RISK/REWARD System in Business

Risk and reward are related factors in the business world. Any company that chooses to enter the marketplace faces risks, whether financial or operational. Therefore, reward is the benefit achieved when companies mitigate their risk and earns income from their operations.

Systemic Risk

Systemic risk is the collapse of an entire market or industry in the marketplace when one company fails. Businesses face this risk when selling products in a saturated marketplace with large competitors.

Systematic risk is faced by businesses that do not diversify their products or services. Companies can avoid this risk by offering several products in the marketplace and creating multiple revenue streams.

Measuring Risk

Businesses measure risk by comparing their expected rate of return to the normal risk-free rate of return in the marketplace. Formulas like the Capital Asset Pricing Model (CAPM) help businesses determine the amount of reasonable risk by comparing rates of return to the amount of risk in investments.

Mitigating Risk

The first step in earning rewards in business is to mitigate the risk involved in business decisions. Diversifying investment strategies can mitigate risk. Choosing some safe investments or products along with some high risk/reward investments or products will maintain a diversified business strategy.

Achieving Rewards

Businesses achieve rewards when they choose investments that have the highest rewards and the lowest amount of risk. Some investments will have higher risks than others, so businesses will require higher returns on these investments. All business decisions carry risk, so carefully measuring the risk versus the reward is essential when reviewing business opportunities.

We face business decisions every moment of the day. Some business decisions are more important than others.

.                 Your business is at a fork in the road. Which way do you go?

.                 Should I invest more money into the company?

.                 How much of my money should I invest?

.                 Maybe I should sell my business?

.                 Is my business worth saving?

.                 Should I downsize or try to grow?

Unless you are clairvoyant, there’s no way to know for sure whether your business decisions will be the right ones. In the end, we should all have to do the best with the information we have at the time. The business decisions you make based on limited information may not be the business decisions I would make, but the results and consequences from those business decisions will certainly be yours and yours alone. 

Awhile back, I remember a colleague of mine making a statement about my opting to stay the course and continue to conduct business as usual when everyone knew that the environment in which we were now operating was very different and more importantly, unfamiliar.  His statement to me was,” Are you basing your business decisions on facts or feelings?”  When push came to shove, I was basing my business decisions more on feelings rather than facts. 

Since that time, I have found one decision-making tool that I’ve learned to use over the years that helps me organize my thoughts and separate facts from feelings.  I’ve adopted it and applied it to many business scenarios. It’s the risk-reward calculation. In other areas of business, it’s also called a cost-benefit analysis. In layman’s terms, it spells out the probabilities of success and failures based on certain actions.

Here are 5 basic questions you can ask yourself before you make business decisions. The first order of business is to simply stop and take the time to go through this exercise.

5 Essential Questions to Ask Before Making Important Business Decisions

1.     What Are the Potential Rewards? What could you gain by performing action X? It could be a dollar amount, or something less tangible like peace of mind or the respect of your co-workers. In some cases it could be both.

2.     What Value Do You Place on the Potential Rewards?  This question, in some respects, is more important than the first. If you don’t personally value the rewards presented by action X, what’s the point? Even if you are not a numbers person, you should place a numerical weight on each reward factor and come up with a mathematical model for whether or not you should move forward with a particular decision.  In the case of rewards/gains, it becomes essential and critical to calculate the potential dollar amounts from your business decisions.

3.     What Are the Potential Risks?  What risks are inherent in action X?  What could go wrong? What is the likelihood that the risks you’ve outlined could materialize? What is the dollar amount related to each decision risk?

4.     What Value Do You Place on the Potential Risks?  Every risk has to have a potential dollar gain and loss associated with it. If you could potentially lose $50,000 on an investment, you might be fine with that. But if that $50,000 represents all of your capital, you might see things differently. If you’ve just lost you’re your largest client, you might not want to risk any of your capital. Considering best practices and historical proof prior to your discovery for change should be leveraged and weighed in your decision making process as well.

