Transforming Real Businesses: A Case Study in Effective Business Planning
I'm going to tell you a story. So many people ask me what I do in my job and how I help people. I could give you the usual spiel, but I think it's more impactful to show you a real example. Let me introduce you to Bob. Now, Bob's a typical hardworking guy who came to me because he was stuck in a rut, working 60 hours a week in his business without seeing the profits he deserved. Through a focused approach to business planning, we managed to turn things around for him. This is Bob's story, and it illustrates just how powerful effective business and strategic planning can be.
The Challenge: Too Many Hours, Too Little Profit
Bob was overwhelmed, working way too many hours without seeing the results he desired. He didn't know his numbers, wasn't working on his business, and needed to delegate tasks he was handling himself. Bob's primary goal was to increase his net profit because there wasn't enough money on the bottom line to justify his exhaustive efforts.
Business Plan Financial Snapshot
When Bob came to me at the end of the financial year 2021-22, his financials were as follows:
- Turnover: $598,000
- Cost of Sales: $297,000
- Gross Profit: $301,000
- Expenses: $140,000
- Wages: $110,000
- Net Profit: $50,000
No wonder Bob wanted to make more net profit; $50,000 was not enough.
The Business Planning Process
With any journey, the first thing we need is a plan. We created a business plan for the 2022-23 success. We got very clear on the outcomes Bob wanted to achieve and the goals that related to those outcomes. For example, Bob wanted more net profits. We set a specific goal: how much net profit did he want? We then identified the strategies to achieve this goal and the actions he was prepared to take.
A vital part of the process was aligning the financials with the plan. Just like building a house or planning a wedding, you need to ensure you have the budget to match your plans. For Bob, his goals and budget for 2022-23 included increasing his turnover by 14%, his gross profit by 62%, and his net profit by 191%. His biggest goal was to increase his net profit to $147,000.
Commitment to Change
The next step was to get commitment. Nothing happens unless you make it happen. Bob dedicated one day a month to working on his business by joining our Entrepreneurs Group. This group involves one full day a month of learning, working on the business, and accountability. Bob also decided to delegate tasks he didn’t need to do himself and invested $15,000 in coaching through the Entrepreneurs Group. This commitment ensured he was held accountable for his desired results and continually educated himself on business management.
Implementing Effective Business Strategies
We worked on six key strategies for the year. Here’s what Bob focused on:
- Pricing Strategy and Service Offerings: Streamlined services into packages and reviewed prices. Created a budget to track monthly progress.
- Contractor to Full-Time Employee: Converted his contractor into a full-time employee, which turned a variable expense into a fixed one, improving gross profit.
- Outsourced Bookkeeping: Hired a professional bookkeeper to replace Bob's inefficient, self-managed bookkeeping.
- Changed Payment Terms: Started taking deposits upfront and worked only with clients who respected his payment terms.
- ABC Analysis of Clients: Focused on A and B clients, and moved away from C clients who were not beneficial for the business.
- Expense Management: By reviewing all expenses and creating a budget, he managed to reduce operating expenses by 20%.
The Results: A Dramatic Transformation Through Effective Business Planning
Now, let's reveal the results after 12 months of implementing these strategies. Here are Bob’s numbers for the end of the financial year 2022-23:
- Turnover: $1,120,000 (increased by 87%)
- Cost of Sales: $560,000 (relatively stable)
- Gross Profit: $565,000 (increased to 88%)
- Operating Expenses: $112,000 (decreased by 20%)
- Wages: $120,000 (slightly increased due to new full-time employee)
- Net Profit: $332,000 (increased by 556%)
Bob’s life has dramatically changed. He now smiles more, has more time, and recently enjoyed a month-long holiday with his family without business interruptions. He has more choices regarding his time and money and can delegate tasks he doesn't need to do.
Bob’s journey illustrates the power of effective business planning and strategic planning. With a clear plan, aligned financials, commitment, and focused strategies, Bob transformed his business and his life. You too can achieve such results by participating in our business planning workshops. Whether you're a new or existing business, it's always beneficial to re-evaluate and refine your vision and strategy.
If you want to achieve similar results and transform your business, get in touch to find out more about our business planning services. Let us help you work on your business, not just in it, to achieve greater success and balance in life.
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