. Create simple monthly key financial indicators that can help you interpret your success. For example:
Number of clients
Number of units sold.
Monthly gross income
Monthly expenses
Monthly net income
Monthly number of employees
Create a chart so you can quickly see every month how well or poorly you are doing.
No Planning, No Budget, No Income.
For small businesses planning ahead and looking back is a time consumptive process. Many business owners don’t have the inclination, skill or want to take the time to take the time to plan. But if you can see your way to get it done on an annual basis, you will be able to successfully grow your company. Once you have completed your planning process, bring it back to the office and share it with your employees, so they can help you carry the load as you lead them forward.
Planning is not a panacea and is no guarantee for growth and/or business success, but it is one of the basic things all successful companies do to reach their financial goals. I encourage you to give it a try.
Clifford A. Hockley, CPM, CCIM, MBA
Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.
He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.
Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that helps investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses. He can be reached at 503-267-1909 , Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.
