It’s impossible to predict all of the changes and unexpected events that will come your way as a small business owner. You no doubt witnessed that in 2020.
Even now, unpredictability is well underway in this new year… COVID-19 is still taking its toll on people and the economy, we’ve witnessed an unprecedented scene of chaos and insurrection at the Capitol building, and Donald Trump is facing another round of impeachment.
So, whether you’re a one-person business or you have a crew of a hundred plus, it’s not too late to do a 2021 business plan.
Get ready to pull out pen and paper because it’s time to S.O.A.R. (Stop. Observe. Assess. Respond.) so you can make a plan that will get you better results in 2021.
Don’t Fail To Plan
A yearly plan helps you to see what’s ahead and focus on what is important. That’s why every year, I encourage my clients to stop and pull out their previous year’s business plan and compare it to what really happened during the year.
Oddly as it may sound, too many people believe they do not need a plan to govern and manage the next 12 months of their business. But this is a big fallacy when it comes to running a successful business.
Sure, some people can get away with doing this for a little while, but, for most, having a plan and updating it on a yearly basis is essential to business survival.
If you fail to plan, you are essentially planning to fail.
Without a plan, people tend to stumble, fumble and flounder, especially when faced with unexpected situations. (Can you say “hello” to 2020 and COVID-19!)
When you implement your yearly plan, you solidify the necessary objectives to advance your organization. Plus, you and your employees can use it as a roadmap to make sure everyone is on the same page.
What I personally love about the planning process is that it helps you avoid driving your business with force and choosing instead to navigate your business with intention.
“Stop driving with force and start navigating with intention.” Chareen Goodman
Your plan doesn’t have to be elaborate nor does it need to be exceptionally long. In fact, simple plans are far more likely to get you to your desired outcome.
Schedule time on your calendar and then follow these seven steps to kick off your planning process.
Step 1: Take Time To Reflect
Before you begin building out your 2021 plan, it’s important that you spend some quality time reflecting on what happened in your business last year. (How can you really know where to go if you don’t know where you’ve been?)
It is only through reflection that you learn from whatever happened over the past year. This is something many business owners simply don’t do, and you’d be surprised at how many repeat variations on the same mistakes over and over again.
For example, make this year the year you act on the knowledge that you need both an online marketing and ecommerce strategy for keeping in contact with your customers when physical contact is no longer an option. If nothing else, COVID-19 has taught us this lesson.
Deliberately capturing the lessons of the past year and thinking about how you can use this new knowledge can uncover opportunities that may boost your business in 2021.
Reflect on what your year was like… the good, the bad, and the ugly. That means releasing all the stuff that’s in your head and putting it on paper.
I suggest doing a free writing session for about five minutes or simply journal about your personal 2020 experience. This exercise of getting your thoughts, feelings, and insights out of your head and onto paper will help you gain clarity and prepare you for the planning process.
Start with a review of your company’s performance and its impact. Take a look at how you did and compare it to how you expected you would do. Look for and assess the gaps between what was planned versus what actually happened.
Answering the questions below will provide input to help you make good decisions for the upcoming year.
- What did you accomplish?
- What was your biggest challenge?
- What did you learn about your business?
- What were the unexpected gaps?
- What caused the gaps?
- How severe was the impact?
- What will you do going forward?
Maybe 2020 didn’t go quite the way you thought it would, but hey, did 2020 meet anyone’s expectations?
As you answer these broad questions, you may need to dig deeper, so don’t hold back. The more you can uncover the issues, the better you can plan going forward.
There is no doubt that 2020 was a crazy year and came with a lot of unexpected surprises. Spending a little time analyzing your past efforts will help you formulate a robust strategy for the year ahead.
Step 2: Objectives Before Strategy and Strategy Before Tactics
To really plan properly, I encourage my clients to follow this motto: “Objectives before strategy and strategy before tactics.”
I have found that when people start executing tactics without a clear objective and an aligned strategy, they are taking potshots at a non-existing target.
It’s so easy to jump into execution for the instant gratification it brings, only to discover later that you’re treading upstream without a paddle (i.e., failure to plan).
