Business Planning

■ Fast track route to writing and implementing rock-solid

business plans ■ Covers key areas of business planning, from understanding why a

plan is necessary and what issues it should address to compiling the plan and using it to direct the business and ensure goals are met ■ Includes the low-down on key planning aids such as swot

analysis, the Boston and Ansoff matrices, and practical examples and advice drawn from banks and accounting firms as well as business practitioners and gurus such as Philip Kotler ■ Includes a glossary of key concepts and a comprehensive

resources guide

ENTERPRISE

Patrick Forsyth

02.09

Business Planning

Copyright  Capstone Publishing 2002 The right of Patrick Forsyth to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 First published 2002 by Capstone Publishing (a Wiley company) 8 Newtec Place Magdalen Road Oxford OX4 1RE United Kingdom http://www.capstoneideas.com All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, including uploading, downloading, printing, recording or otherwise, except as permitted under the fair dealing provisions of the Copyright, Designs and Patents Act 1988, or under the terms of a license issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London, W1P 9HE, UK, without the permission in writing of the Publisher. Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons, Ltd, Baffins Lane, Chichester, West Sussex, PO19 1UD, UK or e-mailed to [email protected] or faxed to (+44) 1243 770571. CIP catalogue records for this book are available from the British Library and the US Library of Congress ISBN 1-84112-376-5 This title is also available in print as ISBN 1-84112-315-3 Substantial discounts on bulk quantities of ExpressExec books are available to corporations, professional associations and other organizations. Please contact Capstone for more details on +44 (0)1865 798 623 or (fax) +44 (0)1865 240 941 or (e-mail) [email protected]

Introduction to ExpressExec ExpressExec is 3 million words of the latest management thinking compiled into 10 modules. Each module contains 10 individual titles forming a comprehensive resource of current business practice written by leading practitioners in their field. From brand management to balanced scorecard, ExpressExec enables you to grasp the key concepts behind each subject and implement the theory immediately. Each of the 100 titles is available in print and electronic formats. Through the ExpressExec.com Website you will discover that you can access the complete resource in a number of ways: » printed books or e-books; » e-content – PDF or XML (for licensed syndication) adding value to an intranet or Internet site; » a corporate e-learning/knowledge management solution providing a cost-effective platform for developing skills and sharing knowledge within an organization; » bespoke delivery – tailored solutions to solve your need. Why not visit www.expressexec.com and register for free key management briefings, a monthly newsletter and interactive skills checklists. Share your ideas about ExpressExec and your thoughts about business today. Please contact [email protected] for more information.

Contents Introduction to ExpressExec 02.09.01 02.09.02 02.09.03 02.09.04 02.09.05 02.09.06 02.09.07 02.09.08 02.09.09 02.09.10

Introduction What is Business Planning? The Evolution of Business Planning The E-Dimension The Global Dimension The State of the Art In Practice Key Concepts and Thinkers Resources Ten Steps to Successful Business Planning

Frequently Asked Questions (FAQs) Acknowledgments

v 1 5 13 21 31 41 67 81 97 105 115 117

02.09.01

Introduction » A dose of reality » The causes of failure

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‘‘If you’re not planning where you want to be, what excuse do you have for worrying about being nowhere?’’ Tom Hopkins, American sales trainer The information presented here is directed at those managing, or involved in managing, small/medium sized business. Many people regard such a manager as being in an enviable position. Often they are their own boss, they are independent, able to be flexible, to concentrate on the things that interest them, to organize matters their way and generally get on with the job in hand. By contrast, larger enterprises may seem slow, bureaucratic, committee driven and steeped in rhetoric. The reality is often all too different. A DOSE OF REALITY Under pressure, the manager of the small business often seems besieged by a plethora of difficulties that conspire to make running the business unnecessarily complicated. Paperwork, administration, taxation, legislation, the bank and more paperwork, administration, form filling. . . ; the problems can be numerous, and may be all too familiar. Furthermore, a business – any business – ultimately stands or falls by its success in the marketplace. It needs sufficient customers buying its products and services often enough to produce both the necessary financial return and the wherewithal to invest and secure future growth. Now the manager doubtless recognizes this, but the process of ensuring it happens can still prove problematic for a variety of reasons. Senior managers may be specialists. Perhaps the business was founded on engineering or design skill, and it is these things at which they are best, but the business-generating and management process is less their real forte; and as that process may seem complex and is certainly time-consuming, this too may contribute to it being neglected. Besides, business-generating activities cost money, real money, paid out in advance with no guarantee that it will bring in results which will repay and exceed it. However, somehow any business must be made to work as a complete entity; finance, marketing, production, and more must all contribute and contribute effectively. There is one thing that can act as

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a foundation to all aspects of operating success – and that is planning. This is not an overstatement, planning really is vital. Starting with a blank sheet of paper as it were, it takes a little time to do; but not a disproportionate amount of time given the advantages it bestows on the planner. It needs to be done, done effectively, and then kept up to date (this latter process is easier and less time consuming). However, the problem is that planning can tend to seem somewhat academic, fine if you have the time, but something a little cosmetic and not really a part of actually running the business. With this attitude it is easy to ignore it, do only lip service to it or just bypass or ignore it. This is a mistake. As this work aims to show, planning is important for practical reasons. A plan is not a good one if it does not help – really help – direct and manage the business and make success, however that is defined, more likely and more certain. THE CAUSES OF FAILURE If we look at things from a negative viewpoint for a moment, we can focus on what makes a business fail. For new small business the causes are well documented, the top ten are often quoted as: » » » » » » » » » »

lack of experience and skill in the founder lack of capital uncontrolled expansion weak management credit and cash flow problems wrong location too high levels of capital expenditure taking too much money out (as salary for the proprietor) staff problems over-complicated systems.

Each of these headings could be developed into a list, and perhaps into a tale of woe. But one thing is clear: every single one of these areas can be made into less of a problem area through some judicious planning. Planning has positive merits and, make no mistake, it is also in the nature of insurance – it can prevent you running into trouble.

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So, let us end this short introduction by quoting some well-known words explaining the need for planning and why it is worthwhile to do it. Lewis Carroll wrote, in Alice’s Adventures in Wonderland: ‘‘Would you tell me, please, which way I ought to go from here?’’ ‘‘That depends a good deal on where you want to get to,’’ said the Cat. ‘‘I don’t much care where – ’’ said Alice. ‘‘Then it doesn’t matter which way you go,’’ said the Cat. ‘‘ – so long as I get somewhere,’’ Alice added as an explanation. ‘‘Oh, you’re sure to do that,’’ said the Cat, ‘‘if only you walk long enough.’’ Elegantly and memorably put, and the Cheshire Cat’s logic is surely very clear. Planning is essential as a basis for a well-run business; you need to plan and do so effectively – it enhances the likelihood of achieving what you want.

02.09.02

What is Business Planning? » » » » » » »

A business plan defined The dynamic business environment What is competition? Limited resources Driving the business Operations must be controlled Summary

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‘‘If you reach for the stars, you might not quite get one, but you won’t end up with a handful of mud, either.’’ Leo Burnett, founder of Leo Burnett Advertising Agency The process of running a small/medium sized business was never easy; and the competitive pressures of recent years, and many market recessions also, have combined to make it downright difficult. If the business you manage is your own, you know also that it is vulnerable, as good as its last month’s sales – and there is a great deal hanging on its success. Such a feeling is only marginally reduced if you manage the business for someone else or share the risk. So, how do you make sure of your success? There is, regrettably, no magic formula and, as such, it is not the intention here to suggest otherwise. Success depends on a number of things: such as what you sell; where it is sold; how you sell it; and the quality of every kind of service which is involved before, during or after the sale. All are important. So too are the processes of ‘‘bringing in the business,’’ many of which are usually encompassed by the word ‘‘marketing’’. People are important too, from their recruitment to their effective management, plus a whole raft of other things from design and innovation to administration. We begin to paint a complex picture here. So, what of planning? Planning is the foundation to success. It underpins the complexity of business. It makes sure that it is well organized and well directed, and thus running it is easier and more certain to be successful – and thus will meet its goals. A clear definition quoted from the Oxford Dictionary of Business appears below. A BUSINESS PLAN – DEFINED: ‘‘A detailed plan setting out objectives of a business over a stated period, often three, five, or ten years. A business plan is drawn up by many businesses, especially if the business has passed through a bad period or if it has had a major change of policy. For new businesses it is an essential document for raising capital or loans. The plan should quantify as many of the objectives as possible, providing monthly cash flows and production

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figures for at least the first two years, with diminishing detail in subsequent years; it must also outline its strategy and the tactics it intends to use in achieving its objectives. Anticipated profit and loss accounts should form part of the business plan on a quarterly basis for at least two years, and an annual basis thereafter. For a group of companies the business plan is often called a corporate plan.’’ Business planning is, or should be, a response to four specific factors, examined here briefly in turn. THE DYNAMIC BUSINESS ENVIRONMENT No business operates in a vacuum, cut off from outside influences, and any business must therefore be managed in a way that recognizes the many influences – some positive, others less so, or downright negative – that surround and affect it. A whole range of different influences are involved, listed, and commented on here under six headings. » Economic climate: Financial factors may frequently seem restrictive and they often are. Think of borrowing-rates, taxes, operating costs, etc.; whereas positive economic situations prompt higher spending and help business. » Technological developments: These may be positive or negative, for example technological development may assist (as word processors have assisted the quality of presentation), but keeping up often necessitates investment and training. There is also a high degree of uncertainty; who can accurately predict the future development of the Internet or dot-com companies? » Social changes: Changes here again may have a variety of effects, as with the demographics of the ageing population in the UK and elsewhere, which may provide opportunities (retirement homes/holidays) or reduce the potential in other sectors. » Political dictates: Government may affect company operation and markets also, with legislation on anything from the compulsory testing of pharmaceutical products to safety measures governing car

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tires, and other areas, for instance the prevailing or future level of spending on schools or oads. In recent years another influence has been added to this list. » Environmental considerations: The green movement has affected many product areas, with advertising featuring recycled paper (toilet tissue/stationery) or the omission of harmful chemicals or additives (CFCs have now largely disappeared from aerosol products). Amongst all the factors that can logically go under these headings opportunities abound. It is an area that repays regular consideration. Another factor affecting all businesses is: » Competitive pressures: a broad view needs to be taken of what constitutes competition (see box); action from any quarter can affect your business unexpectedly, directly, and rapidly. Further, it may be sensible to link customers to this heading. The market – the world of customers and potential customers – is essentially dynamic. Customers are fickle, their loyalty hard won and easily lost. Change is the norm. Responding to it is essential, or even long-term customers will go elsewhere. WHAT IS COMPETITION? It may seem obvious, but it is worth asking – what exactly is your competition? Consider an example: for someone who makes pens or undertakes printing, then the competitors are surely other pen manufacturers and printers. Yes; but competition is broader than this. Consider the pen manufacturer, who makes, let us suppose, medium-priced ballpoint pens. His competitors – and there are probably 10 or 20 of them – make similar pens. But what about fountain pens, roller balls and fiber tips? And pencils? These are competitors too, as are dictating machines and word processors, and, of course, other writing instruments throughout the range of all prices, from throwaway ballpoints to solid gold fountain pens. These days a stylus on a palm size computer may substitute for

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the use of other writing instruments (in the UK a recent survey reported that more than 50% of people less than 25 years old had never written a letter by hand). Still further factors must be included to define competition completely. Many pens are given as presents, so competition includes alternative present choices, a book, a music CD, a necktie and so on. Many more are given as business gifts, so competition here ranges from pen pots to calendars. No doubt this picture could be extended. Certainly you can consider in a similar way any product or service your organization may provide; it may be a sobering thought and produce a longer list than might first be imagined. Planning has to accommodate all these kinds of things, and more; and still work effectively for you. LIMITED RESOURCES In any organization, even a small one, there are different resources, especially people, time, and money, competing for attention. All sorts of options exist. Do we spend more on research and development or on new computer equipment? Do we extend our business geographically or concentrate on better exploiting the areas we are in now? Such questions and relationships are almost endless and often more than a limited choice between two decisions is in question. Often only one course of action can be taken. Resources are not interchangeable. If George is to set up a new office, then he cannot – at least at the same time – be doing something else that demands the same time. Planning must address this situation. It is planning that produces a basis for such decisions, and leads to the allocation of resources and the focus on whatever are decided to be key activities. DRIVING THE BUSINESS Any business has a certain momentum. But its operation should not be either a case of an automatic perpetuation of the status quo – more of the same – or of constant reaction to circumstances. This latter is particularly to be avoided if it constitutes unthinking reaction to

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difficulties – a process that can sometimes best be described as panic. Similarly, even if thought is involved, constant ‘‘firefighting’’ prevents time being spent on what really matters. Planning, and the existence of a sound plan, gives the business direction and helps ensure that the expertise and the right action are lined up behind what matters, so that those things that support the core of the business are given full attention. OPERATIONS MUST BE CONTROLLED A fourth point addresses the question of management control. Any business must know how it is doing. This is not just for the satisfaction of ‘‘keeping the score,’’ as it were. Control is designed as a final part of the process of hitting objectives. If the signs are that all is not going well, this is flagged by the control system. This should give sufficiently early warning for corrective action to be taken to ensure that progress towards goals set can be put back on track. There is a positive side here too. It is just as important to react diagnostically when things are proceeding better than expected; more of this in Chapter 6 ‘‘The State of the Art.’’ SUMMARY Thus planning is undertaken to provide a solid base from which the business can operate. It is, or should be, essentially practical; that is, doing the planning, and having the plan, should make it easier to run the business. Certainly it is sufficiently important that no new business, or new business development, is likely to be supported by an organization’s bank without a sensible and well-documented plan being on the table. That alone is enough to make many who doubt the value of business planning to think again. The plan for the year – the annual plan – may well be an integral part of longer term planning (say for three years ahead) with the operational plan for the immediate future linking to outline plans, and lines of thought, for the longer term. However it is defined in a particular organization, a good plan will: » identify opportunities for future profit improvement; » have the ability to anticipate dynamic external changes;

WHAT IS BUSINESS PLANNING?

» » » » » » » »

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provide better protection for the future of the business; prompt the collection of relevant data; allocate the company’s resources towards specific ends; underpin the process of control; assist with clear communications around the company; focus individual efforts and assist personal motivation; provide a proper commercial reference for all activities; and justify development (and development funds).

Further, if it is to be a practical process, it will help if: » the approach is an integration of ‘‘bottom up/top down’’ (i.e. it involves people throughout the company); » the system and purpose is clear to all; » standard (tailored) planning formats are used; » a planning cycle, specifying all timings, is agreed; » the planning includes a facility to ‘‘fine-tune’’ (particularly to take advantage of opportunities); and » an eye is kept on the external reactions to everything done to facilitate ‘‘fine-tuning’’. Someone must take responsibility for the planning process (and give some time to it), while others must agree to be involved as necessary. Some discipline may be required here as other pressures so easily intrude. In the context of this work and with smaller businesses in mind, while all aspects of business planning are important, the promotional aspects – the things that will bring in the business – are key. So often organizations refer to their business plan, and also to a marketing plan; the latter is simply a core element of the whole. That said, every aspect of the business needs planning. Whether an activity is significant or not, in the sense that there is an HR department for instance, it needs a plan. But in a small business so too may the proportion of the general manager’s time that goes on HR issues be significant in the absence of any sort of department. Essentially you must ensure that you get planning to address issues that are important to you and your business, whatever they are and whatever their scale.

