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The Importance of having a business plan, budget and structure

Published on 27 July 2021 at 14:39

In the past year, during the pandemic, I have learned more than ever that many businesses run without any internal structure or even a business plan.

We have seen so many businesses fail and close down, almost without a logical pattern to it. Why would one cafe survive the other if the product and service they provide is "potentially the same"?

I am putting this in brackets, because I know that your success or failure could be caused by the lack of either or both! But this is not what I am referring to on this occasion.

I have spoken to different people, asking the question of how their businesses were coping: many said they were just hoping to survive...

This made me think: as a business owner, how do you "hope to survive"? I mean, if you were drowning in the sea you would not just "hope to survive", surely! Would you not "try" to survive somehow?

Between HOPE and TRYING there is a huge gap,

and that is called ACTION.

 

What you do to stay alive, the actions you take, the changes or developments that may give you one more day ahead, is what will make the difference in your business' survival later on.

 

After having witnessed the closure of a business of a close acquaintance, I realized that very few business owners do fully understand the responsibility behind running, managing, and maintaining a business open! I have seen some of them only opening a business for the ideal behind it, such as "It will make us easy money!", and yet complaining about financial gaps here and there in their reconciliations. Firstly they don' t understand their financial situation: they don't look into their expenses because they don't believe it is important.

They don't measure costs vs earnings, and percentage profit and budgeting

are words they do not even know exist.

 

I have spent a few hours with this couple on a few different occasions discussing why their business seemed not working: the couple told me that "nobody walks up this road!", so I asked them what they were doing to advertise, and their answer was nothing.

There was no signage nor at the bottom or at the top of the road as an indication to where to find the business, and no other advertising effort was made apart from a tiny Facebook page that they hardly used.

 

I gave them a few ideas to do some pre-ordered package meals for their breakfast and lunch office clients (for those who were still going in during curfews) and offer them mainly take away deals.

With this suggestion (based on the orders coming in) they could have planned their offer in advance, organized their stock orders accordingly, and minimized their waste costs by loads!!!

 

The response was they had tried everything, without additional information. I asked them if they were aware of their profit and their losses, they said that they had an idea of how much to make a day to cover for the monthly bills, but they had no clue of a percentile targeted profit they should have had.

They wouldn't plan or forecast because

they were under the impression that doing so was a waste of time.

 

Another time, there was a lady with a farm: she was mainly working in her office business and this farm was meant to be something she was running on the side. When I went to visit her again (I have been there many times), it was clear that although it was well looked after,

there were never any signs of clients,

so I asked the question to see what she thought the problem was. It turned out, they had an immense expense on the animals, but out of the animal products they would produce, only have a little seasonal earning percentage would come in out of their sales. They had a mainly indoor covered area with a bar and tables, perfect for smaller events or weddings. They told me they didn't want to use it anymore as they didn't know how to run an event and last time they did that, the reconciliation after the wedding was a nightmare as their client did not pay them for months,

they also had no clue of how much money went into the products they sold,

the rental fee of the venue, nor for the staff cost....

At this point I was sure they had no organizational or business skills, nor any financial knowledge behind it. I did some quick calculations, checked costs and ran some ideas and they saw the light in the tunnel.

The amazing thing I have learnt is that you can help only those who are prepared to be helped.

 

The first couple I mentioned above, sadly, closed their business for good, a month after my visit without taking any suggested actions.

The lady with the farm is still running it with her husband and, in their own way, they are developing different areas that, on my advice - especially because they didn't want to run events!-

they are looking to hire out to local event organizers who are searching for venues.

 

A business is not just the idea you have. That is the starting point.

There must be a project you lay out, and questions such as "Why, how, when and where should I do it?" must be answered. You must understand your costs, your expenses before all. Then build from there.

Everything must be accounted for, for you to be able to clearly benefit from the set percentile profit you wish to gain.


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