Any strategy you select for your business should first be tied to a specific objective you want to achieve.
Hence, the second step in your yearly planning process is to identify your objectives for 2021. That means, identifying and clarifying your business goals.
The fundamental question is: What do you – in your heart of hearts – want to accomplish this coming year?
The keywords to consider are “want to accomplish.” Not what do you think will happen – with or without COVID – but what do you really want to do and accomplish in 2021.
One way to arrive at your answer is to think across my 7 Pillars of Profit™
(You’ll see more about each of these pillars in upcoming posts.)
Each of these pillars will impact your business profits in some capacity, especially when they are out of alignment.
So, get crystal clear and set two to three SMART (specific, measurable, achievable, realistic, and timely) goals you want to achieve for yourself and your business in 2021.
Step 3: Set Benchmarks and Key Performance Indicators
Having metrics whereby you can measure performance is vital to your success.
As Lord Kelvin said, “If you can not measure it, you can not improve it.”
Given the current landscape, it is imperative that you measure everything, so that you can review and analyze the results, and make tactical changes as needed throughout the year.
Performance benchmarks and key performance indicators (KPIs) will help you work towards your goals and measure progress.
Determine which KPIs are the critical (key) indicators of progress toward your goals and objectives. Too, use KPIs to help create an analytical basis for decision-making and keep your attention focused on what matters most.
Benchmarking is a method that companies use to compare the performance of their output to that of a standard. It can be a useful tool for tracking the progress of your company’s goals and objectives by showing the gap in performance that your business may be facing.
Don’t just randomly come up with your performance numbers, but instead stretch out with purpose.
Most importantly, be sure to set targets that will inspire you and your team to get out of bed every morning and execute effectively.
Step 4: Anticipate Both the COVID-19 and Competitive Landscapes
Agility, flexibility, capability, and resourcefulness are words to keep in mind as you look forward.
Now is the time to review the changes that have occurred in your marketplace especially in light of COVID-19.
There is certainly a new normal being formed, but you are standing on the precipice of a new opportunity.
- Are there new factors you need to consider?
- Have there been changes in customer buying behavior?
- Have there been shifts in the demographics?
- Are there new issues in your industry?
- Have there been new competitor activity?
- What do these changes mean for you and your business?
- How will you position your business strongly against these changes?
Consider how these changes will make it easier or harder to achieve your goals and factor your answers into your plan.
“You are standing on the precipice of a new opportunity.” Chareen Goodman
Do any of these changes cause you to rethink the targets you’ve set? If so, go back and make the adjustments you feel are necessary.
If you are struggling to get to the meat of Step 4, then consider doing a SWOT Analysis.
S.W.O.T. stands for Strengths, Weaknesses, Opportunities, and Threats.
Strengths and weaknesses often refer to internal factors stemming from the organization.
Opportunities and threats often refer to external factors associated with the business environment.
When you consider these sections, it’s important to look at multiple factors such as resources, communication, reputation, suppliers, leadership, etc., as well as the 7 Pillars of Profit™.
Performing a SWOT Analysis is a powerful exercise and can give you varying perspectives and insights into the opportunities and challenges that lie ahead.
Finally, cross-reference your findings. In other words, match your Strengths with Weaknesses; Strengths with Opportunities; Strengths with Threats, etc.
Do this across all four of the S.W.O.T. dimensions to develop a broad and big picture view of your business.
Step 5: Develop Your Financial Projections and Budget
Here is where you need to know your numbers (because numbers are everything in business.) I call this process, #MakeMyCashFlow and it’s a two-step process consisting of analysis and approach.
Start by analyzing your 2020 income.
- Where did the money come from?
- Were there specific products or services that were the winners?
- Did you get government support due to COVID?
- When did the money come in? (Consider seasonality, specific marketing campaigns, etc.)
Next, analyze your expenditures for the past year.
- When you spent money, was it money well spent?
- When it comes to expenses, will you need to allocate more money to certain areas in 2021 and less to others?
- Did you have enough reserve or contingency baked in given the current economy and COVID?