02.09.03

The Evolution of Business Planning » » » »

An increasing need Small business assistance Towards excellence Summary

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‘‘There are three kinds of companies: those who make things happen; those who watch things happen; and those who wonder what’s happening.’’ Anon. (quoted by American marketing guru, Philip Kotler, in his book Kotler on Marketing) Business planning is a perennial skill. When the early cave men were setting up a first co-operative to make and sell fish hooks they would have quickly learnt to plan. The need to kill sufficient animals to source the bones they needed had to be matched against the number to be traded. Every aspect of business would have had to be addressed in a practical manner. If they were to swap fish hooks for food, and their planning was misjudged, they risked starvation. That said, useful background about business planning comes only from the last 50 years or so; the period during which there has been a progressively increasing formality and focus on all matters to do with the skills of managing a business enterprise. AN INCREASING NEED The background is best commented on in terms of large and small companies. Large companies Though planning was doubtless always necessary, the spur towards more sophisticated planning methods came as a result of the drive for organizations to grow to large size; a trend that started in the 1970s continuing through the 1980s and beyond. Cash made from core businesses went into growth and acquisition and the resultant entities were such that more formal planning processes were needed than in the past, to initiate and control action. What proved an unwise and complex combining of disparate business interests created in turn more complex management structures and increased administrative processes – all of which needed to be tamed, if possible, by better planning. Then in the mid-1980s these broad growth policies, some of which had proved less than successful, became less attractive and the emphasis

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switched to a focus on core business areas (the ‘‘stick with the knitting’’ of the best-seller In Search of Excellence). This trend too required a tight planning focus. By now planning had become an accepted core element of most large companies’ operations. A further spur to this was the development of and fashion for using planning devices of one sort or another (such as the Boston Grid – see Chapter 8 for details of this and others). Strategic planning was now firmly on many an office door and large organizations retain a commitment to it and continue to have specialist staff and departments to assist in completing the process. At the same time (since the 1970s onwards) the management consultants have seen this as a major area of work – with numbers of firms providing assistance with planning, or training in how to go about it. All this tends to suggest that planning works; or at least that it is useful. The large firms with a major commitment to this would not continue to invest in the planning process if it had been seen to be even of doubtful value. Smaller firms may take some note of this. Small companies The smaller firm has not been untouched by what larger ones have been doing. Because of the trends reported above, management literature has reflected the need – and the detailed methods – of planning, and few can be unaware of its prevalence. However, small business has always been schizophrenic about planning. Those running a small business rarely voice a logical argument against it or believe it to be a ‘‘bad thing.’’ They just relegate it down the priorities so that it is either not done or done inadequately. A negative circle develops from poor planning – it does little to help manage the business, and so it is again regarded as unessential. However, while this situation prevails, small business has – certainly since the seventies and more so since the eighties – been the recipient of many factors seemingly designed to make life more difficult. These include: » financial pressures: taxation, interest rates, more pressure on cash flow; » administrative burdens: largely, so the conventional wisdom has it, government-inspired. Whatever the truth of that, paperwork – from

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matters linked to employment law to the provision of information to compliance with edicts of all sorts – does take up significant time; » competition: market conditions seem to get more and more competitive; and international competition is a major factor in this picture; and » technology: of all sorts, and information technology in particular, is a wonder of the age. There is no doubt that it brings major efficiency and convenience; but it also brings cost, a steep learning curve and an apparently built in obsolescence that means many people feel they are on a technological rollercoaster and there is always something new to get to grips with. All this, plus recessions and a general pressure on margins, makes the job to be done in small business a challenging one to say the least. They add up to the fact that running a small business is a risky business; and sometimes the risk is considerable and the penalties for failure very personal (especially for the owner/manager). One other factor, itself a reflection of the other difficulties that have become inherent in running a small business, is the agencies set up to help small businesses. SMALL BUSINESS ASSISTANCE There are a number of agencies set up specifically to assist small business. In the UK at least, and similar situations exist elsewhere, they are subsidized in one way or another by government. Here in the UK they have had a turbulent past. Because government can seemingly not resist the urge to tinker, and often to tear up and replant, there have been a series of business agencies in the past. As each has come along it offers slightly different facilities on a different basis; as I write this the Business Link network is being replaced by another set up, as yet incompletely defined. But business planning has always been one of their priorities. That said, they are useful; if you have anything of this nature near you it may pay to check it out. They may do just what you want, and you may be allocated an advisor whom you like, and who knows their stuff. See Chapter 9 for more information.

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The conclusion of even momentary thought about this is that planning has become more necessary than ever before. It is not just the bank that demands your business has a sound plan, it is the overall circumstances in which you operate. A good plan, well considered and worked out, will help cope with all the problem areas listed above. True, it may not negate them all, but let us be realistic; there is no magic formula to which many will yield. But they are reduced by a systematic approach, by attention to detail and by using planning to minimize every disadvantage – and, equally important, to maximize every opportunity. From being a routine or a ‘‘good’’ option if there is time, planning has gone to being a must. The unplanned business leaves itself wide open to external disruption to its operations; worse, it allows opportunities to go stillborn because they are either not recognized or not addressed in the right way. As the twenty-first century gets under way we are in the age of business planning for good reason: it is necessary, and it offers practical help in achieving business goals. TOWARDS EXCELLENCE Finally, let us look at what creates excellence. Since 1982 saw the publication of Tom Peters, and Robert Waterman’s seminal book In Search of Excellence, the term has been applied to those organizations whose success is most pronounced. The main prerequisites to success listed by Peters and Waterman said that excellent companies: » » » » » »

had a bias for action; were close to their customers; had autonomy and entrepreneurship; believed in productivity through people; were hands-on and value driven; stuck to the knitting (i.e. focused, without distraction, on core activities they knew); and » had a simple form and lean staffing. Commentators have not significantly altered these since and they remain valid today. A moment’s thought shows that these are all

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philosophies that are dependant on planning. Planning, or certainly the thinking that planning implies, makes adopting the characteristics and approaches of an excellent company easier. This is nothing to do with the size of an organization. It is, to take one example, just as important for the small company to be close to their customers as the large. Understanding customers and organizing business approaches to maximize meeting their needs and delivering the quality and service they want surely makes sense for anyone intent on being successful. To do so it is necessary to spend some time thinking about customers and what they do want, talking to them, researching them and looking at how they are dealt with by other organizations. The information gleaned from this sort of examination needs transforming into an inherent element of the company’s philosophy and operating approach; what is that if not planning? All the facts about what makes companies successful, and all the trends about how this will change in future, demand a planned approach. They illustrate that planning is only a practical response to the circumstances in which modern business operates. Recognizing this is important. So too is acting on it. For the smaller business it must not be allowed to take over and waste time, a manageable planning approach must be found. Finding it can make the difference between success and failure. SUMMARY The brief history here has certain common sense morals. Certainly a recognition of the dynamic nature of the business environment is one. If nothing really changed year on year, then you could operate knowing what would happen. But, of course, things do change. The implications for planning are clear. » One of the prime reasons for planning is as a response to dynamic circumstance. You can never know what circumstances will prevail in the future, but planning bridges the gap between total ignorance and certainty – at least to some extent. » Changing circumstances also affect the form planning must take. For example, if you find you have more, or more active, competitors than

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in the past, then time spent assessing their activity and anticipating their next moves may need to become part of your planning process. » Changing demands from others for whom your plan is significant may also dictate how it should be done. You may need to provide more detail for the bank, or it may be prudent to be more open with staff about certain plans, in an environment where staff increasingly expect a higher level of consultation by management. Looking ahead as you contemplate the next planning process and taking an informed and open-minded attitude to change will help ensure that the planning you undertake remains relevant and that each plan you produce will be genuinely useful.

02.09.04

The E-Dimension » » » » »

The power of technology Forecasting Technical assistance Best practice: analyzing customer profitability Summary

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‘‘Rushing gleefully into the information-laden future – a future in which we will be increasingly willing to replace direct experience of the world with mediated data about the world – we may find that an obsessive fascination with information has some unpleasant consequences.’’ Hugh Mackay, Australian market researcher PLANNING THAT REFLECTS FAST CHANGING TECHNOLOGY The pace of change is a fact of life and nowhere is this truer than in the area of technology. If your organization is involved in markets and products directly affected by this, then planning must reflect the need to act quickly. A couple of examples make the point. Example 1: Competitive intelligence A basic element of most company plans is to cast a glance, indeed to study in some detail, the state of play with the organization’s main competitors. As one obvious example of how much quicker and easier technology has made some things, just consider Websites. In many cases a few minutes logged on to appropriate sites can give you a lot of information about competitors – from their own sites, and also from banks or industry information sites. Example 2: Planning for product development Sony is one organization that currently seems to deal well with this situation. One tactic developed by Akito Morita, when he was chairman of Sony, was to follow the launch of a new product by establishing three teams. These had different roles, which were: » team one: had the task of developing short-term improvements so that the next, revised, version of the product was better (and kept up with or ahead of competition); » team two: looked further ahead and were responsible for mediumterm improvements; they had more time and could aim for more radical development; and

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» team three: had the task quite simply to make the new product obsolete by coming up with its replacement. This kind of approach is clearly designed with an acceptance of the fast changing world in which Sony operated; it is very different from the ‘‘watch-and-see,’’ or ‘‘do-we-need-to-change-yet’’ methods of more traditional companies. Of course planning must look ahead, and it must be organized in such a way as to prompt creativity, as is doubtless the motivation for Sony. But it is also concerned with the fundamentals, with providing a secure basis for the business, and it is in this area that information technology has perhaps the most to offer. THE POWER OF TECHNOLOGY There are still small businesses where the accounting system is manual and the planning involves the back of one or more envelopes. Such may be successful too; planning is primarily a thinking process and this can be done with no great formality. As such it can benefit any business and should not be ignored or avoided just because it can seem complex or time-consuming. Any degree of complexity risks the simple approach missing things and, when a more formal approach becomes necessary, technology can usually help. Consider first the way in which the major areas of information technology can help. » Word-processing: just about the simplest form of IT, this is invaluable in developing written plans – ideas can be documented, discussed, challenged, revised, and refined with the process of amendment being done promptly and the whole process moving along apace. If planning falters, the problem is likely to be with the people, not with getting plans into print. » Data processing: the ability to manipulate data, quickly and precisely, has never been greater. Whether the necessary detail relates to sales revenue or profitability, product mix, stock control, accounting information – whatever, it can be calculated at the touch of a button. Additional facilities assist other aspects of planning. For example, the

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ability to turn a plethora of figures into a neat graph can transform the ability to communicate effectively around the organization. » Information storage and retrieval: there is no excuse for not having the best data to work from. Integrated systems can these days juggle the information into whatever form is required, store it conveniently ready for use, and make updating it straightforward (and thus more likely to occur). » Integrated systems: crossovers between such things as ordering and accounting systems are now routine and much duplication has been removed. » Interactive systems: more sophisticated perhaps, but diagnostic systems can increasingly link what has happened to what should happen – for example by extrapolating results or producing models of the future. There are several results that flow from all this change. » Though initial investment in (computer) equipment is necessary, running costs are lower – certainly planning tasks are possible where previously the amount of detailed work ruled out getting to the same level of precision. » Information used for planning should not be in doubt; it should be accurate and up to date. » Equipment, and staff skills need to be kept up to date if abilities here are to be maintained. » Some action is necessary to protect systems; if the computer goes down in the middle of the planning cycle, it may make real problems. » The ability to record, source, analyze, and manipulate information and particularly numbers and statistics is easier and quicker to do than ever before. As business methods themselves adopt an increasingly electronic element, there is a direct link between some new methods, the collection of data, and thus planning. Take Websites as an example. With, say, telephone contact, collecting information about how many potential customers contact you and how they heard of you demands that a number of things is done. A count needs to be kept, the right questions asked, and a record kept of the answers. The information collected needs to be transformed into a form useable and useful for analysis and

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so on. All this can be programmed into the Website. Contact information is stored automatically, with people completing information about themselves as they interact with the site. Later the totality of this sort of information can simply be printed off. Overall, modern technology should assist planning. This is what is said in Online Planning – how to create a better business plan using the Internet (G.N. Cohen, Career Press): ‘‘The widespread availability of the Internet and World Wide Web gives you the opportunity to improve your business plan by accessing current marketing, managerial and financial information. Previously, most of this information was available only through back issues of magazines, public libraries, and government archives. Now it can be obtained on personal computers at home or in the office.’’ Amongst the areas of information this book suggests are available in this way are: » » » » » » » » »

statistical, financial, and economic data; business plan outlines; market research; target marketing; choosing a franchise; selecting a location; advertising strategies; obtaining bank loans; and raising venture capital.

More becomes accessible every day. FORECASTING An attempt to predict what the future might hold for the business is an inherent part of the planning process. This must be thought about in the right way. On the one hand remember what the physicist Niels Bohr said: ‘‘ Prediction is always difficult, especially of the future.’’

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And of course this is right; forecasts are never one hundred percent accurate (or if they are, bless your luck and be sure to take the credit for it!). On the other hand forecasts are useful; and the more accurate they are the better. Their accuracy depends on: » the accuracy of the data on which they are based; extrapolating a figure which is only an estimate anyway is unlikely to give a good prediction; » the assumptions that are made which, in turn, reflect the quality of the thinking and analysis that underpins the planning process; and » the methods used, especially the statistical methods used. In terms of technology therefore, if you do not understand, say, regression analysis (or indeed do not want to do so), then there is software that does. Somebody inside, or close to, the organization may need some skills in order to select and deploy the right technology here, but it can be done – and forecasts can benefit from it. That said, and without diminishing anything said about forecasting methods, judgment remains important. It is always a major factor in planning ahead. Some things have major significance, a company’s whole future may depend on them – like the vexed questions facing mobile phone companies (how much of the coming new technology will their customers actually want?). A decision has to be made about the likely outcome. Technology changes so fast currently (and there is no sign of it slowing) that there is always something to be considered; and however much things are researched personal judgment will always be part of the process. The box below gives a current example. YOUR CALL IS IMPORTANT TO US, YOUR CALL IS . . . We are all familiar with the automated telephone system, and especially with the labyrinth of options and queuing that is necessary to get you through to a real person in so many organizations. Technology has improved this over time, for example by producing systems that tell the caller the length of time they will have to wait. Now the next generation of systems can incorporate a facility to

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respond to people in the queue, record their number, and initiate a call back to them when they reach the front of the queue; and tell people what is happening. As a customer this sounds good – I can think of a few organizations which I would love to see buy this tomorrow. But there is a cost. So when does a company plan to adopt such a system? Act too soon and it may cost more, though customers will be impressed. Act too late and your customers will go through a period of feeling you are old-fashioned and uncaring compared with others. A decision needs to take account of cost, likely takeup of the system and competitor action . . . and much more. You can never be sure what the right action is, it will always involve judgment; and just when you have decided on your reaction to the latest technological innovation, technology will produce another change that demands your attention.