5.     What If you’re Wrong?  Unconsidered variables and unknowns can throw a wrench into your risk-reward calculations. What if the rewards you anticipate don’t materialize?

What if there are risks out there for which you have not accounted? By definition, you cannot enter the proverbial Black Swan into your calculations. For those who aren’t familiar with the term, the reference is to Nassim Taleb’s bestselling book about the highly improbable. (Tangential Mini-Rant: Many have said that the recent (ongoing?) financial crisis was a black swan event.)

The key here is to outline some contingency plans. How will you react if your business decisions don’t pan out? Will you sell or hang on in hopes of a recovery? How will you react if that recovery never happens? How will you react if you are correct and your business decisions yield 20% more than expected? Would you continue to implement calculated risk-reward decision making for the remainder of the business life cycle?  The key is to have a plan in place before these things happen.

These guidelines won’t guarantee a 100% winning decision. Nothing can do that. But at least you’ll know that you’ve based your business decisions on facts not feelings and numbers not notions to increase your chances for success.

In my 15 years of working closely with business owners, I have found those who have sought information from outside of their own reaped the benefits of risk-reward calculations to steer their business towards their goals.

How are you going outside of your own knowledge and experience to calculate your risk-rewards for business decisions?

Innovating the Business Model

Armed with this perspective, where might management innovation go from here? I offer three short predictions: 



First, Management Innovation will become more collaborative. Opening up the innovation process will not stop with accessing external ideas and sharing internal ideas. Rather, it will evolve into a more iterative, interactive process across the boundaries of companies, as communities of interested participants work together to create new innovations. Organizations like Syndicom, for example, have already established a community of spinal surgeons who meet up virtually to share effective protocols for screening patients for new therapies, and new methods and techniques to achieve better patient outcomes when utilizing those new therapies. 



Second, Business Model Innovation will become as important as technological innovation. It is generally accepted that a better business model can often beat a better technology. Yet companies that spend many millions of dollars on R&D seldom invest much money or time in exploring alternative business models to commercialize those discoveries. Not all business models are created equal, and we will learn how to design and improve business models in the coming decade. The rise of multinational companies from BRIC economies will further advance this trend. 



Third, we will need to master the art and science of innovating in Services-Led Economies. Most of what we know about managing innovation comes from the study of products and technologies. Yet the world's top advanced economies today derive most of their GDP from services rather than products or agriculture. To preserve prosperity and high wage employment in the advanced economies, we will have to learn how innovation works in services, which is likely to differ from how it works in products. If we incorporate the above two predictions as well, one can predict that the winning formula for managing innovation in the next decade will be via open services.

Business Principles from the Book of Proverbs

What is the best book on business that you have ever read? 



If you visit the typical bookstore-at least in the U.S.A. you will find hundreds of volumes in the business section, each claiming to hold the ultimate secrets to business success and professional advancement. Some are biographical; others suggest multiple step "how-to's" of becoming a great business leader or high-producing salesperson. Some focus on motivation, trying to convince you that you can do whatever you set your mind to do, while others offer cute little stories in which they convey basic business truths. 



I have read dozens of these books, and I'll agree that in them I have found many worthwhile insights and principles. However, I don't think that all the books displayed in the business section can come close to the substance that is available in what I consider the greatest business book ever written-the Book of Proverbs by Solomon. In fact, there is more practical business wisdom presented in one small section of the book of Proverbs than you can find in any other book, even those written by today's foremost business leaders.

Right now I am rereading King Solomon’s Book of Proverbs: I love to read the most about business ethics, positive working attitudes, sales, and management.  All this and more can be found in the Book of Proverbs. The book of Proverbs of Solomon written between 960 and 922 BC and his thoughts were remarkable and if you read today’s writers like Tracy, Rohn, and Canfield you will find traces of Solomon in their writing.

I know what you are thinking (saying)… Hey I am not a bible reader, nor do I want someone pushing me to a “churchly” dialogue.  You would be mistaken, however, if you do not investigate the wealth of information that can be found here for the 21^st century businessperson.

