WHY PLAN A SMALL BUSINESS AND FREELANCE
An important part of a business is pre-planning. After the idea of your project has appeared, it is important not to succumb to the temptations of ephemeral fantasies, but to go down to earth and carefully think about what results you expect from a business or private practice, what needs to be done to achieve these results, what will be the initial investment and operating costs. Today with us is a financial consultant Marina Samartseva, and we will talk about the need for planning in business.
Very often they try to prove to me that planning in business does not work. I’m not surprised when, for example, employees who are trying to get them to take part in drawing up plans do this, but they amicably evade it. They can be understood: the plan must be carried out, and if there is none, then there is no court, as they say.
But when entrepreneurs with years of experience ardently prove that no plans are needed because they never get done, I conclude that one of the following situations (or a combination of them) is taking place:
- The entrepreneur does not know his business and does not want to know it, as he suspects that his business is not going well.
- An entrepreneur does not understand what an important business management tool is planning, and does not even imagine how much money he is losing due to its absence.
- The entrepreneur is afraid to plan because he thinks that it is very difficult and accessible to a select few.
Below I will try to answer the most frequently asked questions about planning.
WHO NEEDS PLANS?
Everyone – small businesses, large businesses, beginners, and active ones. Freelancers, and you too!
WHAT ARE THEY NEEDED FOR?
First, to better know and understand your business – from marketing and sales to finance.
Second, to optimize your business activities – to set the right prices, get rid of unnecessary and low-profit work, reduce costs, and focus on profitable areas.
Third, to minimize costs. You have no idea how much money you are wasting.
For aspiring entrepreneurs and freelancers, business planning can help avoid many fatal financial mistakes. This is especially important for those who want to start a business with borrowed funds (which I strongly advise against doing).
Most importantly, planning develops financial thinking. People with a financial mindset are much less likely to make mistakes in making business decisions, which is a very valuable quality nowadays.
CAN YOU DO WITHOUT PLANNING?
Of course, you can. However, you can do without marketing or sales. The question is the price.
Every time entrepreneurs and I begin to analyze the finances of their business projects, we find wasted money. In my practice, this is from 20 to 250 thousand monthly for several previous years (usually 3-5 years). The price is more than solid. This money would remain in the pocket of the entrepreneur if the business kept records and planning.
For novice entrepreneurs, the price of the issue is also very high: without really calculating anything, they often get involved in a business that plunges them into a financial hole, and they lose not only their money but also those that have borrowed.
HOW DIFFICULT IS IT TO LEARN PLANNING?
It is a skill that develops with practice. And anyone can learn this.
Of course, the first plans you make will be far from perfect. But if we were only doing what we are good at the first time, then everyone would be lying on the sofas because even the ability to walk is given to people with difficulty – but sooner or later everyone comprehends this science.
WHAT ARE THE PLANS?
If you do not have your own business yet, the first one should be a business plan for opening it. In it, you describe the business model, its three most important parts (marketing, sales, finance), and the time frame during which the business is established. Such a plan will allow you to make a decision whether to open a business or not (sometimes, according to the results of calculations, it turns out that it is financially untenable, and this allows you to save time and money on the expensive experience of opening a deliberately unprofitable business).
The next planning steps are annual and monthly planning for existing business projects. They allow you to optimize all the most important business indicators: marketing, sales, prices, expenses, payments, debts.
HOW LONG DOES THE PLANNING PROCESS TAKE?
The hardest and longest time to get the first plan, and it can take a month or more, depending on the size of the business. There will be a lot of technical work describing marketing and drawing up financial tables. But when you make the next plans, things will go easier and faster.
Why do we need plans if all the same, in fact, there are deviations from them? In this case, we can compare the achieved indicators with the planned ones, understand the reasons for the deviations, and make decisions on what to do to improve our work in the future.
However, if you have several hundred thousand or even millions of unnecessary rubles, you can afford delicious non-planning.
We hope you have no doubts about whether to plan or not. In the next article, Marina will talk about the financial traps that not only beginner entrepreneurs and specialists fall into, but also experienced businessmen.