TECHNICAL ASSISTANCE For the smaller business, which may not have specialist staff able to utilize computer technology that goes beyond whatever others in the organization regard as the basics, there is help available. Two sources make the point. » Banks: many people have a love/hate relationship with the banks – and with their own. You pay for their services (much too much you may say!) so you may as well get the best from them. The most help here is relevant to small and start-up businesses. You may want to take on board the bank’s experience of business planning or, more important, you may want to do it their way because their funding is dependent on their liking your plan – both what it says and the way it is done. Not only do the major banks provide guidance here (see Chapter 7 for more about this), they provide specific planning formats – and do so on disk. You can simply take a disk out of their pack, slot it into your computer and fill your plan in under their headings (though of course you can also use it as a starting

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point and tailor it to your precise circumstances). For a simple plan this may be all you need. » Accountants: an element of the plan links to your accounting system and similar things apply here. Use the computer system that your chosen accountant recommends and uses, and you will certainly save time and money. They can train someone to use it, they can adapt the standard version just for you and they can help link it to any other allied systems that you want. Again, technology has changed the way this can be done. They might well have experience of the slightly more specialist systems needed and used in our next example. BEST PRACTICE An example is always useful to demonstrate the practical potential of an area that may sound, to some people, like over-engineering. So here is comment about an element of planning which is towards the middle of the complexities involved. It is a common situation that organizations find their business reflects Pareto’s Law (the so-called 80/20 rule) in terms of customers, with something like 80% of revenue, or profit, coming from maybe 20% or so of the customer list. So far, so normal; but given the importance of this, planning must reflect it. And computer processes can make the necessary analysis straightforward. One aspect of this is the analysis of customer profitability. Analysis of customer profitability This has come to be more important as customers have polarized and the big have got bigger. As customer demands or services offered (or both) extend, more and more margin is vulnerable to being eaten up in just getting the business. Any company that analyzes the costs of obtaining business may be shocked at just how many things seemingly conspire to reduce margin. Using an unspecific example that uses headings applicable to a consumer goods product, these costs might include: » all the costs of the field sales force (from recruitment to commission); » account development (which with a large customer may go beyond the simple sales relationship);

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» discounts (and there may be many different bases for them, e.g. quantity bought or when purchase is made; and some are retrospective); » any special packaging and packing; » delivery (maybe to multiple locations, labeling; credit terms (and beyond)); » returns and damage; » advertising and promotional support; » merchandising assistance; » training of customers’ staff; and » financing (including special credit terms). These sorts of cost are all in addition to normal production and distribution costs. A format can be worked out listing all these costs. In addition, a further dimension can be added if necessary in terms of the relative profitability of the sales of different products in a product range. That done, planning can take into account the true picture, rather than being misled by the simple large revenue figure against large customers. There may still be questions to be asked, about, for example: » sales approaches and account management; and » negotiation involved in major business. And about the individual items of cost. » Are discounts consistently handled or does clear policy need devising or modifying? » Can training continue to be provided for customers’ staff at no cost? » Do credit terms need review or change? Etc. If this is beginning to look a little complicated in terms of the amount of work necessary to come up with all the information, remember that this is fielded as an example of technology assisting planning. Although personal input and judgment is necessary in setting things up – everything here can be computerized. With such a system in place, once the information is input, the true profitability picture is available at the touch of a button. This in turn highlights the areas to question and consideration of areas so flagged can lead to action of immediate and significant benefit to the business.

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Linking back to the last example: once the real costs of various discounts are realized and totaled, then action can be taken – perhaps on policy and in negotiating skills – to reduce costs if necessary. The point here is that the rise of electronic methodology has allowed matters of such detail to be faced and handled with greater ease than ever before. Remember too that in this example we are talking about analyzing and then planning around a small proportion of customers whose business may contribute 80% of sales and profit. SUMMARY Given the need to plan, and the need for planning to be based on sound information, there are key principles here to be noted. Technology will doubtless continue to produce new things to wonder about as planning is done, and some of this may cause difficulties, or at least uncertainties. More positively, electronic methodology can: » save time and reduce costs; » ensure greater accuracy and therefore allow better plans to be produced; and » make possible analysis, and therefore consideration, of information the manipulation of which would be impossible (in terms of time, cost, or both) done manually. Planning can usefully utilize every method that improves the quality of what the plan can do for the business. You might rule out some planning methodology – the more sophisticated methods, if you like – as being impossibly costly, time-consuming or just downright over-complicated. If this occurs with something that could act to help improve results, then it might be an opportunity lost. In addition, it may be important for the thoroughness of the work on which plans have been based to be visible (for example to the bank). Technology offers assistance with a great deal in this area and helps you create better plans in the process.

02.09.05

The Global Dimension » » » » » » » » » »

Why do business overseas? Overseas is different Research Finding out and making decisions Planning how to organize matters International options Suitable support Some invisible exporting Key factors necessary to success Summary

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‘‘The future is out there in the world, and the one place you won’t find it is the place where most people look for it. It’s not in your office.’’ Faith Popcorn, American business consultant You may already view your market as international, or you may aim to grow and do so one day. If you are to deal with overseas markets, doing so must be approached as part of your planning. First, consider the opportunity.

WHY DO BUSINESS OVERSEAS? There are a variety of reasons. » Market size: the simple fact that the world is a bigger market than any one local market, and that particular markets are individually worthwhile (e.g. the USA takes more than 15% of the UK total export, valued at more than £200bn). » Diversity: some markets may be especially well suited for a particular product or service and thus provide special opportunities. » Safety: operating in more than one market protects you from the ups and downs of one (which may be either seasonally or economically prompted). » Interest: this may be less ‘‘business-like’’ but is nonetheless important to the smaller business; perhaps you want to travel or have international involvements. So, provided it is financially sensible – why not? » Utilising under-used capacity: overseas sales can allow production increases, reduce unit costs, and increase profits. The reasons that make it right for you need thinking through, appraising honestly, and then – for the smaller business – it needs linking to plans for where you will operate, at least initially. The megalomaniac tyrants in the movies may say and tomorrow the world!, but realistically just one, or a small number, of territories may need to be selected to keep things manageable, at least initially.

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OVERSEAS IS DIFFERENT It is important not to underestimate the differences of operating away from your home base. It is not just that people may speak a foreign language; other factors are involved. » Distance: with the attendant higher cost and time this involves. » Contracts: must be honored and may involve the complexities of international or foreign law. » Credit: longer payment terms are common and this will directly affect cash flow and financing. » Local differences: can mean difficulties caused by everything from political changes to customs and documentation problems; » Culture: the way people operate may itself be different in both small ways and large. Some understanding is necessary if business relationships are to be built successfully. » Foreign currency: no one should operate overseas without clear knowledge of the currency implications. » Physical distribution: local delivery can be problematic; delivering half way across the world with attendant insurance, shipping, and packing implications is not to be undertaken lightly. The need for specialist knowledge in these kinds of areas is obvious. Planning must reflect the need to be appropriately set up for overseas trade as well as the need to be able to operate and sustain it. RESEARCH The principles here are the same as with any business venture: forewarned is forearmed. You need to do your homework; and much of this needs to be done market by market. » Desk research: a great deal of information can be obtained from publications, Websites, Chambers of Commerce, business libraries, etc. Such information will include: details of the market (economics, currency, business practices, currency, etc.); market size; competition; operating practices (duties, taxes, quotas, etc.); standards to be met (quality, safety, etc.); potential customers (location, creditworthiness, etc.); distribution (packing, insurance, etc.)

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» Field research: you will also need to check things out on the ground, as it were. Visiting a market costs money (and it is easy to make the mistake of thinking that it can be done on a rapid in and out basis). But there is no substitute for talking to people direct and seeing what things are actually like, whether contacts are potential customers, competitors or distributors or other potential collaborators. There are plenty of sources to help this process, both at home and overseas, but you must be sure that information is up to date, that advice is genuinely helpful and that promises mean what they say. Time spent on reconnaissance of all sorts can pay dividends. The box below begins to suggest some of the questions to which you must have answers before moving too far or too fast.

FINDING OUT AND MAKING DECISIONS Ask: » which of my product/service ranges is suitable for overseas sale? » which makes a suitable starting point? » do products/services need adaptation to help (or make possible) their sale overseas? » what mandatory regulations or other factors affect the product (e.g. local voltage for electrical products)? » is climate a factor (e.g. chocolate has a ‘‘less-likely-to-melt’’ formula in hot countries)? » is the product name suitable (not being a trademark elsewhere or rude in a foreign language)? » how is labeling affected? » does language pose any other problems? » will different promotional materials be needed? » what about servicing (e.g. of machinery)? » how well can you afford to keep in direct touch with on-territory visits? » what can you do from base and what must be done on the ground?

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» how will prices be set (including discounts if you go through intermediaries like distributors)? » what other additional costs are involved? (e.g. landing charges or air freight if things are urgent). Such a list can only be a starting point. Many questions must be considered and answered before initiatives can be taken in this area. In terms of planning, one of the most important things to do – at the start – is to allow time and resources for this to be done systematically and thoroughly. And remember that such time may be invested only to discover that one factor or another means that a particular market is shown not to be viable.

PLANNING HOW TO ORGANIZE MATTERS There are a wide variety of ways of becoming involved in international trade. The potential methods are not mutually exclusive, but what is best needs careful research and the chosen methods will need action plans to make them work just as any other part of the business does. As a starting point it may be worth having one person head up overseas operations. If time and resources are exclusively dedicated to it, then it is more likely to succeed. It must not be planned or organized in any way that allows it to be the ‘‘poor relation.’’ Lack of commitment is almost always a part of any failure here, and this has its roots in insubstantial planning. INTERNATIONAL OPTIONS To review how your overseas business can be approached you need to consider the various ways in which international business can be organized. The following is adapted from the ‘‘Global Dimension’’ section of the ExpressExec volume on Sales Management. This lists the main options for organizing international operations. Export marketing This means selling goods to overseas customers but doing so from a base in your home market. Essentially this implies physically shipping goods

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across the world. This may be done by the organization themselves: for example, using their own fleet of trucks to ship goods to Europe or beyond. Its execution may be dependent on the use of shippers, whether goods are to travel by road, rail, air, or sea. It can be done with no, or little, support or presence in the final market; but is an area that demands specialist knowledge of such things as export documentation, shipping, insurance, credit control, etc. as well as marketing. Export with a local presence The form that a local presence takes clearly affects the way a company operates and thus the nature of the operation involved. Maybe the company will have certain facilities. » Their own local office: this will link with the headquarters and may handle independently a range of things that have to be done locally (and maybe done differently from the way they are executed at home); local advertising or service arrangements, for instance. » An agent or distributor: in other words, a local company that undertakes the local work, and marketing, on behalf of the principal. Such a company may specialize, only selling, say, construction machinery. Or they may sell a wide range of products, sometimes across the whole range of industrial and consumer products in the way large distributors – often called trading houses in some parts of the world – do. Sometimes such arrangements are exclusive, meaning they will not sell products for competing manufacturers; sometimes not. Payment of such entities is often on the basis of results, but they cannot simply be set up and left to get on with it. Success is usually in direct proportion to the amount of liaison, support, and communications that is instigated between the two parties by the principal. International marketing This implies a greater involvement in the overseas territories, everything from setting up subsidiaries, to joint ventures and, in some businesses, local manufacture. The complexities here can become considerable, with components, for example, being sourced from several different locations around the world, assembled in one or more main centers

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and then distributed to and sold in many markets. Such is common, for instance, in the motor market. Licensing Here nothing may be done by the principal on an ongoing basis. They sell the right – the license – to produce the product to someone else. The deal may include help with a variety of set up processes (from the provision of drawings to machinery), but thereafter the local company runs their own show, and marketing, and payment is on some sort of ‘‘per product produced’’ basis. There are other methods also: for instance franchising, well known from the likes of McDonald’s and Holiday Inn, but used with a wide range of products and services. Management’s job is to select and use methods appropriately; and maybe to originate new ones. Any option will only succeed if its implementation and ongoing operation is well planned. SUITABLE SUPPORT Whatever way, or mix of ways, overseas activities are organized in, they must be well supported. ‘‘Well’’ means appropriately, systematically, and regularly – and usually it also means personally and often enough in person. For example, you cannot simply appoint an agent and leave them to get on with it. They need information, motivation, and possibly helping, training, even cosseting. Time and effort so spent pays dividends – and all these processes need planning and orchestrating with all the other aspects of the business. Despite the challenges inherent in doing business overseas, even small businesses can organize an international element to their activities and make it worthwhile, profitable, and useful in a number of other ways. An example will illustrate. Some invisible exporting A snapshot of the training business undertaken by the author’s company in South East Asia provides an example, and shows that services – socalled invisible exports – are also part of the international scene.

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This activity is not untypical of small business thinking; it is a mixture of the practical and of personal taste. First, it reflects the fact that, once a training course is originated, it is more profitable to conduct it numbers of times than to endlessly originate others. Secondly, overseas work and clients adds to the credibility of the business. And I like to travel. So, why South East Asia? There are several reasons: » it is an attractive part of the world, for the most part a pleasure to visit, especially in a miserably wet, cold British November; » English is widely spoken (though more so in, say, Singapore than in, say, Thailand); » English expertise is widely acceptable and, with English education having left its mark locally, this is certainly true of training; and » travel and accommodation costs are reasonable. Business was initiated from face to face meetings, and from small beginnings – trial courses for some of the management associations – it grew. In-company work was obtained too, in part via the first contacts where they acted as referral points. Some projects became regular, with certain public courses repeating once or twice each year. Crucial to success was a basis for maintaining the momentum of sales activity. It proved easier to arrange several visits each year than one. Three or four visits meant that it was never too long from one until the next planned visit, discussions on one visit could lead to work on the next. With several people traveling to some extent the frequency of presence worked well. In addition, because public seminars are planned well in advance, this assisted our ability to quote dates ‘‘when we will be there,’’ giving both a feeling of regular presence and of commitment, and a practical basis for agreeing in-company work. On larger projects air travel is funded by clients, especially if they want to guarantee a date, alternatively numbers of smaller inputs can be arranged with internal financing of the visit – the total revenue simply needs to be sufficient to pay for travel and leave an acceptable margin. KEY FACTORS NECESSARY TO SUCCESS » Quality of service: courses are seen as being delivered from an international context so they are not expected to reflect every

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» »

»

»

39

nuance of local conditions – but they must reflect key differences and give evidence of being delivered by someone who knows the area (as well as being good, practical programs). Continuity: it is vital to keep in touch regularly; out of sight is definitely out of mind without taking steps to maintain memory. Hassle reduction: although in fact – not least because of modern technology – it is not too difficult to keep in touch, visible efforts to reduce any difficulty and make the relationship work, despite the distance, are appreciated. So too are helpful actions which are manifestly more than the minimum necessary. Priority: what is also looked for is a commitment; people do like to feel that the region is a peripheral part of your business and that any one client is of no great importance – elements of all the other factors can be used to prevent this view. Understanding of their business and way of working: this affects many things, but one example makes a point. There is a distaste for guru-type speakers who set up a visit, not intending to come regularly (though that may not matter) and then, for instance, run up excessive hotel bills. So, I never charge alcoholic drinks at all, just as a small part of creating the relationship that I feel works best. Tolerance of things that create difficulties (like the Malaysian government’s reluctance to set public holidays for the year until about five minutes before midnight on 31 December; I exaggerate only a tad) may also be necessary.

Having analyzed matters in this way, planning must reflect these issues. Thus, course preparation must allow time to build in some recognition of local factors (and observation on territory must add new examples). Beyond that, the manner of liaison must be prompt and efficient, and time must be planned in amongst other priorities to ensure that the regularity, reliability, and continuity of communications can flow as necessary. Strategies are evolved around a set amount of time for work in the region. This is linked to the advance selling of public courses, and a regular series of visits then transpires. The scheduling has to fit both ends. For example, it is little use trying to schedule courses in Singapore around Chinese New Year, but August (which can be a low month in the UK because of holidays) is good. The centers have varied over

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time, one new involvement in, say, Jakarta or Borneo leading to further assignments worked out on the first visit, and with contacts linked back into the cycle of regular contact. The fact that there is such an overseas element to the mix of business activities certainly makes planning a more complex process. But some aspects of it fit well with the core business and it has produced interesting assignments and profitable work over many years. SUMMARY It is important to think about overseas markets in the right way. The following are key: » do your homework and check out the potential and practicality; » accommodate the differences; do not expect every market to be the same; » maintain contact, offer service excellence, and do not try to do everything at arm’s length – go there; » do not overreach yourself. Maybe you cannot deal with the whole world but a few selective markets may produce profitable extra business; and » plan carefully and ensure that your plans at home and abroad are compatible.