It behooves all of us in business to seek competent information, wherever the source.  You may be surprised just how many business coaches apply the Proverbs principles.

The Book of Proverbs may be the most practical book ever written for the modern day businessperson. It was designed to be a success manual.

Proverbs defines success far more broadly than economic success. It includes economic as one mark of a successful person. But these proverbs make it clear that economic success apart from wisdom is a snare and a delusion.

The book applies its principles to such areas of life as money, work, planning, peace, goal setting, self-discipline, and other topics. It covers the following in detail:

1. The steps to personal success

2. The standards of personal success

3. Success indicators

4. Failure indicators

5. The function of riches

6. The basis of riches

7. The concept of ownership

8. The nature of economic causation

9. The marks of an ethical economy

10. The purposes of inheritance

Whatever your persuasion, non-religious or religious, should you not at least investigate a tested resource that can aid you toward a professional and personal path toward success?

I would love to hear your comments and opinions.  You can publicly display them on my Blog: http://businessmanagementcounselingservices.blogspot.com/

Or e-mail me in private: stevehomola@gmail.com

Your opinion is always highly regarded and respected!

The Art of Customer Service

Customer service isn't just the job of your customer service department and representatives; it's the job of every employee in your company. And service starts at the highest levels of a company.

The four key elements of good customer service are:

1.     A high level of trust in your company and in the people customers deal with

2.     Knowledgeable employees who understand what customers are talking about

3.     The company and its employees not wasting customers' time

4.     Friendly employees who go the extra mile for customers

The question is: "How does my company get to a high level of customer service, where the key elements become second nature to my employees?" Here are five steps you must take to achieve great customer service:

•                Make sure that everyone in your company understands and measures the customer experience. Employees must know how their jobs impact the customer, and they must become obsessed with providing satisfaction to the customer.

•                Educate your people about how they should act and treat customers. They must realize the importance of good customer service and what you expect from them.

•                Communicate examples of good customer service to your employees.

•                Make sure that potential and new employees have the kind of customer-service mindset that you want.

•                Deal with employees who can't or won't deliver the customer service you need. You can move them to other areas of business or let them go, but you have to take action quickly.

Not dealing with the employees who don't have a customer-service mindset can be deadly to your company. Bad apples can spoil your efforts to deliver satisfactory levels of service to your customers.

The modern customer is a pretty savvy consumer. He or she hears what you say and promise and then watches closely to see if you deliver. You've probably had some experiences as a customer in which a company's walk didn't match its talk, and you probably took your business elsewhere. In your business, you have to continually find out whether you're delivering the things you promise to your customers. It's natural to want to promise your customers the world, but you can't do so unless you know that you can deliver the world.

So, how can you find out how you're doing in the promise-delivery department?

•                Ask your customers for feedback.

•                Keep in close contact with your employees and get their feedback, too. Ask them how they're doing and solicit ideas about how you could help them do better.

http://businessmanagementcounselingservices.yolasite.com/

stevehomola@gmail.com

Holding On to Dumb Business Concepts

It’s a truism that “nothing is certain in this world except death, taxes and bad management.”  Why does bad management remain so pervasive, even after decades of MBA courses, millions of management books, and billions spent on management training?

The root of the problem lies in five basic management concepts that became popular in the 20th century and continue to propagate stupidity.  As long as the business world kowtows to these obsolete management concepts, managers who screw up plague their company, employees, vendors, suppliers, and their customers.

Some of these concepts are dearly held panaceas for much of the business world.  Even so, they were ill considered and ill conceived from the start, and should be jettisoned for the good of everybody.

Dumb Concept #1: “Downsizing”

Thousands upon thousands of articles in the mainstream business press characterize CEOs as “courageous” because they instituted a downsizing.  Apparently, the decision to fire people is so difficult, that the CEO who takes that path must be a brave and lonely soul.  He’s putting the interests of the investors ahead of his own kindhearted inclinations, and making the difficult decisions that will allow the company to remain profitable.

