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Profit in a Page

August 1, 2008 By: Ben Markens Paperboard Packaging

Business Planning: Step by Step

I've been getting emails asking me what I feel are the most important steps to creating a good business plan are. So for then next few issues I'll try to answer that question with a step-by-step list of actions.

Step 1: Develop your next ACT This is your stretch goal, where ACT stands for your achievable concrete target. This target is expressed in revenue and or some expression of earnings (profit, surplus, profit before tax, EBITDA).

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You may add or substitute elements like net worth, net assets or ROA. The idea is to be concrete and specific yet inspiring and enthusiastic enough to rally the troops. Your objective should be SMART — specific, measurable, achievable (but not too easy), relevant, and time-limited.

One of the ACTs from my childhood was when President Kennedy challenged us to put a man on the moon by the end of the 1960s. This was a SMART goal, and if you can find something similar for your organization, great. Otherwise we suggest you use numerical targets.

Here are some examples:

1. $25 million in sales and 20 percent EBITDA by 2015 (the preferred form);
2. Justify a new press by adding $6 million in new customer revenue in the next 18 months; and/or
3. Consolidate operations into one building by Dec. 31, 2010.

Step 2. Your underlying strategies are required to achieve the next ACT. Choose between three and five underlying strategies. The five listed below work well for almost any organization.

1. Profitable Growth. I do not know any converting company where this is not a critical underlying strategy.
2. Customer Satisfaction. Understanding what they want and solving their problems by customizing your offering to their needs — creating relationships. Almost all converters that I know use customer satisfaction as their core operating strategy.
3. Operational Excellence. World-class quality, productivity and delivery of goods and services to customers, at low prices. This is a high hurdle for most converting companies. Converters often substitute the words "competitive price" or "fair price" for "low price." I call this operational competence instead of operational excellence. There is not a converter out there today that can afford to be less than operationally competent. In other words, we must do it faster, better and cheaper than we used to, and are striving to drive out cost and waste everyday. But we just cannot only compete on lowest price.
4. Product Innovation Leading edge innovation and technology. Most organizations we have worked with do not use product innovation as a theme. Their efforts in this area are generally in support of either profitable growth or customer satisfaction. So if your primary business purpose is not to become the next Sony, forget product innovation as a theme for a stand-alone strategy.
5. Employee Satisfaction. Making your organization a great place to work and an employer of choice.
6. Wildcards.

If your organization has special commitments to the planet or a certain community or constituency, here are a few other ideas. Remember, no more than five. I mean it.

A. Environmentally responsible (green, sustainable).

B. Ethnic diversity.

C. Technologically up to date.

Underlying strategies must be ongoing activities that can never be satisfied. They are different from initiatives, which are time-limited gap closure interventions. Initiatives are tactical steps that help achieve strategies. They are not the strategy itself.

Let me know how you're doing and keep sending me requests for content and I will do my best to answer in an article or by email.

Ben Markens is president of The Markens Group Inc., a boutique consulting firm guiding business toward excellence. He can be reached at 413-562-8405 or ben@markens.com . Sign up to hear his weekly audio tips about business at www.markens.com/tipoftheweek.php

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