02.09.06

The State of the Art » » » » » » » »

Mission statements The core planning principles Compiling the business plan The promotional plan What do you need to incorporate into your plan? Marketing plans An element of control Summary

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‘‘The process of planning may be more important than the plans that emerge . . . Managers must think about what has happened, what is happening, and what might happen. Managers must set goals and get agreement. The goals must be communicated to everyone. Progress towards the goals must be measured. Corrective action must be taken when goals are not being achieved. Thus planning turns out to be an intrinsic part of good management.’’ Philip Kotler, American marketing guru It has been said that planning is only anticipating the inevitable and then taking the credit for it. In reality it is much more than that, of course, and the reasons that make it necessary – and useful – are explored in Chapter 2; changes making it even more relevant are discussed in Chapter 3. Here we review the art of actually doing it, doing it well, and making sure it is of practical use to your business. As Philip Kotler is quoted as saying, above, planning is a key element of the management job. The effective business plan must recognize and balance: » » » » »

the needs of the company; the needs of its staff (and other groups such as shareholders); the demands of the external environment and the market; the activities of competition; and the resources and capabilities of the organization.

The starting point should be having a clear overall view of the business. MISSION STATEMENTS This now ubiquitous piece of jargon describes what is simply a succinct, but all embracing, statement about a business and its role, purpose, and goals. It is not so much having a mission statement that is important, though it does have considerable merit in communication terms, acting to enthuse employees, customers, and shareholders if appropriate, with the feeling that the company knows what it is doing. Rather it is being able to construct one that is vital. For without thinking through much about the organization, writing such a description may be impossible, and if you are not clear in overall terms about what you are trying to achieve, how can you ever devise a detailed plan?

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Mission statements are not panaceas, they do act as useful means to an end. Preparing one is a logical first step in the overall planning purpose. They can be devalued by being turned into a public relations statement; this can result in something nice sounding, but less useful for planning purposes. Specifically, mission statements should: » define the kind of business the organization is in; » identify dimensions of business which current plans exclude; » focus on customers, specific customer categories, and customer benefits; » link to benefits to stakeholders (e.g. shareholders, owners, and, not least, employees); and » say something about the organization’s culture and values (these may be an important part of the profile of the firm, as with the Body Shop’s environmental attitudes). Note: one important point here: a mission statement is not an internal statement, it must describe the organization primarily in terms of its outside involvements with markets and customers. THE CORE PLANNING PRINCIPLES Essentially business planning stems from five key questions. These may seem deceptively simple, but between them they define the process, illustrate its logic, and dictate what must be done to accomplish it. 1 Where are we now? This needs addressing through research and analysis – and is sometimes called ‘‘situation analysis.’’ 2 Where are we likely to be (at a particular future time)? This is the situation addressed by forecasting, whether this constitutes an intelligent guesstimate or a sophisticated system and the likes of regression analysis. 3 Where do we want to be? This is simply your objectives: what you want to achieve and by when. 4 How will we get there? This relates specifically to the objectives you set – and specifies the strategies you will use to get there; it is the action plan. 5 How will we know whether we are on track and – ultimately – when we have got there? This reflects the needs for

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management control and control systems. It also reflects real life: no plan can be a wholly accurate description of what will happen. It is designed to be as accurate as possible and if you do achieve it, then that is good. But it is essentially more like a route map than a strait-jacket. It must not restrict you to one course of action, but allow – and help – you to take action to change and fine-tune things as a period goes by. This is just like a route map. You may plan your ideal route on that, but it will also help you find alternatives if things do not go exactly to plan (if your chosen route has road works, for instance). Now we address the actual process. It needs a clear, well-defined, and systematic approach. The next series of headings are therefore subsections of the overall approach, which encapsulates those elements currently seen as the main issues. This is intended to be a good, practical guide – and, not least, to demonstrate a manageable approach – hence the inclusion of simple forms to illustrate how actual compilation of the plan can be organized. Note: though core aspects are common, the detail of what any individual needs to do must be tailored to the situation of their own organization. COMPILING THE BUSINESS PLAN Naturally, writing a plan presumes that those doing the planning know the markets in which they operate, have clear marketing objectives and have the power to authorize or recommend action to agreed cost levels. All companies should have financial goals expressed in budgets of revenue and expenditure (see Fig. 6.1) and the first task is to note them. The financial aspects are referred to again in Chapter 7. However, since sales and profits can only be made from customers in the markets we select, the first task must be to translate the financial objectives into market objectives. These must answer the question, ‘‘What results must be achieved in the market place to produce the financial objective required?’’ Meaningful answers can only be produced by considering two interrelated analyses.

THE STATE OF THE ART

FORM 1 FINANCIAL GOALS

Financial Objectives Revenue (by product) A B C D Total Costs

Profit Comments:

Fig. 6.1

Form 1.

Last years’s actual

Next year’s plan

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FORM 2 STRENGTHS AND WEAKNESSES

Company Strengths

Action:

Fig. 6.2

Form 2.

Weaknesses

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» What opportunities and threats will be present? » What are the strengths and weaknesses of the company? These together form what is called a SWOT analysis (Strengths/W eaknesses: Opportunities/T hreats). More on this appears in Chapter 8. This only means taking a hard, objective look inside the company and out, before setting down more of the plan. Figs. 6.2 and 6.3, Forms 2 and 3, allow you to make notes under these two headings. The list below gives examples of the sort of questions that should be asked (this appears also, in a different form, in Chapter 8). Market opportunities and threats What do we know about our market? » How large is it (how many potential customers)? » What do they currently buy? » How much do they buy (e.g. annual/monthly spend)? » How often do they buy (i.e. frequency)? » Who do they buy from? » How do they find/locate potential suppliers? What do customers think of the market? » Why do they buy? And why do they buy the way they do? » What do they think of the product/service (e.g. good value, overpriced)? » What do they think of service from suppliers? How is the market served competitively? » Who are our direct/indirect competitors? » What are their strengths/weaknesses? What are the trends? » Is the market growing, contracting, changing, restructuring – and how is the competition reacting? Thus, for example, good information about how and why people buy may allow sales approaches that are better than the competition and

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FORM 3 OPPORTUNITIES AND THREATS

Market Opportunities

Action:

Fig. 6.3

Form 3.

Threats

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therefore provide an opportunity (which links to an internal strength). Conversely, the development plans of a competitor may represent a threat. Internal strengths and weaknesses What is our customer base? » Who do we deal with (by size, location, industry, etc.)? » What is customer mix (e.g. which category is most important)? » Are our customer groups increasing/decreasing in size? » How dependent are we on our largest customer? Range of products/services » Does it accurately reflect market needs? » How does it compare with competitors? » Is it too narrow/too broad? Prices/price policy » How do we set price? » Are we competitive? » Are we seen as offering ‘‘value for money?’’ Promotion and selling » Whom do we communicate with, how often, in what way? » What do they know/feel about us? » Are we selling the range? » Are sales contacts seen as providing good service? Internal factors » Does our planning help the business? » Is individual responsibility well defined? » Do we set appropriate standards/targets and measure and control to fine-tune performance? There is more here than can reliably be kept in mind, and thinking it through and making some notes that may influence action is valuable. Fig. 6.4 relates to objectives and strategies.

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FORM 4 OBJECTIVES A ND STRATEGIES

Objectives:

Strategies:

Fig. 6.4

Form 4.

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Objectives and strategies The next step is to translate financial goals into marketing objectives that bear in mind the SWOT analysis, then, with the objectives in mind, to identify strategies which could be pursued. The difference between objectives and strategies and the precise definition involved here is crucial: » an objective is a desired result in the marketplace; and » a strategy is a course of action to achieve that result. Let us take these in turn. Without objectives, it is impossible to focus and to place any tactical activities in order of priority. Yet the main options available to us in marketing objectives are limited, perhaps to six. 1 To increase market share. In a static market this can be done by ‘‘conquest selling’’ or winning business from competitors. 2 To expand existing markets. This objective will focus on selling the fullest range of products/services to existing customers and markets. It also presumes very close co-operation between those who are involved in different aspects of the business. 3 To develop new products/services for existing markets. This marketing objective can involve simply the revision of existing products/services or else the introduction of the radically new. 4 To develop new markets for existing products/services. This is more attractive and lower risk than some options, but is finite; especially so in some service areas where demand is already met. 5 To develop new products/services in new markets. This is an example of true diversification. This usually carries the highest risk of all marketing objectives. Many companies do not even consider such objectives. Future pressures, however, for the growth necessary to keep good staff, may force a reassessment. 6 To improve the profitability of existing operations. When growth opportunities are limited, many companies must in the short term seek higher returns from higher productivity and greater costeffectiveness of their operations. From the analysis of market opportunities and threats and the internal assessment of strengths and weaknesses, we can select the marketing

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objective(s) which will best achieve the financial goals for the planning period. Next, objectives must be linked to strategies, the purpose of the strategy being to focus effort, co-ordinate action and exploit identified strengths of the firm. By corollary, the purpose is also to avoid wasting resources on peripheral and non-productive activities. Clearly, different objectives will require very different strategies. For instance, the two might line up as follows. Table 6.1

Strategy alternatives for marketing objectives.

Marketing objectives

Some possible strategy alternatives

To increase share of the existing market

Marketing segmentation and concentration of resources on selected segments Developing product/service applications and range extension Range of registered firm names for different segments Increasing the frequency of customer purchase Increasing product/service usage (in other applications) Opening new branches Expanding the range of segments currently dealt with Overseas expansion Diversification by purchase/take-over Technological extension Exploitation of corporate resources and skills Improving the total product/service package offered to each account Marketing audit and productivity analysis Reduction of product/service range

To expand existing markets

To develop new markets for existing products/services To develop new products/services in new markets

To increase profitability of existing business

The selection of strategies need not be mutually exclusive. Often a combination that combines several different strategies can provide an

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even stronger effect in marketing plans. However, the greatest danger at the point of selecting appropriate strategies is that we may be tempted to adopt too many courses of action. Such a mistake spreads management too thinly and prevents commitment of maximum effort to the prime and most important courses of action. Business planning, and especially that part of it that relates directly to the market, must then begin with a thorough and creative attempt to choose the most appropriate focus of the entire firm’s marketing effort. The determination to concentrate simplifies the tactical marketing plans which must then follow for the range of products/services to be offered, the prices to be charged, and the promotional and selling actions to communicate with the chosen markets. Products/services and price Next, using Form 5 (Fig. 6.5), we turn to products/services and price. There are factors to be considered here, such as product lifecycle and positioning, which are beyond the scope of this work. However, we do need something that will prompt ongoing thinking about both. Products need to be changed and updated and must keep up with the market; services too. And price must be watched constantly for profitability and competitiveness; such decisions must not become merely formulae. A small firm, without long decision-making processes, may be able to steal an edge of competition with their use of price. (I once saw an independent petrol station compete very successfully on price with a large group rival across the road because it took them two minutes to decide what price to set, whereas their larger rival took two weeks to liaise with head office before a change could be made.) With products/services, consider particularly that: » long established, mature products/services may remain the same in principle as they were years ago, but they will have to change in detail to meet changing customer needs; » new products/services may have to be developed, both to meet new customer needs and to keep out competitors who see them as a means of ultimately acquiring more business; » there may well be opportunities to offer a range of differently priced variants for different customers and different situations; and

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FORM 5 PRODUCTS A ND PRICES

Unchanged products:

Modifications to existing products Products

A ction/timing

New products Products

A ction/timing

Deleted products Products

A ction

Price Products

Fig. 6.5

Form 5.

A ction

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» as any harsh economic climate forces corporate customers to seek productivity improvements in all functions of the business, so they become more demanding, but the same pressures may also produce new opportunities. And with prices, ask yourself the following questions. » How aware are customers of price – the actual levels and the hourly rates (e.g. car service)? » How do customers perceive price? Does, for example, a higher price imply in their minds higher quality or do they view price as a commodity factor, with no differentiation between firms? » Are there ‘‘price barriers’’ in a customer’s mind that we must avoid in any quotation for business (e.g. £100 or £10,000)? » How far can we price differentially because of the perceived and accepted reputation we have? Price is a critical area of the marketing mix and one that tends to receive too little analytical attention. Far too often, the decision is simply to keep in line with the competition or to work essentially on a cost plus basis. In fact, price should reflect the overall policy at the strategic level and show creative flexibility at the tactical level, up or down, depending on the threat or opportunity. THE PROMOTIONAL PLAN Successful promotional activity needs to be based on a continuous process of review and action, and preparing and implementing a comprehensive promotional strategy demands time, skill, and a systematic approach. This is an inherently important part of the plan and also makes a good example of the detail into which different sections of the plan must go. The checklist below makes clear 12 key points which will then be examined in more detail. They can be considered under five main sequential stage headings. » Analyze the market and clearly identify the exact need. » Ensure the need is real and not imaginary and that support is necessary.

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» Establish that the tactics you intend adopting are likely to be the most cost-effective. » Define clear and precise objectives. » Analyze the tactics available, taking into consideration the key factors regarding: » the market; » the target audience; » the products/services offered; and » the firm’s organization/resources. » Select the mix of tactics to use. » Check your budget to ensure funds are available. » Prepare a written operation plan. » Discuss and agree the operation plan with all concerned and obtain management decision to proceed. » Communicate the details of the campaign to those involved in implementing it and ensure that they fully understand what they must do and when. » Implement the campaign, ensuring continuous feedback of necessary information for monitoring performance. » Analyze the results, showing exactly what has happened, what factors affected the results (if any), and how much it cost. 1 Analyze the company’s needs The prime difficulty in the analytical stage is not so much the identification of the need, but ensuring that the need is real and not imaginary. Identification of a need can come from: » » » » »

formal, and informal, research; own company investigation; professional staff; specific market demands; and your own observations.

Such analysis is part of the total marketing review (and SWOT). With promotion, we are primarily concerned to show clearly the interrelationship between customer categories (i.e. the kind of firm/organization/individual they are), products/services, and business (i.e. new

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business – a new client, extension – an existing customer buying more, etc.). We may well have to plan different strategies to impact specific areas, for example to create sales to a specific kind of business with whom we have not had prior contact. Once a need has been clearly identified, it must be established that the kind of support you intend using is likely to be the most costeffective method of fulfilling that need. Then the planning stage can commence. 2 Preparing the operation plan The first stage of any plan must be the quantification of the objectives. A clear statement is needed of exactly what you want to achieve, stated as specifically as possible. Listing an objective ‘‘to improve business’’ is just not precise enough. Whereas an objective which states ‘‘to improve the number of new customers buying Product A by 50% this year’’ makes it clear to everyone exactly what needs to be done and above all how success will be measured. Once the objective is finalized the selection of tactics can take place. This will depend on a number of factors, including the following. The market available » What is its nature? » Is it buoyant or is it in a low period? » Is it price-conscious? If so, how? » What is the competition doing? » What is the customer profile? The target audience » Types of people/organization? » What are their buying habits? » What motivates buyers? » What are their current attitudes to promotion? The products/services we offer » What is our current performance? » What are the strengths and weaknesses?

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What promotional support has it received in the past? Capacity available? Market profile/image? Position in life-cycle (i.e. is it seen as new and interesting or old and dull)?

