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Why Do Small Businesses Close? – No Planning

In yesterday’s post we looked at the three things that the Australian Securities and Investment Commission considered to be the main reasons why small businesses do not succeed in an all too vast number of cases. In that post I talked about in one of the reasons being that many small businesses don’t maintain adequate or sometimes any records at all.

Today I intend to look at the second reason why so many businesses fail to last very long. That reason is that they don’t have any sort of plan. It is all too easy to jump up out of bed one morning and decide to go on a business. To put it bluntly it just doesn’t happen that way. Your football team doesn’t go on the pitch without hearing a game plan and the captain of the ship always knows where they are headed and how they can get there. Not likely. The game plan and the ship’s course at precisely plotted well before anything else is done. So why anyone would think they could operate a business without hearing some sort of plan in place or how it is to be operated run are things I’ve never understood.

Only a few weeks ago now I was approached by a new client who wanted me to give him some quick advice on what sort of information he should include in a business plan. After chatting for a while, it became really obvious that he had the man had no idea about what was involved in preparing a business plan. To him the fact that he had been asked by his financier was a huge imposition. A plan. what for? He thought it was a waste of time because all he want to be doing was sell products to anyone willing to buy them from him. He had no interest in record-keeping and less interest in knowing anything at all about a business plan or how it was going to help him succeed. I was pretty sure he wa heading for a fall.

After considerably more discussion I at last managed to get him to understand why a business plan was so important. Even then I had to take the time to prepare a PowerPoint presentation that he took away with him and watched several times. Not that I mind doing this for him that it make me wonder just how successful this man was going to be with his business venture.

Planning for any endeavour is essential. Yes I know that explorers go out looking for things and sometimes end up finding whatever it was that they were seeking. But all too often the intrepid explorer perishes in the attempt. Just think, when James Cook first discovered Australia and Christopher Columbus discovered America it is highly likely that these discoveries were due more to accident than any good planning.

So it is too with a business. Without a plan you might end up where you want to go. But then again you might not. And according to ASIC the likelihood of ending up where you don’t want to go is the more likely outcome.

I’ll bet that you’d never consider going on a world tour without planning it out first. You’d want to know where you were going? How long for? How you will be travelling? Where you will be staying? What side trips will you want to make? How much money will you need to take with you? How much luggage can you take with you? will you need travel insurance? Is the tour company reputable? The list goes on. The answers to these and other questions form your travel plan.

A business plan is just that. It is a plan. It contains a basic outline of what it is that you want to achieve and then lists steps that you need to take in order to achieve that success that you are looking for. Thus a well constructed business plan will include consideration of the dreams, aspirations and  and visions of the potential business owner. Then to it will look at what can go right and what can go wrong. It will include backup plans in the event that it does in fact go wrong. There will be thought put into how the business will be owned and by whom along with serious considerations about how it is to be financed. These are decisions not like not to be taken lightly.

Do not think for one moment that once you have prepared even the most basic of business plans that you can then put it in the bottom drawer and forget about it. Never do that. The business plan should be looked at, and thought of, almost as a living thing. It needs to be reviewed regularly and updated often. I read once that one of the major Japanese manufacturing companies has their business plan set out for the next 600 years. Think about it. 600 years? Some business owners can’t be bothered preparing a business plan the next six months.

If you don’t have a business plan then please go and prepare one. If you are unsure what information should be included in your business plan then I am making available to you a modified copy of the PowerPoint presentation that I made for my client. You can get a copy of it here.

What do you need to do now? Simple. Create a business plan for your business. Or if you already have one take it out from wherever it is a review if thoroughly. It has more than a couple of years old in the out of date anyway. In today’s marketplace circumstances change by the hour sometimes. If you don’t keep your finger on the pulse when you send a very strong chance of being amongst the 97 or 98 out of every 100 businesses that go to the wall. I don’t want that to happen to you and am sure you don’t either.

Constructive criticism is welcome. Not spam, just delete that. If this post helped you then please add a comment below and tell me how. I would appreciate that.

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      My best suggestion is to bullet point the things you want to mention. In a notepad. Then expand these into sentences or paragraphs in your actual posts. Once each bullet is dealt with mark it off. That way you keep your focus

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