The Facts of Business Life by Bill McBean Read Free Book Online Page A

common elements of a successful business plan is the development of strategies. Strategies are, simply put, the means by which you will accomplish the goal and objectives you’ve set for the company. That means, for example, if one of your goals is to capture the business of one of the market’s top-volume customers, you might develop such strategies as assigning a specific employee to handle their business, fast-tracking their orders, or perhaps setting special pricing or discounting for certain products or for purchasing in specific volumes. Similarly, if one of your goals is to increase gross profit margins, your strategies would have to include increasing your selling price, lowering your product cost, or some combination of the two. You might supplement this with a short-term objective of increasing training for your salespeople, and a long-term goal of eliminating some of your competition by buying or squeezing them out in order to dominate the market.
    Planning at Level 1, as at all levels, is essentially a step-by-step process that enables you to determine if and how you will be able to attain whatever goal you have set for your company. At Level 1, though, it is also about preparing yourself for what may occur if you decide to move toward ownership or expansion, and to provide you with more information on which to base that decision.
People at Level 1
    Employees are not only a major part of any business but also, in most companies, one of the largest expense categories—if not the largest. Owners accordingly want to get their money’s worth by hiring the best people they can find. Unfortunately, there is a limited number of such people, and even if you can find them, they may not want to work for you. And even if they did, you probably wouldn’t be able to afford all of them. However, since you aren’t actually hiring anyone at this level, you have time to identify these people, recruit them, and work their cost into your expense structure.
    When you are thinking about employees at Level 1, there are essentially three issues you must take into account. The first is their overall cost, including payroll taxes and benefits. Because employees constitute such a large expense, their cost will have a major effect on profits, which means that estimating the cost correctly is important as it can affect the opportunity decision, either positively or negatively. The second issue is that every business has key positions, and it’s essential to identify these key jobs and make sure they get filled first. The fact is that not every job is equally important, so it’s best to know which ones are vital, identify some candidates for those jobs, and be realistic in terms of the salary and benefits they will demand. The third issue concerns training. In any new opportunity, training is important, and sometimes employees have to be hired even before the first customer walks in the door. For that reason, the cost of training has to be taken into consideration, especially if processes have to be designed and coordinated with each other. The bottom line, so to speak, is that setting a limit on personnel expense is a tool you must use at this level if you want to be able to make an informed opportunity decision.
Marketing and the Customer at Level 1
    After you’ve done all the research and analyses you need to determine if a particular opportunity is right for you, there is one last area on which you need to focus—who your customers are and how you can reach them. As an owner you have to get this right, because if you don’t, even if you do everything else right, your chances for success will be slim at best. Of course, at this level the opportunity is still a mental concept rather than a physical one, and you have yet to fight any real marketplace battles. But marketing and the customer have to be one of your focal points, both before and after you start your business, because without customers