Organization of the firm » What are our current sales and promotional methods? » Would some tactics cause internal difficulties, e.g. in terms of administration or resources? » Is the company involved in any other activity which might affect what we want to do or detract from it? Having answered these questions, there may still be a number of alternative tactics, all of which could be suitable for achieving the objective. Which tactic to use will depend on which is the most cost-effective. Once the decision on tactics has been made, the details should be formalized into a written operation plan. It is always worth writing this down, even in a small firm. This should not be a one-off exercise, but will eventually provide a reference, which can be updated regularly so that it always sets out the plan for the next period. Planning of this nature is a ‘‘rolling’’ process. It should include: » background information as to why the promotional support is necessary; » the objectives; » profile of the target audience(s); » reference to product/service details; » details of additional support other than that which you are actually planning, perhaps that being done by associated offices, or various staff; » budget details – how much the action is estimated to cost; » details showing exactly how the plan will be implemented; » controls, standards, and methods of obtaining results; and » an action plan or timetable, showing what actions are required, when they should be carried out, and by whom.

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There are a variety of ways of making the decision on the budget more logical, for example using comparisons with competitors, standard percentages of revenue and so on. 3 Preparing for implementation As long as the operation plan has been correctly prepared, the preimplementation preparation should be a formality. This can only be achieved if the operation plan has been discussed and agreed with everyone concerned with the support activity, well before any action is required. This can ensure you pick up ideas (or identify snags) from everyone in the firm, some of whom may surprise you with their constructive comments. Do not forget, either, that if everybody feels involved they will more readily commit themselves to the next stage. 4 Implementation The success or failure of any promotional activity, providing it has been thoroughly planned, then rests on how well it is implemented. The effectiveness of the implementation will depend on how well the details are communicated around the company and then controlled. Therefore the details of what is to be done must be communicated in such a way that they are clearly understood by everyone. Effective methods of controlling the implementation must be set up to obtain maximum feedback while promotional activity is running. This will permit any necessary changes to be made at the earliest opportunity. 5 The analysis of results Any promotional campaign can involve a great deal of personnel time and is often expensive in terms of opportunity cost. This is true regardless of what is spent on the other aspects. You therefore want to know how money is being spent and what achievements are obtained from that expenditure. Examining the detailed results of every form of promotional activity will show clearly: » what the situation was prior to the activity; » what we aimed to achieve (the objective);

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» what the situation is after the promotional activity has ended (and what we have achieved); » whether there are any factors outside our control which might have influenced the result, what they were (e.g. competitive activity, legislation changes), and their effect; » what has happened to the rest of the market or at least our near competitors; » what the effect might have been had we not carried out the promotion; and » what the budget was and how it was spent. Careful analysis of what has been achieved is important, not least as part of the planning and consideration of what to do next, which should be occurring in a continuing cycle. No promotional activity plan can be carried out in isolation, particularly without linked sales follow-up and service along the way. This must be planned too, so, as an addendum to Form 6 (Fig. 6.6) – the promotion plan – Form 7 (Fig. 6.7) focuses on sales. Here we should think about and list who will do what. » » » »

How much prospecting will be done, when, how, by whom? Who will follow up leads, to what time-scale? What sales targets are necessary? What record will be kept?

Planning and implementing a soundly based systematic promotional plan is not easy, nor is ensuring that all the back-up resources, people, skills, and systems are geared to converting the initial enthusiasm created in potential customers into actual business. But it is certainly necessary and, done successfully, it provides a sound basis for securing and, more importantly, enlarging your business. (Note: Most people plan and work with the promotional plan (Form 6) best if it is in the form of a calendar. This creates an ideal rolling plan [a perpetual year planner will give you a 12-month view at all times] and the detail will fill out as time goes by. Thus, in January, 99% of the activity will be listed for, say, January to March, whereas only half can be listed at that point for the next part of the year. Using a wall chart with plenty of space and tailoring the headings to your

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FORM 6 PROMOTION PLAN

Advertising January February March April May June July August September October November December

Fig. 6.6

Form 6.

Promotion

Public relations

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FORM 7 SALES PLAN

Sales plan

Individual targets Name

Target

Actions/timing Name

Fig. 6.7

Form 7.

Action

Timing

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business will provide a practical planning and implementation tool and also shows the relationship in time terms between different activities at a glance.) Finally, it may be worth having one last sheet, Form 8 (Fig. 6.8), on which to note ‘‘other issues.’’ This flags the implication of the rest of the plan for other elements of the business. Here are some examples. » Does a sales initiative (involving formal presentations perhaps) necessitate training being done in advance? » Does recruitment need to build in the new skills required in future? » Does the organization or structure need changing (e.g. a new job description)? » Do systems/controls need adjustment? As has been mentioned, any – and every significant – activity area may need its plan as a sub-section of the overall plan. The box below lists possible areas, but think about what you need before finalizing a plan’s content. WHAT DO YOU NEED TO INCORPORATE INTO YOUR PLAN? Headings might include (in no particular order): » » » » » » » » »

management roles, structure, and succession; legal matters; research and development, and new product launch; action to alter relationship with competitors; production, quality control, and capital equipment; personnel and HR activity; training; information technology; design.

If these, and more, need their own section within a plan, so be it. Business planning, and all its components, is a broad issue. The foregoing represents a minimum approach; it should not put you off doing

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FORM 8 OTHER ISSUES

Issues:

Action

Fig. 6.8

Form 8.

By whom

By when

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more (and investigating more), but think carefully before omitting the thought or action implied in any of the areas that are specified. A sound foundation makes everything in this book more likely to hold up. Note: there is merit in keeping plans for the continuation of the existing business and new ventures separate (while, of course, ensuring that they operate in an integrated fashion); if that is done then new ventures may justify the addition of further dedicated forms. MARKETING PLANS The core of the corporate plan is usually regarded as being the marketing plan; after all, revenue comes only from outside the organization, so how markets are addressed is paramount. It is worth having a checklist style approach to what any individual section of the plan must do, an overview that specifies the core elements it should contain and the key issues it should address. As an example, the marketing plan should usually include: » a statement of basic assumptions regarding likely future developments (for example, short/long-term economic, technological and social changes); » a review of the past sales (revenue and profit) in as much detail of individual product, market, geography, and even major customers as seems useful; » a statement of the external part of SWOTs – the opportunities and threats; » an analysis of the organization’s strengths and weaknesses (the internal side of SWOTs), in terms of such factors as facilities, human resources and skills, finances, customer franchise, etc. – also parallel competitive information is useful here, so far as it can be ascertained; » a statement of long-term objectives and the strategies for achieving them; » a detailed statement of the objectives and strategies for the year ahead – taking this to whatever level is appropriate, i.e. individual product, market, and elements of marketing activity; » a specific action plan scheduling what will be done, by whom, and the full timing implications of implementation; this needs to deal separately with all the component parts of marketing utilized (that

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is, public relations, advertising and promotion, sales, etc. – and the detail of each). It is here above all that activity needs to link tightly to the budgets and financial statements; » a look ahead at how the plan for the next year will need to pick up from that for this (and for years beyond that depending on the organization’s scale of operation); and » a statement of priorities showing what is key to the plan and how the organization will capitalize on its opportunities, identify and correct any weaknesses, etc. A ELEMENT OF CONTROL Finally, never forget that one way in which plans assist the running of the business is with control. Two things are important here. » Corrective action: if actual results diverge from plans, then controls need a diagnostic element. It may be necessary to discover why things are going wrong and to fine-tune activity so that the deviation is overcome and activity, albeit revised, still produces what the plan intended. » Positive feedback: just as important is analysis when things are proceeding better than planned. Again, questions need asking and if useful lessons are learned there may be positive lessons to build into future plans. SUMMARY Details notwithstanding, the key issues here can be summarized in just a few words. A plan must be: » approached systematically; » based on sound information; and » practical and able positively to assist the decision making and action that drives the business.

02.09.07

In Practice » » » » » » » » »

What business are we in? An accurate basis for information Ensuring the process is creative The mechanics of brainstorming Doing the research No magic formula Some approaches to deciding the promotional budget Satisfying the bankers Balancing the books

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‘‘If one wants to be successful one must think; one must think until it hurts. One must worry a problem in one’s mind until it seems there cannot be another aspect of it that hasn’t been considered.’’ Lord Thomson of Fleet, former chairman of the Thomson Organization Business planning is important. You may have accepted that and taken on board the processes it involves, yet still feel completing it is a daunting prospect. In this section, therefore, the rationale for business planning and the principles of doing it are exemplified through a number of examples. The first reflects the most basic question of all. CASE: WHAT BUSINESS ARE WE IN? The thinking demonstrated here is an excellent example of how the most basic form of planning – just defining the business – can focus the mind and lead directly to new opportunities and growth. A company, let us call them Scaffolding R’ Us, leased scaffolding; they defined their business very simply and directly as the provision of scaffolding to the building trade. Just rethinking this took them through three stages, all of which helped their business growth. » First, they replaced the description building trade with construction industry. This broadened the market at which they directed their marketing efforts, taking them into areas selling to companies constructing, for instance, motorway flyovers, or to oil rigs (where there is evidently copious amounts of scaffolding) – effectively a different market and one of potentially larger order size. » Secondly, they described what they did less in terms of what they did, more in terms of what that did, in turn, for customers – providing temporary access and support. This took them into the leisure market, providing scaffolding networks to support seating at sports events and parades. » Thirdly, they refined that description with more confidence, stressing their skill and expertise in providing temporary access and support. This, in turn, prompted them to enter export markets. Not erecting their scaffolding overseas (clearly, shipping heavy steel poles is

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prohibitively costly), but running training schools for local organizations and their staff in new markets where building was a rapid growth industry. This kind of thinking can be very productive, and it is sometimes surprising how the status quo acts to blind an organization to new opportunities that only need a fresh look and an open mind to spot. CASE: AN ACCURATE BASIS FOR INFORMATION A personnel recollection: I was working with a medium-sized firm of Chartered Accountants (four offices across one county) and asked about their ‘‘typical client.’’ The senior partner described a family business of a certain size and type (the details are unimportant). I asked what proportion of their clients fitted this category and was told it was ‘‘about two-thirds.’’ Subsequent analysis – simple analysis – showed he had overestimated by twice the number, in fact one-third of their clients fitted the description. He was both out of date and had not troubled to check. Of the clients he personally handled, two-thirds did fit the description and up to a couple of years before, the proportion had been right across the firm. Times change. This is not just a matter of getting a few numbers wrong. It matters. In this firm decisions about marketing and promotion were being made on the assumption that the higher figure was right – promotional materials were being designed largely for the wrong kind of people. Probably their effectiveness suffered as a result. Moral: planning, and the strategic decisions that follow it, must be based on accurate information about what is happening. Now, we turn to more positive things. CASE: ENSURING THE PROCESS IS CREATIVE In a European management consultancy firm (with around 100 employees) two factors of their planning process are worth noting. Overall the process is systematic. There are prescribed formats and a planning cycle is scheduled and agreed well in advance. The dates for all the meetings this will necessitate are set, together, in advance. They are

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regarded as mandatory on those deputed to attend; this avoids the progressive delay that so easily creeps in when at one meeting the next is to be scheduled and other commitments necessitate its being set later rather than sooner. This is a sensible practical point worth noting. The process results in a written plan, and the use of this in communications and as a practical ‘‘route map’’ to drive and assist operations during the year is well proven. Two factors help, and both rely on sensible decisions having been made about the make-up of the planning group. The right individuals, a manageable number of people, and having all aspects of the business represented are the key guidelines here. Over and above the basics of getting the job done, creativity is fostered by: » Brainstorming: early in discussions, before there is a chance to get locked into simply extending the status quo or there is great pressure of time with deadlines looming, critical areas are reviewed in a wholly open-minded way through brainstorming (see box below). This makes sure that designated areas, especially those demanding attention or reflecting opportunities, are examined broadly ahead of discussion being locked into any particular option for action. This proved invaluable to the adoption of new approaches, and areas of the business have regularly benefited from this process, with radical plans kick-starting new ventures or changes acting as a catalyst to new – and successful – ways of working

The mechanics of brainstorming Brainstorming is a group activity and can be used to provide an almost instant burst of idea generation. It needs a prescribed approach: » » » »

gather people around and explain the objectives; explain that there are to be no comments on ideas at this stage; allow a little time for thought (singly or, say, in pairs); start taking contributions and noting them down (publicly on, say, a flipchart);

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» when a good sized list is established, analysis can begin; » grouping similar ideas together can make the list more manageable; » open-minded discussion can then review the list; and » identify ideas that can be taken forward. Such a session must exclude the word ‘‘impossible’’ from the conversation, at least initially (and especially when used in senses such as ‘‘It’s impossible, we don’t do things that way’’ (why not?) or ‘‘It’s impossible, we tried it and it didn’t work’’ (how long ago and in what form?)). By avoiding negative or censorious first responses, by allowing one idea to spark another and variations on a theme to refine a point (perhaps taking it from wild to practical), you can produce a genuinely new approach. It can be fun to do, satisfying in outcome and time-efficient to undertake – and a group who brainstorms regularly gets better at it, and quicker and more certain in their production of good, useable ideas. Try it, you might be surprised at the results; it can creatively augment planning and what planning produces. » Challenge: timing is always the bugbear of planning. People are busy running the organization now, and it can be that thinking about the future is categorized as a distraction. Here the timescale was specifically long to include a stage where draft plans and ideas could be challenged. People were encouraged to pick holes in the plan – and did so. Sometimes this led to further discussion, which then produced much better ideas; sometimes major problems were avoided. And this was only possible because planning started sufficiently early and an open-minded attitude amongst all concerned was carefully fostered. CASE: DOING THE RESEARCH To show that even neglecting basic things can throw a spanner in the works, I refer to an American firm who manufactured and sold a waterproofing treatment for buildings with flat roofs. They were successful Stateside and wanted to expand overseas, choosing Europe

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and the United Kingdom on little more than the basis that it was accessible and spoke the same language (well almost!). Their planning was painstaking, they set out plans which included moving key executives to and housing them in the UK, investigating materials and contractors, reviewing and selecting possible sites for their factory, building the factory, and launching their promotion just ahead of launching sales operations. They then asked a research company to do some market research, primarily to see in which areas of the country sales staff should principally be deployed. The results were a revelation. The incidence of flat roofs in the country was found to be only a small fraction of that Stateside. The market they had assumed was there was much smaller than they had anticipated. So far down the line in commitment and investment, they struggled on. But the factory closed again within a year. The moral: it is surely clear, planning – and even the most thorough plan – must always reflect the real situation. If that is not known, then finding out becomes a priority. Here, if only research had led the way, a great deal of time and money would have been saved. Perhaps it was a case of enthusiasm overriding common sense. And it is from America that the maxim ‘‘Ready, aim, fire! is always the best order in which to do things’’ comes.

NO MAGIC FORMULA Planning would perhaps be much easier if there was one set, and better still one straightforward, way to do everything – but there is not. Some things are more complicated. They must however be addressed. Inventing a simple formula that is just easy to apply, rather than dealing with the facts, is a mistake and leads to plans being wrongly based. One good example is that of deciding the budget for something like promotional activity. Various mechanisms suggest themselves, and indeed are used by some people, but the best way forward needs some thinking through. Doing so relates decisions to the job to be done and provides a much more realistic and useful way forward. The box below illustrates this.

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SOME APPROACHES FOR DECIDING THE PROMOTIONAL BUDGET Percentage of sales To take a fixed percentage based usually on forecast sales relies on the questionable assumption that there is always a direct relationship between promotional expenditure and sales. It assumes, for example, that if increased sales of 10% are forecast, a 10% increase in promotional effort will also be required. This may or may not be realistic and depends on many external factors. The most traditional and easiest approach, it is probably the least effective. Competitive parity approach This involves spending the same amount as competition, or maintaining a proportional expenditure of total industry appropriation or an identical percentage of gross sales revenue compared with competitive firms. The assumption is that in this way market share will be maintained. But competition may be aiming at a slightly different sector, and including competition in the broadest sense is no help. If we can form a view of competitive/industry activity it may be useful, but the danger of this approach is that competitors’ spending represents the ‘‘collective wisdom’’ of the industry and the blind may be leading the blind! It is important to remember that competitive expenditure cannot be more than an indication of the budget that should be established. In terms of strategy, it is entirely possible that expenditure should be considerably greater than that of a competitor – to drive them out – or perhaps, for other reasons, a lot less. Remember that no two companies pursue identical objectives from an identical base line of resources, market standing, etc. and that it is fallacious to assume that all competitors will spend equal or proportional amounts of money with exactly the same level of efficiency.

