By Jill Nagy
Many business owners draw up a business plan when starting up, often in order to get bank financing. And often they then put it on a shelf and never look at it again, observed Phyllis Wang, a Saratoga Springs business consultant.
As a result, she said, they often miss warning signs that their business is not doing well.
In the past, a business plan was typically written for a five-year span. Today, Wang, of Auster Wang Consulting, advises a three-year plan or even a two-year plan because the environment and economy are changing so rapidly.
“Think of what’s been happening in our economy. Look back two years and it’s a different world,” she said.
Howard Litwak, of Paradigm Associates based in Mechanicville, advises an even narrower window. He said that he reviews his plan “almost daily.” He also does a thorough review and update — taking as much as 40 hours — once a year.
Currently, he said he is looking at his overall objectives for 2014: What does he need to accomplish? What are his top priorities? What actions will help him reach those goals?
Litwak leads clients through a similar process of evaluating the past year, comparing results with the previous year’s plan; trying to find out what is working and what is not. “If something is working for you,” he said, “do more of it. If not, stop.”
Both consultants emphasized that the development and review of a business plan requires research and a critical look at what is happening within it, as well as examining the environment in which it operates.
“If you didn’t meet your objectives from last year, what got in the way?” Litwak said. They should examine the skills, resources, attitudes and behaviors of the people involved in the business.
He also looks at the CEO’s skills as an executive. Can he or she create a vision? Is it a values-driven organization? Are goals in alignment ? Is there a goal achievement process?
“A lot more goals seem to get set, than can be achieved,” Litwak said. He encourages clients to set goals that can be achieved. He calls them “SMART” goals, the acronym meaning: specific, measurable, achievable, realistic, and with a time frame.
Wang said she often detects far more serious flaws in the way a business is organized and operated.
Many small businesses “are incredibly lacking in strong financial structure. They may be going down the tubes without realizing it,” she said. “They operate on cash flow. If they are able to pay their bills, they think they are OK. But they don’t see that they are draining their reserves.”
She sees a lack of sophistication and “financial savvy” in many entrepreneurs. They are feeling successful, but “all it takes is one slip to show that there is nothing there.”
Often, Wang said, the problem is with the initial plan. It fails to take into account all expenses, including overhead.
“If you ask them, they’ve all planned very carefully. But in reality, they have this dream but they haven’t thought it through,” she said.
Perhaps they do not know their market, or their pricing is wrong, or they are unrealistic about costs, she said. Also, she finds people trying to be all things to all people. Those people should they narrow their focus.
“It is very hard to change direction,” she noted, especially if a business seems to be successful. However, environments change. For example, a business owner who has depended upon contract work, may find those contracts drying up and have to find an alternative referral source.
“I get companies to look at themselves,” Wang, said. A review of a business plan, or the initial development of one, provides a framework for that examination.
Litwak sees it as a “conceptual exercise” of reviewing specific goals and the action steps that go with them.
Wang can be reached at, 469-9961. Litwak is at 664-5033.