Don’t Fall Asleep at the Wheel – Keeping Your Business Plan Up to Date
We all create annual business plans, and then attempt to get our proforma budgets in line. But how many of us revisit those plans on a regular basis? Are we monitoring the environment for changes that could impact us – a change in minimum wage, a new entrant into the marketplace, or a disruptive technology that catches us napping. Not planning for developments from competitors or governments can put your plan, or possibly even your business, at risk.
Reality check – there just isn’t enough time in the day to monitor every environmental risk that could impact us. That’s why we belong to industry associations, subscribe to newsletters, and follow blogs. These act as our early warning systems for new things coming on the horizon. There is no way that any of us can keep up with all the changing regulations that the various levels of government impose on us. Some are in response to emergency situations and get pushed on us with little notice. Others (such as the ELD mandate) are publicized years in advance, and have lengthy implementation periods before enforcement begins.
So, lets look at some things that we can control ourselves. Let’s start with your target market – have you really spelled out what it is? What is your preferred network? Your hot lanes? How will these affect your retention efforts? Have you spent enough time doing your research so that you know what your customers really want and value? And even if you did that once, have you revisited those assumptions to make sure that they are still valid? If you have the target market right, have you crafted your marketing and sales efforts to appeal to the needs of your current and potential customers. With 10-25% unseated percentages, and 250% over-capacity. It’s easy to fall into the trap of forgetting that the economic tables will eventually turn, and you’d be wise to heed one of Warren Buffett’s famous warnings – ‘only when the tide goes out do you discover who has been swimming naked’. Now is the time to make those technological investments, get lean, build that competitive advantage.
Next, what sort of branding have you done? Have you positioned yourself as a premium provider, or are you competing purely on price, effectively telling the market that you are a commodity? Playing the low-price game will eventually put you out of business. Similarly, have you focused on a market niche or are you trying to be everything for everyone? If you want to be a premium player, then you need to focus on parts of the market where you provide real value and can command a higher price. Think of the mistake that Cadillac made in the early 1980’s with the Cimarron. At that time Cadillac was known for large luxury vehicles like the Fleetwood Brougham or the Eldorado. The Cimarron was essentially a rebadged Chevrolet Cavalier with leather seats and a Cadillac logo on it, poor performance and a significantly more expensive price tag than its sister vehicles. By trying to compete against some of the smaller luxury import models Cadillac rushed the Cimarron to market with a vehicle that didn’t meet the needs of those buyers. They misread both the threat and what buyers wanted – they even had a four speed as the base transmission, not exactly something that your average Cadillac buyer wanted at that time.
A more recent example was Build-A-Bear’s “pay your age” fiasco. For those of you that aren’t familiar with Build-A-Bear, they take buying a stuffed animal to a higher level. The child gets to pick out what one they want, gets to custom fill it and then picks from hundreds of outfits and accessories to customize their new friend. And guess what, they were able to charge a premium because of the customer experience. Pay your age has probably put that premium image at risk. Why? Partially because they failed (massively) to deliver – by 11AM most malls had forced the stores to shut down because of the large lineups. But also, because now they have put the thought into the minds of parents and grandparents that $1 to $10 is all that they really should cost! In one poorly thought out and even more poorly executed swoop some major damage was done to their brand image.
Your reputation is something that could take a hit, especially with social media sites where some people have no concerns about sharing negative opinions. Unfortunately, you really must wow someone to get them to put up something positive about your business, but all it takes is one little slip up (and it probably seemed like something insignificant to your employee) to have someone start a rant against your company. We all need to be monitoring social media constantly and be prepared to give some honest and real answers when someone posts criticism or something that is plain old nasty. It’s going to hurt but if you respond in a thoughtful and respectful way you will be on track towards regaining people’s trust.
The last risk we will look at is having too much of your sales tied up in one place – whether it is one customer or with one salesperson. Too much concentration, regardless if it is internal or external, is not good. Relying too much on one customer puts you at too much risk of something like a management or ownership change causing a serious reduction in your volumes. Even worse is if they go into bankruptcy leaving you not only with lower volume but also with the potential of your receivables from them only being worth pennies on the dollar. A similar risk occurs if you rely too heavily on one salesperson. She manages your top five accounts and is very hands-on with them. Now what if she moves to one of your competitors? If she has such a great relationship with those customers, will you be able to overcome that to keep them? Depending on your state, courts may be reluctant to enforce non-compete clauses for much more than 6-12 months (if at all). You had better have a backup plan for either of these scenarios.
These examples only scratch the surface of the risks that your company could face and that you really should have a plan “B” for. Depending on your local market, there may be others that are more important, but these will give you a start. Don’t try to cover off every possible risk – the idea is not to make this the full-time job for a team. Devise realistic probabilities of any of these risks happening and what the potential cost would be. Determine what a realistic number of threats that you should (or can) mitigate against and start from there. However, ensure that these probabilities are reviewed on a regular basis so that new threats are being considered and any old ones reviewed to see if they are still relevant. It’s sort of like insurance, you hope you never need it, but you will feel significantly better if you already have a plan should any of those threats become real.