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What can we afford? This method appears to be based on the premise that if spending something is right, but we cannot objectively decide the optimum amount, whatever money is available will do. We look at: » what is available after all the other costs have been accounted for, i.e. premises, staff, selling expenses, etc.; » the cash situation in the business as a whole; and » the revenue forecast. Then in many companies advertising and sales promotion are left to share out the tail-end of the budget. More expenditure is considered to be analogous with lower profits; in others, more expenditure on advertising leads to more sales at marginal cost, which in turn leads to higher overall profits. Fixed sum per sales unit Similar to percentage-of-sales approach, except that a specific amount per unit (e.g. per holiday sold) is used rather than a percentage of pound sales value. In this way, money for promotional purposes is not affected by changes in price. This takes an enlightened view that advertising expenditure is an investment, not merely a cost. What have we learned from previous years? The best predictor for next year’s budget is this year’s. Are results as we predicted? What relationship has our spending to competition? What is happening in the market? What effect is it having and what effect is it likely to have in future? We can do the following. » Experiment in a controlled area to see whether we are underspending or over-spending. As the chairman of Unilever once said: ‘‘I know that 50% of our advertising expenditure is wasted, the trouble is I don’t know what 50% .’’ » Monitor results. This is relatively easy and the results of experiments with different budget levels can then be used in planning

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what next (though we must always bear in mind that all other things do not remain equal). Task method approach Recognising the weaknesses in other approaches, a more comprehensive four-step procedure is possible. Emphasis here is on the tasks involved in the process already described of constructing a promotional strategy. The four steps of this method are as follows. » Analysis. Make an analysis of the marketing situation to uncover the factual basis for promotional approach. Marketing opportunities and specific marketing targets for strategic development should also be identified. » Determine objectives. From the analysis, set clear short- and long-term promotional objectives for continuity and ‘‘build up’’ of advertising impact and effect. » Identify the promotional tasks. Determine the promotional activities required to achieve the marketing and promotional objectives. » ‘‘Cost out’’ the promotional tasks. What is the likely cost of each element in the communications mix and the cost-effectiveness of each element? What media are likely to be chosen and what is the target (i.e. number of advertisements, point of sale material, sales promotions, direct mail leaflets, etc.)? For example, in advertising, the media schedule can easily be converted into an advertising budget by adding space or time costs to the cost of preparing advertising material. The sales promotional budget is usually determined by costing out the expenses of preparing and distributing sales promotion material, etc. The great advantage of this budgetary approach compared with others is that it is comprehensive, systematic, and likely to be more realistic. However, other methods can still be used to provide ‘‘ballpark’’ estimates, although such methods can produce disparate answers, e.g.:

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we can afford £10,000; the task requires £15,000; to match the competition would require £17,500; and last year’s spending was £8,500.

The decision then becomes a matter of judgment allowing for our overall philosophy and objectives. There is no wholly accurate mathematical or automatic method of determining the promotional budget. The task method does provide, if not the easiest, probably the most accurate method of determining your promotional budget.

SATISFYING THE BANKERS A major reason for many smaller businesses to take an interest in business planning is that funding from their bank is dependent on it. The banks, not unreasonably, prefer to lend money to those who have given their business some real thought, however good the idea or opportunity on which it is based. Thus it is worth looking at what precisely the banks suggest that their clients do. Many of the banks produce literature about business planning. This is aimed primarily at start-up businesses, but those further down the line might well find useful information here too. Apart from general guidance in the form of text, there is usually information in format form. Barclays’ planning guidelines are a good example. There is a certain amount of information geared to new business (date of set up, etc.) and financial details; beyond that the information that they suggest is documented is worth noting. The headings used, just slightly paraphrased (presented in the bank’s material as a form with room to enter details) are shown below: » » » » »

My ultimate goal is: I expect to achieve the following (in year 1, 2 and 3): My market may be described as (e.g. type, size, location): My customers may be described as: My product/service is special because: (to which it is suggested that a comparison is run with main competitors on such factors as price,

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quality, availability, customers, staff skills, reputation, advertising and promotion, delivery, location, and after sales service; this list can, of course, be made specific to your operation) My main advantages over competitors are: My personal strengths are: (experience, skills, training etc.) My promotional and advertising intentions are: (methods and costs – and reasons why) My competitors’ promotional strategy is: My pricing strategy is: (suggesting a detailed costing to ensure this is viable) My sales projections are: (listing orders firm and in prospect)

In addition the format includes provision to note details of anticipated operating costs, assets, credit availability, premises, and other financial details that will link to the task of producing supporting budgets. BALANCING THE BOOKS In the last part of this section we look at the question of finance. At the end of the day money drives every business profit-making and non-profit – unless the finances are well organized then the business is in jeopardy however well it may be doing in other ways. Planning must incorporate action to create financial certainty within the business. This stands repeating: without the key financial mechanisms being addressed no business plan is doing a good job and, at worst, too little attention here can spell disaster. It is worth remembering too that a common circumstance of business failure is not simply when the business is failing to produce revenue from the marketplace, it is when it is growing and becomes over-stretched. The following should be planned. » A good relationship with your bank: that includes negotiating the terms under which they deal with you. Any overdraft facility needs to be clear. It can be a particular problem for things to change suddenly, so build in regular reviews, keep in touch and advise and consult your bank about any change sooner rather than later. Sharing your plan with your bank is not just for start-up businesses, it can be useful to do year by year.

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» Sound financial provision: at various times this will include a number of areas: » start-up funding » profit and loss forecast » cash flow forecast » managing working capital (i.e. debtors, creditors, stock or work in progress, cash and/or overdraft) » financial records » provision for investment » tax arrangements and provision (including income tax, National insurance, Value Added tax, Capital Gains tax, Corporation tax and eventually perhaps Inheritance tax) » insurances. All the above speak for themselves, but one perhaps deserves special mention. Cash flow. The forecast, monitoring, and record of this on an ongoing basis is vital. It is one of the key things that banks want from a new business, one of the first things they look at in reviewing progress and one of the first that will give you trouble if it goes away. Plan the cash flow and sleep untroubled at night. » Budgets and management control systems: you need to link plans, finances, and budgets. Management controls need to operate accurately and always give you an up to date picture of the state of the business. It is said of the Ford Motor Company that their corporate headquarters knows the details of every car sale made world-wide within 24 hours of its having been secured. If they feel they need to know that and can organize it that fast, there should be no excuse for smaller businesses. The budgets need to show revenue on the one hand and costs on the other. Note: some costs can be scheduled easily as a result of activity: if you sell 10 widgets, say, you are going to incur the cost of making or purchasing them. This is pretty straightforward. Other budgets may be less easy to find a basis for setting, but one always needs to be found. An example of this, in context of a promotional budget, appears earlier in this section. A sound financial situation is necessary to the success of a business. It is also necessary to the smooth running of the business, if constant fire-fighting is necessary just to keep the bailiffs at bay, then time and

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attention is inevitably taken away from activity that could build and grow the business.

A FINAL WORD A personal memory: many years ago, going out as a young salesman in the days before much in the way of formal training existed, my sales manager regaled me with various instructions and maxims. One that I have always remembered, and that certainly came back to me forcefully when I started my own business, was to remember – it is not an order until the money is in the bank! Wise words. The moral: make sure you plan and organize not only sound contractual terms and accounting processes, but good credit management as well. Debt collection can be embarrassing (though why this should be so is perhaps a mystery), but it needs to be done and done right. Your plan focuses and directs all your business and all that it does. If you see business activity as a cycle, perhaps the last act is paying the revenue into the bank (so that you can ultimately pay the profit back out!).

02.09.08

Key Concepts and Thinkers » » » » » » » »

Glossary The top ten financial terms The SWOTs concept Boston Grid Ansoff Matrix GE Matrix Strategic approaches The scope of planning

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‘‘Without strategic vision, a business might struggle to succeed. The vision is the creative idea, image or imagination about the business. It is often the idea of the founder of the business or those responsible for particular projects or initiatives. A vision that is communicated effectively to others is likely to be shared by all and be successful.’’ D. Hall, R. Jones, and R. Raffo, business authors First, in this section, we list some terms that link directly to business planning and the processes it involves. This is not a long list, though you may find it is worth checking separately any terminology used in the budgeting and accounting side of the business that lies close alongside planning. Below the glossary is a list of 10 key terms; this sets the scene and certainly here are things that must be understood. GLOSSARY Analysis – the purposeful thought and investigation of data that is a prelude to any properly constituted planning exercise. Ansoff Matrix – a planning device which focuses on the interrelationship of products and markets in terms of key strategic alternatives (see more in this chapter). Audit – a business or marketing audit is simply a review, albeit a thorough one (perhaps using something like SWOTs), conducted as a preliminary to business planning. The term ‘‘environmental audit’’ is also used in the concept of audits linked to planning. Boston Grid – this describes an analysis device originated by the American consultancy firm Boston Consulting Group. It provides a particular vision of a company and its products and markets; more details appear later in this chapter. Competitive advantage – this is a key feature of what a planned strategy is designed to achieve; to give you an edge, to put you one step ahead of your competitors. Contingency planning – the sensible precaution of anticipating problems or complications and planning how they could be dealt with. These may be specific, something expected like a rise in fuel cost, or more intangible or uncertain.

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Corporate culture – this is the attitudes, values, beliefs, and attendant intentions of the organization. A statement of such is usually part of a mission statement and thus a foundation factor in planning. Delphi method – popular forecasting technique involving a range of forecasts being made around an organization, with these then being centrally aggregated and, if necessary, modified before being looked at again by individuals. The final forecast thus incorporates the best estimates made both centrally and in individual sections. Forecast (sales forecast) – a statistically valid extrapolation of future sales based on the facts from the past and reasonable assumptions about conditions in future; forecasts may never be completely accurate, but they provide the only possible guide in a key area of planning. GE Matrix – this is a device developed by McKinsey consultants on behalf of General Electric (it is also sometimes referred to as the Multifactor Portfolio Model). What it does is to help assess the relative attractiveness of products in two dimensions: that of the organization and that of the customer. More details follow. Hierarchy of plans – this describes the interrelationship of plans, with the corporate or business plan at the top underpinned by what may be separate plans for finance, marketing, human resources, and operations, with further layers consisting of areas such as market research, communications, etc. and then areas like promotion and sales. Markets and market segments – the market is the group of customers, potential and actual, that a plan is directed at accessing; market segments are sub-units of a market, groups of people with similar needs who act in similar ways – segments may well need to be addressed separately in planning. Marketing plan – the core element of the business plan that focuses on the process of bringing in the business. Mission statement – a succinct general statement of a company’s beliefs, role, and intentions. Objectives – these are desired results; they should be specific, measurable, and timed, and provide a realistic basis for managing the business.

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PEST analysis – a process of analysis defined as examining the external environment and the global factors that may affect a business. It can provide a quick and visual representation of the external pressure facing a business and threatening the success of its strategy. It divides its attention across four external influences: political, economic, social, and technological. Planning cycle – the time-scale and deadlines involved in putting an annual business plan together. Porter’s five forces – describes five factors that affect the potential performance of any organization, identified by management guru Michael Porter. They are: » » » » »

the nature of competitive activity; the threat of new entrants; the threat of substitute products; the power of suppliers; and the power of buyers.

Searching for changes here is very much a part of the planning process. Product life cycle – the bell curve that shows the typical progress of a product from inception and launch, through growth, maturity, and ultimate decline; product planning needs to take into account the stage a product is currently at in its cycle (for example aiming to extend maturity). Reward – this simple word is used in a planning context to label the result of a successful strategy. Situations analysis – the first stage of planning, answering the question ‘‘where are we now?’’ through research and analysis. Strategy – this is the course of action – the route – to be taken in order to achieve set objectives. SWOTs – the method of analysis that is a necessary preliminary to planning. It encapsulates the process by prompting examination of internal factors (Strengths and Weaknesses) and external factors (Opportunities and Threats); it is not a magic formula, but neatly systematizes a process, helping to make it more manageable. An example of the technique in use appears later in this chapter.

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Vision – the broadest statement of what an organization sees itself doing; it is an integral part of a mission statement and linked to the organization’s culture. As an adjunct to this list the box below defines 10 key financial terms.

THE TOP TEN FINANCIAL TERMS 1 Return: net profit (and this usually means profit before tax). 2 Capital employed: the fixed assets in the business and the working capital. 3 Fixed assets: money locked up in buildings, land, machinery, equipment, etc. 4 Current assets: money locked up in stock, work in progress, debtors etc. 5 Current liabilities: this is money in the business but owed in the short term: creditors, loans, provision for tax, and dividends, etc. 6 Working capital: current assets minus current liabilities. 7 Fixed liabilities: money within the company on a long-term basis, includes shareholders’ equity, long-term loans, retained profits, etc. 8 Margin: sales revenue minus costs of goods sold or services provided. 9 Balance sheet: the overall statement of the company’s position – a snapshot at a particular moment (most often the end of the financial year). It shows all the sources of money in the company, that is, fixed assets plus current liabilities, and how it is deployed, that is, fixed assets plus current assets. 10 Profit and loss account: this is a statement showing the results of the company’s trading during a particular period; it itemizes revenue expenditure and thus calculates profit.

There are a number of devices (for want of a better word) that can assist planning, and the main ones are commented on here in turn. It is important to realize that while these can be used with some sophistication, they can also be used in ‘‘cut-down’’ form. Simply,

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even to the extent of utilizing just a few estimates and guesses on the back of an envelope, they can still provide useful guidance. While you should not oversimplify this sort of thing, and some care is, of course, necessary, they are devices that many people can utilize to some degree. The first appears in the form of a well-known acronym. THE SWOTS CONCEPT This acronym stands for Strengths and Weaknesses: Opportunities and Threats. Essentially it only formalizes a common sense view of what needs to be investigated early in the planning process. It is a classic means to an end. SWOTs prompts the questions that should sensibly be asked. These may need investigation before they can be satisfactorily answered, and the answers may need some analysis before it is clear what they are telling you. Diligently addressed, the process ensures that planning can proceed on the basis of a sound knowledge of the situation within the organization (SW) and externally (OT). Some answers will be obvious and well-known. Others will not, and investigation may produce surprises. Even one key area of information may affect action materially. If such an analysis has never been done in the past it will take a moment. On an annual basis it is not a daunting part of the total process to update the picture. That said, here SWOTs is perhaps best expanded on through an example of the sort of questions that are used during the analysis (which can, of course, be applied to products or services). An organization’s strengths and weaknesses 1 Customer base 1.1 What is our current customer base, by size, by location, by category? 1.2 How does our disposition of customers (customer mix) compare with the market mix? 1.3 Are our customers in growth sectors of the market? 1.4 How dependent are we (as a specific measurement) on our largest customers?