Now apply one of these two approaches to refine your projections: Top-down or Bottom-up.
In a top-down approach, start with your desired revenue goal and then figure out, based on price point, how many products and/or services you will need to sell in order to achieve your revenue goal.
In a bottom-up approach, start by identifying the products and/or services you plan to sell based on 2020 sales data and how much you can expect to earn from each sale in 2021 to arrive at your revenue target.
In either approach, consider resources, capacity, lead time, capabilities, etc. which will affect the numbers.
Finally, consider your cost planning, you know those pesky expenses that small business owners so often run into.
Consider what new purchases and expenses you’re going to incur in 2021. This includes all fixed and operational expenses, personnel and payroll expenses, equipment purchasing, marketing, and ad spend, training and development, etc.
The combination of your revenue plan and your cost plan gives insight into how profitable your year could be.
Once you have completed the above steps, start laying out your income and expense projections month-by-month.
Based on your plan and history, create a monthly budget you’ll follow for the upcoming year.
You should now have a clear picture by the month of your cash flow throughout the year. You can utilize this to measure each month’s performance and compare as the year progresses.
This is, of course, a simplified guide. If you need help with 2021 business planning or putting your strategy into action, book a chat with me.
Step 6: Review Your Ideal Customer Profile
Now with all the data you have put together so far, it’s time to look at your ideal customer to see if changes are in order.
Your business wasn’t the only thing that changed in 2020. Many people, including your customers, have changed, which makes this a perfect time to revisit your ideal customer profile.
Start by looking at who your best customers are. Consider what makes them the best from a financial standpoint, followed by who is the best to work with.
Consider these questions when refining your ideal customer profile:
- Who are your current customers?
- Who are your best customers or repeat customers?
- What are the shared similarities and differences?
- What challenges do they face that relate to your product or service?
- What characteristics do they have that make them ideal?
- What shifts did you experience with your customers last year?
Understanding your ideal customers can help you refine your target market, reach similar people who are not yet customers, or even carve out a new niche of customers.
Step 7. Set Your Priorities
Once you’ve mapped out your 2021 business plan, now is when you set your priorities.
Keep in mind that the landscape of your business may look very different three, six, even nine months from now.
If you’re like most small business owners, you’re constantly getting new ideas for things you can create in your business. But not all of them are created equal.
Start with the core things that will help you stay afloat and align with the goals and objectives you set in Step 2. Consider the answers to questions like:
- Which of these ideas are “shoulds,” or relate to other people’s priorities, rather than your own?
- Which of the ideas are good ideas, but don’t directly relate to your key business objective(s)?
- What’s the most important thing you want to celebrate this time next year?
- Which will matter the most in the next three to five years?
Next, create a simple map of your priorities.
The best way is to grab a desk calendar and some small colorful post-it notes and follow the boulders, rocks, sand concept to set your priorities, but stay flexible and agile.
Begin with the big stuff and work your way down.
- Boulders: Holiday promotions, launches, and sales. Even if the details of your offer changes, holiday dates don’t. Mother’s Day is set. Black Friday will still be the day after Thanksgiving, and New Year’s Day will always be Jan. 1. Find the unmovable things in your business.
- Rocks: Introducing a new product? Intending to launch a new program? These can shift especially if you have your basic “bread and butter” offerings that are currently working. Give yourself a bit of flexibility and ample runway when you’re launching something new, and your launch will certainly go better.
- Sand: Filler events and activities such as joint ventures and affiliate promotions may not necessarily be the core of your business and therefore should not take up the majority of your time. Keep your focus on first things first.
It’s A Wrap
Well, there it is… the seven steps you need to take to put together your 2021 business plan.
This step-by-step process can help you in creating a focused plan that will allow you to ignite your business success in 2021.
OK, I get it.
Planning always seems like a daunting task, but now is the time to be more disciplined.
So just do it, and get that plan done!
- A Fool-Proof Formula for Creating Your 2021 Business Plan - January 14, 2021
- Assumptions: Your Invisible Decision-Makers - June 3, 2020
- 3 Creative Ways To Avoid Project Disasters In Your Small Business - February 27, 2020