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2 Range of services 2.1 How closely does our product range reflect the market’s needs? 2.2 How does our range compare with competitors? 2.3 Are the majority of our areas of business in growth or decline? 2.4 Is the span of our product range too narrow to satisfy our markets? 2.5 Or is our product range too broad to allow satisfactory management of performance across the range? 3 Price structure 3.1 What is the basis of our pricing policy? 3.2 Do our direct and indirect competitors structure in the same way? 3.3 Are our prices competitive? 3.4 Do our customers perceive our prices as offering ‘‘value for money’’? 4 Promotional and selling activities 4.1 With which customer groups are we communicating? 4.2 What do they know and feel about us? 4.3 Are we communicating with enough of the ‘‘right’’ people (both groups and individuals)? 4.4 What means of communication are we using? 4.5 What attitudes exist internally that influence approaches to promotion and selling? 4.6 Is each person in contact with customers capable of selling the full range of our range, and doing so equally well for every element of it? 4.7 Do they possess the necessary knowledge and skill for selling? 5 Planning marketing activity 5.1 Do we have agreed plans for marketing and selling? 5.2 Do the plans state specific activities as well as objectives and budgets, and are they measurable and able to be monitored? 5.3 Do we have individual/departmental as well as corporate plans? 6 Organizing for marketing 6.1 How is the firm’s marketing activity organized and co-ordinated? 6.2 Are authority and responsibility for each person/activity clearly defined?

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6.3 Are all our people committed to contributing to a marketing culture that will assist the achievement of commercial success? 7 Control and measurement of marketing 7.1 Have we defined ‘‘success’’ for ourselves and our staff? 7.2 Have we established all the necessary key result areas to measure that success? 7.3 Do these standards examine marketing as well as publishing goals and standards? 7.4 Do we measure performance against desired standards and take appropriate (and prompt) corrective action? Market opportunities and threats 1 How is the market structured quantitatively? 1.1 How many people/organizations of what type are there in our market who have a need for our kind of product? 1.2 What are their current buying practices? 1.3 How much do they spend on such items? 1.4 How often do they buy (e.g. annually/monthly)? 1.5 Whom do they buy from currently? 1.6 What do they not buy? 1.7 How do existing and potential buyers access our market and our kind of products? 2 How is the market structured qualitatively? 2.1 Why do existing and potential customers buy/not buy? 2.2 What do they think of what they buy (e.g. good value/overpriced, etc.)? 2.3 What do they think of those who supply their current needs (e.g. too big/too small/helpful/unhelpful)? 3 How is the market served competitively? 3.1 Who are our direct competitors (i.e. other similar companies)? 3.2 Who are our indirect competitors (i.e. ‘‘overlapping’’ companies, some of which it may be easy to overlook as uncompetitive)? 3.3 What are their strengths and weaknesses (e.g. list-size/staff/ image/pricing/marketing skills/geographic coverage, etc.)? 4 What are the quantitative and qualitative trends? » market/segment size; » market/segment requirements;

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» market/segment structure; » market/segment location; and » competition. Such an analysis is an invaluable tool in charting a course into the future. Which areas are most important will vary depending on the size and type of organization concerned. It may seem to indicate a daunting task, and indeed it can be a significant one, but once it has been addressed then it needs updating and carrying forward rather than necessitating starting again with a blank sheet of paper. This is part of the concept of what is called a ‘‘rolling’’ plan, one that builds on the past as it moves on to the next year and beyond (rolling plans crop up again in Chapter 10). Practical use of SWOTs The questions in the example above (the example is adapted from one in my book Marketing Professional Services, [Kogan Page/Institute of Directors]) form a starting point. Certainly they are indicative of the sort of thinking that must be done, and of the sort of information that needs to be clear to allow effective operation to follow. Every company needs to tailor their approach – and their specific questions – to this kind of thinking, both in terms of the nature of the company and the nature of the markets in which it operates. For example, customers can be defined very differently – if an organization sells direct or only to one industry, then the power of the retail chains may not concern you. But all the specifics of your particular mode of operation must be accommodated. Now, some further planning aids.

BOSTON GRID The Product Portfolio Analysis developed by the Boston Consulting Group is a much copied strategic tool that reviews a product’s market growth rate and its market share, presenting a graphic picture that can assist strategic planning. Fig. 8.1 shows the general concept. The categories of product used are defined broadly as follows.

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Question marks

Stars

Cash cows

Dogs

Relative market share

Fig. 8.1

Boston Grid.

» Stars: as the name suggests, these are products that are doing well, they have a strong market share and good prospects to retain or grow it. » Cash cows: these are currently good, they have a substantial market share now, but their prospects for growth are low; meantime they can produce significant profit. » Dogs: these are bad in both respects: they have low market shares and are also rated low in terms of growth prospects, frequently the situation in mature markets and candidates to be phased out. » Problem children (or question marks): products with a low current market share, with prospects but needing a substantial investment of time and money to gain real growth; might become either stars or dogs.

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Such a technique is in part just to focus, though alternatively it can be used with some precision and the graphic picture may have the members of a product range positioned exactly within their appropriate square. ANSOFF MATRIX This is a planning device that, in context of other thinking, helps decide strategy. There are only four key strategic marketing options, these are: » market penetration (selling existing products to existing customers); » marketing development (selling existing products in new markets); » product development (developing new products for existing customers); and » diversification (developing new products for new customers in new markets). Graphically the analysis appears in Fig. 8.2. These options become more risky as you go down the list. They are not mutually exclusive. A company may undertake more than one: a manufacturer of agricultural weed killer might undertake market development, selling a version of the product more usually sold to farmers for domestic home and garden use, while at the same time developing a new chemical product for sale in overseas markets (diversification). One of the advantages of this planning device is to highlight problem situations in terms of competing resources such as money or personal time. GE MATRIX This useful tool is designed to help portfolio analysis. Developed by consultants McKinsey for General Electric, it is a flexible tool that allows a variety of variables to be reviewed in whatever way is appropriate for an individual organization. The matrix – see Fig. 8.3 below – is a device to rate one against the other. » Competitive advantage: how likely customers are to buy a product in terms of their rating of its price, specification, performance, etc.

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Products New

Market penetration

Product development

Market development

Diversification

Existing

Markets

New

Existing

Fig. 8.2

Ansoff Matrix.

» Product attractiveness: that is, product attractiveness for the organization in terms of profit potential, revenue generation possibilities, fit in product range and more. Several steps are involved in the use of this device. 1 List the characteristics that, for you, together create product attractiveness. 2 Weight each factor in terms of its relative importance, to create an overall score of, say, 10. 3 Score each of your products against this picture, say from 1–5.

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Competitive advantage Medium

Weak

Low

Product attractiveness Medium

High

Strong

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Fig. 8.3

GE Matrix.

4 Multiply this score by the weighting factor to produce a total for each product. 5 Similarly build up a picture of competitive advantage and then log each product onto the matrix in the appropriate position. 6 Use their positions to influence decisions about what plans for each product should be. This is a simplification of a process which is essentially part of the core marketing element of the plan. There is a good example of it in action described in the book Marketing Plans with a Winning Edge (Angela Hatton, Pitman Publishing).

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STRATEGIC APPROACHES Much of the best writing and comment on business planning is on the core element of marketing planning. Without a doubt the main and best-known guru here – and one that has a great many sensible things to say – is Philip Kotler. His seminal work is Marketing Management (Prentice Hall) and there is much in this about planning and more about strategy. He has a list of books to his credit, some with a specific industry focus; his latest book is Kotler on Marketing. THE SCOPE OF PLANNING The description ‘‘business plan’’ has an air of substance about it. What do you plan for? You plan for the business, of course. But it is also important to consider the level down to which planning is taken, and the most important aspect of this is planning at the level of individual customer. Customers are subject to the 80/20 rule (Pareto’s Law, which, in this context, says that 80% of your revenue and profit is likely to come from around 20% of your customer list). This means that large customers are different from smaller ones and that, while small customers are important, major customers warrant some individual attention. If planning seems unnecessary at this level consider the effect of losing one of your own key customers. Size here has no specific measure, it is what is important to you and thus in a small business may be what a large company would rate as small. To illustrate what is worthwhile here, consider two approaches. The first is designed to flag up opportunities with major customers and help plan sales strategies to exploit them. The second addresses the topic of customer profitability. Strategic planning for an individual customer Again a matrix approach is useful here, one that plots revenue from sales of different products alongside ‘‘buying points’’ (these might be different locations, people or departments across a large organization; in the training business for example, different courses might be bought by different departments: sales by sales, business writing by a central HR department and IT training by a technical department). If the significant turnover from a big customer is split across the matrix,

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gaps may show up. There may be good reason for these, or they may represent an opportunity and need a change of sales tactics that can be linked into, and specified, in the plan. The form in Fig. 8.4 shows how this works.

1

Markets or buying points 2 3

Total

Products A

B

C

D

Total

Fig. 8.4

Planning to protect and increase customer profitability This has come to be more important as customers have polarized and the big have got bigger. As customer demands or services offered (or both) extend, more and more margin is vulnerable to being eaten up in just getting the business. Any company that analyzes the costs of obtaining business may be shocked at just how many things seemingly conspire to reduce margin. These include: all the costs of the sales force (from recruitment to commission); discounts (and there may be many different bases

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for them, e.g. quantity bought or when purchase is made); special packing, delivery (maybe to multiple locations), labeling, credit terms (and beyond), advertising and promotional support, merchandising assistance, training of customers’ staff . . . the list goes on. Unless this is addressed carefully, profitability may well be in danger. A plan for ‘‘large’’ customers may be useful, but the situation should be measured quantitatively with individual customers of appropriate size to make a link to an action plan for any where the figures demand action is taken. Action: management must plan by addressing the list of possible ‘‘profit diluters’’, the policy involved, and sales staff’s attitudes and competence. For example, it may be that policy is at fault and profit being lost because published terms need attention, or that policy is right, but that sales people are losing out due to poor negotiating skills. Overall, while there are a variety of techniques to consider, what you do must be a practical compromise that allows planning to take place and reflects the needs of your business.

02.09.09

Resources » » » » »

Business gurus Marketing audit Small business agencies Banks and accountants Summary

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‘‘To talk about information is to talk about objectives. A lot of thought is now being applied throughout the NHS to mission statements and objectives, from which we should obtain a clearer view of our information needs. However, objectives will never stand still, and therefore an information strategy will of necessity be a continuously developing concept. The process of clarification will be incremental, and the concept of a definitive strategy will remain illusory.’’ An extract from a Northern Regional Health Authority report quoted in The Independent. Reading the above example of gobbledegook and woolly thinking one thinks at once that the first overall prerequisite to successful business planning is clear thinking. Fair enough, now what will assist such thinking? Here we look at a variety of resources to back up planning and make it more effective. This is an area in which the smaller business needs to proceed on a well informed basis, but with regard to which things need to be kept manageable. BUSINESS GURUS There is a wealth of books on business planning and many of the short guides (from publishers such as Kogan Page) are more than enough for many a small business. For those wanting more the most useful and stimulating writing probably covers the core element of the marketing plan. The bestknown guru of all, Philip Kotler, is worth reading on this subject. Indeed it is worth identifying, as a possible useful checklist, the basis on which he recommends a marketing audit is conducted (see boxed example, based primarily on his views). MARKETING AUDIT The approach here is to pose questions in all these areas, and planning must be done in light of the answers (indeed planning may include finding out the answers).

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» The macroenvironment: questions here relate to the broad, external environment: the demographic, economic, natural (such factors as energy and the environment), technology, political, and cultural. So, for example, if your product’s sales are influenced by lifestyle changes, this will be one of the areas investigated under the cultural heading. » The task environment: that is: markets, customers, competitors, channels (of distribution – the subject of another ExpressExec title), suppliers, publics (in the public relations sense). Again, detailed questions may need posing in all these areas. » Marketing strategy audit: Mission, objectives, strategy, budgets – a range of questions here will be important, not least checking that objectives and strategy link appropriately. » Marketing organization audit: this may seem less important in a small company than in a large one with many staff, but who does what (even if everything that must be done is somehow spread between few people) is important. Questions here can review formal structures, efficiency levels, flexibility, and crossfunctional communication. » Marketing systems audit: under this heading comes the important matter of information systems, also: the planning system itself, management control, and such factors as new product development and launch. » Productivity audit: here questions address the key area of profitability and cost-effectiveness. » Marketing function audit: this questions product, and all the areas of marketing activity that present it to the market: price, distribution, advertising and other forms of promotion, and the sales force. It may well prove worthwhile to investigate such an overall approach, even if you pare down the concepts for use in a small business. Other reading you might find useful Branch, A.E. (1990) Elements Of Export Marketing and Management, 2nd edn. Chapman and Hall, Great Britain.

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Business Link – The Department Of Trade And Industry – Services For Business. The Essex Business Centre. Cohen, G.N. (1992) The Business Plan. Gower Publishing. London. Gorman, R.T. (1999) Online Planning – How to Create a Better Business Plan Using the Internet. Career Press, USA. Hall, D., Jones, R. & Raffo, C. (1999) Business Studies. 2nd edn. Causeway Press Limited, Lancashire UK. Chapter 2 – Setting Up In Business – pages 10–17. Chapter 15 – Strategy and Planning 1 – pages 119–126. Chapter 16 – Strategy and Planning 2 – pages 127–133 Hammond, A. (April 1998), Planning For The Future. ‘‘Business Review’’, 28–9. Hatton, A. (2000) The Definitive Guide To Marketing Planning. Financial Times, Prentice Hall. Pearson Education Limited. Great Britain. Kotler, P. (2000) Marketing Management. International Edition. The Millennium Edition. Prentice Hall International, USA. Kotler, P., Armstrong, G., Saunders, J. & Wong, V. (1999) Principles Of Marketing. 2nd European edn. Prentice Hall Europe. Lynch, R. (2000) Corporate Strategy. 2nd edn. Prentice Hall. Pearson Education Limited, UK. Mullins, L.J. (1996) Management and Organisational Behaviour. 4th edn. Pitman Publishing, Great Britain. Richardson, B. & Richardson R. (1992) Business Planning – An Approach to Strategic Management. 2nd edn. Pitman Publishing, UK. Websites Business (and marketing) planning crops up as a topic in many business journals. Pick what suits you (e.g. Management Today for overall matters, Better Business as a practical guide for small business). Similarly it may be worth adding certain overall business information Websites to your favorites. US Small Business Administration: http://www.sbaonline.sba.gov Provides a wealth of business planning advice, including business plan outlines, preparing financial statements, and how to apply for SBA loans.

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IPO Central http://www.ipocentral.com Has daily listings of initial public offerings with corresponding links to EDGAR online. Use this site to compare your business with others that are going public (selling stock). Business Week Magazine http://www.businessweek.com Publishes a yearly listing of ‘‘hot growth companies’’ with descriptions of their management, growth strategies, and industry positioning. The question of business planning is a generic topic that is referred to widely. Moving on, we consider next some more hands-on assistance. SMALL BUSINESS AGENCIES » Local authorities: many local authorities, counties, and even quite small towns, put a good deal of resources behind helping small business. They may have an eye on local employment and on matters such as the business rate, but they do it, and many do it well. In my own county, Essex, the Enterprise section at County Hall offers good services. This is certainly an area worth many people checking out; more so if your own business is primarily local in its operation. » Other agencies: as has been said, it is difficult to give a definitive picture of the range of ‘‘Business Link-type’’ services that exist. The point has already been made that these are worth checking out, essentially in the context of planning they provide. » Information: much of which is a useful aid to planning and which includes information about: companies, markets, grants and subsidies, training, standards and patents, published market research, EU – and other – legislation, export information (opportunities, agencies, and research). » Training: some they do themselves, or they can recommend others. » Advice: about a range of issues such as information technology, design, finance and more. They provide the benefit of experience; that is, you may be faced with doing, or planning to do, something for the first time (especially

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in a business start-up situation) and they have been involved with it many times. The advice is as good as the advisor, of course, but some of the people working in this way are well worth knowing. » Consultants: it may seem like an expensive route to get a consultant to do your planning for you, and so may be the case (though if it made the difference between getting the bank’s approval or not, it might be worthwhile). On the other hand some small firms and individual consultants can offer very cost-effective approaches. Providing the role is well defined, and a basis agreed that makes clear what fees are being incurred, a specific contribution to the process may be very useful. Consultants can also act as sounding boards (something that is sometimes lacking in a small business), either on a one-off basis, or with some continuity, with this process merging somewhat with the role of a non-executive director (but being simpler to set up and disband). » Networking: it is worth stating that help may be available informally. Just by being in touch with other business people (through local business clubs, branch level activities of management institutes, etc.) you may find people who have just been through what you are trying to do in planning – or other things, of course – and can pass on advice or warnings. Another body that may be useful is the Federation of Small Businesses. They have regional activities and may be contacted centrally at Whittle Way, Blackpool Business Park, Blackpool, Lancashire FY4 2FE. Tel: 01253 336000. Website: http://www.fsb.org.uk/ BANKS AND ACCOUNTANTS Both of these have much to offer. In selecting which bank or accountancy firm to deal with, ancillary matters such as planning (if indeed they are ancillary) should be part of the selection criteria. They were mentioned first in Chapter 4, in the context of information technology; the comments made then are repeated here. » Banks: many people have a love/hate relationship with the banks – and with their own. You pay for their services (much too much you may say!) so you may as well get the best from them. The most help here is relevant to small and start-up businesses. You may

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want to take on board the bank’s experience of business planning or, more important, you may want to do it their way because their funding is dependent on their liking your plan – both what it says and the way it is done. Not only do the major banks provide guidance here (see Chapter 7 for more about this), they provide specific planning formats – and do so on disk. You can simply take a disk out of their pack, slot it into your computer and fill your plan in under their headings (though of course you can also use it as a starting point and tailor it to your precise circumstances). For a simple plan this may be all you need. » Accountants: an element of the plan links to your accounting system and similar things apply here. Use the computer system that your chosen accountant recommends and uses, and you will certainly save time and money. They can train someone to use it, they can adapt the standard version just for you and they can help link it to any other allied systems that you want. Again, technology has changed the way this can be done. They might well have experience of the slightly more specialist systems needed by some (e.g. the profitability analysis of major customers – see Chapter 4). SUMMARY Planning, that is the need for planning, should never take you by surprise. Having accepted the premise that it must be done, and actually faced with the job of doing it, you need to be: » well informed and up to date about the facts of your own business; » clear about what useful sources of information to tap (so as not to waste time); and » in a position to proceed to the job in hand well informed in all respects. Information really is power in this context; that said, the success of planning – and just how useful it proves to be – is in a systematic approach (Chapter 10, next, summarizes the key issues).

02.09.10

Ten Steps to Successful Business Planning 1 2 3 4 5 6 7 8 9 10

Take some time Formalize the process Create and maintain the necessary database Analyze the information Discuss the possibilities Finalize and agree the plan Draft the written plan Communicate Implement Make it a rolling plan

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‘‘I love it when a plan comes together.’’ Catchphrase of Hannibal Smith in the popular, and much repeated, television show The A Team. In Chapter 9 I suggested clear thinking as the first overall prerequisite to successful business planning; and the second? I would put attention to detail. This latter is especially important in terms of the financial elements of the plan. Beyond that, in this final chapter the key individual issues about making business planning successful are encapsulated into 10 approaches. These are listed only in loosely sequential order, but do make a major contribution to making the planning process work and, more important, making it practical and useful. It is the cumulative effect of these being brought to bear together that gives planning power. 1. TAKE SOME TIME The reasons why planning is necessary have been explained (starting in Chapter 2), and here we assume an acceptance of its necessity and its desirability. Yet, even when that is accepted, one of the prime reasons why business planning is sometimes ineffective is not so much that it is done badly, but that it is done superficially – the job is skimped. It is a clear prerequisite that if planning is to be done and done properly some time must be committed to it. Making sure this occurs is the responsibility of senior management, perhaps, in a small business, of the managing director; but it involves others too. Each Chapter of the business must be represented. This may include core functions: marketing, production, and finance. It may include Chapter heads or those with responsibility for individual products where a wide product range makes this the way things are organized. Whoever is to be involved, and clearly, sensible decisions need to be made about the planning team, all those concerned must set aside sufficient time to do the process justice. That said, there are two aspects to the time requirement that need emphasizing. » Lead time: first, the planning process must be started sufficiently far ahead of, and related sensibly to, the financial year of the organization

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which is central to the planning process. A similar philosophy must be applied to any subsidiary processes that underpin planning. For example, data used as a basis for planning must be available in agreed up to date form as an integral part of the planning cycle. » Planning time: at the same time, there must be a sufficient amount of time set aside to undertake the actual job of planning. All the elements – data collection, analysis, discussion, etc. – take some time. It is frustrating if time runs out, or if there proves never to have been a chance of doing an adequate job before the process even ends. Giving the process sufficient time makes everything else that is necessary, possible.

2. FORMALIZE THE PROCESS Successful planning needs a systematic approach. It needs certain aspects of the process to be formalized, and what is laid down to be a mandatory requirement for all those involved. If you are planning for the first time, then there is more to organize, and discuss, here. Then some parts of the mechanism can serve for a while thereafter (though everything ought to be reviewed regularly). Prime areas to formalize are: » planning formats: these provide the agenda, the topics that planning needs to address (see details in Chapter 6); they also give an indication of the amount of detail into which the plan should go; » time scales: see number 1 above. It is certainly important that timings are regarded as mandatory and deadlines are respected – and hit – by all concerned; and » written format and style: how matters will be drafted, by whom, and, if different people produce different segments of the plan, also who will edit the whole and bring a final, cohesive version together. The time to change formats and procedures is not in the midst of the planning cycle, when concentration needs to be on getting the job completed.

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3. CREATE AND MAINTAIN THE NECESSARY DATABASE Successful planning is dependent on good information, and examples of this have been given elsewhere in this work (for instance in Chapters 6 and 7). It is too late to start to try to find information as the planning process demands it, and it is certainly to late to start to collect it (though you can plan changes in information collection for the next year). This needs addressing by management at another time, and systems need setting up clearly and unequivocally. This includes carefully briefing people involved down the line in the collection process. The last thing you want is for poor briefing to come to light when information is sought – I’m afraid I haven’t kept it up to date – I didn’t realize it was important. Review possible information needs. What is: » essential to decision making: this is what must be available, and systems need to be in place to guarantee it in whatever form and at whatever time it is needed; » desirable: here more compromise may be necessary, balancing what is needed with the cost in money and time of getting it; and » useful: here it may not be worth spending more time and effort, but if information is available (perhaps as a result of other data-collection processes) then use can be made of it. As Chapter 4 touched on, this part of the process is very much tied up with overall company systems and usually with computer systems. One specific area for care is with computer specialists. Goodness knows we could not manage without them, but some can be very blinkered in their thinking. They may understand every ramification of the system, but can only produce a focus on operations if they understand the reason why things are being done and how information is to be used. One example: producing more information might well be possible, but the extra may or may not be useful – and incorporating it could just result in an information overload that disguises important facts, not allowing the wood to be seen for the trees.

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4. ANALYZE THE INFORMATION This heading harps back, in part, to number 1 above. It is one thing to have information, another to take time to look at what it means. Some elements of some companies’ plans owe more to an ‘‘automatic pilot’’ style of management than to anything else. Adding on 10% to the sales target becomes a sort of mantra. There is little thought of a rationale for this, it may downplay the importance of the information to hand, and omit analyzing more detailed information in a diagnostic manner. Planning cannot fly in the face of the facts. If facts dictate one thing, then divergence from that demands action very specifically designed to work in a way that creates change. Yes, you might be able to buck the trend of a downturn in your industry, say, but only by finding a strategy that addresses the problem. The whole question of the data needed to facilitate planning, the collection process needed to capture it, and the analysis and use of it to assist planning needs addressing clearly – and in advance of the planning cycle. Having relevant, sound information as the basis of your planning is the best possible way to start making the process work. 5. DISCUSS THE POSSIBILITIES The stage where discussions take place is key and needs viewing and organizing in the right way. Idea generation and then decision making are involved. Care needs to be taken in selecting the planning team, scheduling sessions for them to meet and thrash out the possibilities, and allowing time for this to happen. Two heads really can be better than one. A group of people involved in constructive discussion can bring the planning process to life. The agenda must be clear and attention given to making discussions. » Constructive: what happens can literally set the scene for operations for the year ahead, and often the influence is longer. The idea is to review everything that might help, to explore ideas, to investigate practicality, and be both realistic and innovative. Planning must never be seen as a chore. Of course in a hectic period fitting it in may present difficulties, but the potential results should make it interesting, worthwhile – even fun.

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» Creative: it is important to be open-minded. If there is a reluctance even to put ideas on the table then opportunities may be missed. Processes (such as brainstorming, touched on in Chapter 7) should be actively deployed to prompt idea generation, and whoever is in the chair should not act, even inadvertently, to cut things off too soon. » Challenge: debate should be open and constructive too. Things should not be agreed on the nod if there are reservations (or might be if something was considered more carefully). This goes especially for assumptions about the status quo. It is too easy to find someone saying right, I guess we go on doing (so and so), what about . . . Something that can benefit from change is then perpetuated by default. Whatever is decided, having it thoroughly discussed can also act to make it more acceptable, and make it more likely for people to commit to it. 6. FINALIZE AND AGREE THE PLAN Agreement is important too. At some point discussion needs to stop. A range of possibilities having been discussed, the ‘‘best’’ needs deciding on. Sometimes – often? – making a decision involves making a compromise within the group, so the decision making process must be clear and everyone must feel that they can commit to the way ahead. At the end of the day, democracy is not usually the best way to run a business. So, once opinion has been sought and discussion has taken place – someone must decide. It is important therefore that there is: » clarity: it must be very clear what is to be done, and nowhere more so than with targets and financial goals. If the revenue target year on year is to increase, then it must be clear how this will occur. When will sales come, month by month? What product mix will be necessary? All such matters must be spelt out and be clear to all – especially to whoever may have particular responsibility for implementation; relating to one specific product or division, perhaps. Similarly with costs. The links to cash flow and budgets must be clear throughout;

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» realism: plans must reflect real life. It is one thing for them to be challenging, quite another to be seen as impractical or frankly impossible; and » commitment: everyone must finally agree – for better or for worse – that the accepted plan is what will be used; and they must then give it their best shot. 7. DRAFT THE WRITTEN PLAN Various papers and drafts may have been put in writing during the process. Then, finally, a definitive document must be produced. This need not be long, indeed should not be overlong, but must summarize key issues (often the same finalizing exercise will produce the budgets). The writing should be: » clear: this is no place for gobbledegook. It should also be borne in mind that a wide range of people around (and outside?) a company may well read this document and that it should make good sense to them all, whatever their role or level; » action based: the document must spell out the clear chapter and verse of who does what and when: the timing implications must not be overlooked and they may start before the planned year commences and stretch beyond its end. This links to control systems. One overall editor is needed if the plan pulls together contributions submitted from different people. 8. COMMUNICATE The plan must be communicated to everyone whose role affects its achievement (and in some cases this can literally mean everyone in a smaller company). The need to make it intelligible to all was mentioned above. It may be, in some circumstances, that two versions are necessary: one containing all the operational details, a second, highlighting key issues and summarizing the way ahead, for wider circulation. Certainly plans should not be completed, then filed away with a sigh of relief. Remember the motivational implications here. Staff should find the plan interesting, challenging (though the realism should be spelt out),

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and relevant to them. Making it so should be a priority. Note: bear in mind too if there are to be any external readers (the bank?); if so, they too may need a specially adapted version. 9. IMPLEMENT A simple point perhaps, but plans must be implemented. At worst the plan is put aside and the operation is managed reactively, perhaps managed well in a sense, but with no focus on the agreed objectives. The plan is only useful if it becomes a working document. Budgets tend to be referred to more than plans, but the two go together. The purpose of the plan is, above all, to bring direction to the business. If throughout the year you use the action plan elements and link planned intentions to control, it will act as a catalyst to action, work for you; and make achievement of objectives more likely. The chart in Fig. 10.1 shows the overall link between planning, implementation, and control.

Planning

Implementation

Strategic objectives (the long range plan)

Tactics (short range operational plans)

Available resources

Controls

Corrective action/ fine- tuning

Times

Communication

Monitor

Fig. 10.1

Control Variance analysis

The link between planning, implementation, and control.

10. MAKE IT A ROLLING PLAN Finally, link plans together. The concept of the ‘‘rolling plan,’’ one that deals with the coming year and looks further ahead, makes planning easier and more useful. In some businesses the time-scale is longer than others. Five year plans are often mentioned, but two or three years

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ahead may be enough for some organizations and others may need to look further ahead (Japanese management talk of ‘‘hundred year plans,’’ but that is only for the very few!). Let us be clear. The concept here means that the plan: » sets out the detailed plan for the financial year ahead; » also addresses some detail of the next; and » adds something about the period further ahead. The time-scale and amount of detail (which will be less and less into the future) is something you must decide. In planning terms it means that at the end of one year, as discussions commence, they in fact have a first core of information, intention, and ideas on which to build. Remember too that without this, with a financial year running from, say, January to December, planning might start in September/October, at which point plans only exist for a very short time ahead. A rolling plan simply reflects the realities of life (and the fact that time does not pause conveniently at the end of an operating period while you gather your wits and prepare to move on). Overall, well-conducted deliberations during a planning cycle can provide a solid foundation for successful operation. A well planned operation is better at reacting to unpredicted difficulty and change (and there will always be some of that), and it is better focused and able to be more purposeful – knowing where it wants to go and working consciously to get there. Yes, it takes a little time, and some thought, but it is time well spent. Plan the work, and work the plan; this old maxim is good advice. The alternative is a future doing no more than reacting to events.

Frequently Asked Questions (FAQs) Q1: Must I have a plan? A: Chapter 1 sets out a positive answer. Q2: Will it help my relationship with my bank? A: Chapter 6 shows how plans can help, and how the bank can help you plan. Q3: Must I write it down? A: Chapter 6 sets out an approach to planning and includes this sort of detail. Q4: How does it help explore overseas markets? A: Chapter 5 investigates the global implications. Q5: Is it just bureaucratic overengineering? A: Chapters 6 and 7, among others, take a practical view of what planning can do to help the business. Q6: Just what details need to go into the plan? A: Chapter 6 sets out full details of plan content and coverage.

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Q7: Who should see the plan? A: Again, both Chapters 6 and 7 will help you here. Q8: Can I use some sort of ready made format for my plan? A: This is one of the matters touched on in Chapter 4. Q9: Will compiling a plan have financial benefits or just cost money? A: This is inherent to the plan; see Chapters 1, 6 and 7 in particular. Q10: How can I plan, but keep the process manageable? A: Chapter 10 sets out and summarizes the key aspects of making the process work.

Acknowledgments I can claim no credit for the origination of the unique format of the series of which this work is part. So thanks are due to those at Capstone who did so, and for the opportunity they provided for me to play a small part in so significant and novel a publishing project. Some of the material in Chapter 6 is adapted from ‘‘The One-hour Plan’’ which appears as an appendix in my earlier book Marketing on a Tight Budget (Kogan Page). I am grateful to Barclays Bank, and to Gail Everson in the Business Sector Marketing department in particular, for permission to reproduce a small part of their overall information pack for business start-ups. It is valuable to be able to show exactly what seems important about planning from the standpoint of a major bank. Last, but by no means least, thanks to Emily Smith who acted as researcher, searching out back-up material and references that saved me time and helped me meet a tight deadline. She took on the task at short notice and did a thoughtful, thorough, and useful job; such help is much appreciated. Patrick Forsyth Touchstone Training & Consultancy 28 Saltcote Maltings Maldon Essex CM9 4QP