But, wait a minute!  How, exactly, did the company get into a situation where it needed to fire people in order to remain competitive? Sure, markets change like crazy in today’s world and business conditions become challenging.  But isn’t it the job of the CEO and the management team to predict those changes, and to staff the company appropriately, and retrain people, so that those challenges can be addressed?

Here’s the truth.  Downsizing is a sign of failure.  It means that management has failed and rather than doing the right thing — which is to quit without severance — they’re passing along the penalty for that failure to the people who, in good faith, tried to execute the flawed strategy that top management pursued.

That’s why top managers (and the kiss-butt journalists in the mainstream business press) love the word “downsizing.”  It makes the results of failure sound like a strategy, rather than a desperate way to remain profitable after top management has made a complete pig’s breakfast of things.

So as we go forward, let’s stop calling it downsizing.  Let’s call it what it is: firing productive workers because top management was ineffective to protect and run their company.

Dumb Concept #2: “Leadership”

A few years before he died, Peter Drucker was interviewed on NPR.  In that interview, he pointed out what should be obvious to everyone — that all this talk about “leadership” is a bunch of horse manure.

Yeah, yeah, the idea of leadership sounds neat — especially if you’re in management — and it makes a manager sound all charismatic and exciting.

But what is a “leader,” anyway?   What does a “leader” do?

I can’t hear the term without thinking of the leader of a marching band.  That’s the person who takes a big stick and makes it go up and down, while the band does the work of actually making the music.

One reason I think of that image is that, in my experience, most of the time the “leader” of the team is the person who found a parade and then got out in front of it.  (I once heard an executive in Fortune 50 Company describe that odious behavior as “smart business practice.”)

The concept of a “leader” means that credit for what the team does goes to the leader.  And you see it every day, in the bloated salaries paid to “business leaders” and in the ridiculous way that some CEOs parade themselves as if they were rock stars.

You see it in the lower levels; too, where managers’ illustrate about leadership and “inspiring” people, when in fact they’re usually just making everyone under them want to puke.

What Drucker said — and I agree with him — is that the business world doesn’t need leaders. It needs managers — people who can actually manage a team of people.

Being a manager means being in service to the team.  It means giving the team credit and making everyone else successful.  So, as we go forward, let’s stop enabling all these tin-pot “leaders” by pretending that they’re doing anything other than grandstanding.  Let’s value the real managers, who actually do the hard (and largely thankless) work of making other people productive.

Dumb Concept #3: “Human Resources”

When you talk to people who work in “Human Resources”, they pretend that they’re all about helping people to become more successful.  But the truth is that the entire concept of HR is really just a way to make sure that employees don’t act uppity.

What better way to let people know that they’re expendable commodities than calling them “resources”?  Indeed, the entire concept of HR is designed to make the process of dealing with real live people as bloodless as dealing with electricity or shipments of iron ore.

As for the functionaries who’ve glommed onto the term, whenever an HR group gets involved in anything, you get a patina of psychobabble that overlays the opinion that an employee is about as important as making sure the trash gets picked up.

Let’s face it.  Many, and probably most, HR groups are just spies and shills for management.  Don’t believe me?  Try taking a complaint about your manager to the HR group and see what happens.

Once people are reduced to “resources”, you can pretend that making them work unpaid overtime, or firing them because top management screwed up is “better resource utilization.”  Most of all, the term communicates in no uncertain terms that you’re completely expendable.

How come you never hear C-level executives being called “management resources”?  No, no, of course, not.  Those guys are essential! Those guys are the leaders! They’re not replaceable like the hoi-polloi, the plug and play “human resources” at the bottom.

You want to know what a CEO does?  He manages a group of 10 to 13 people. Here’s the truth, boys and girls. Being a CEO is marginally more difficult than being a line manager who manages a group of 10 to 13 people.

CEOs do not “run the company”.  They manage a group of other managers who presumably are smart enough to — guess what! — Manage the group of people who work for them.  There’s no reason in heaven or hell that a CEO should get paid more that few multiples of what the “human resources” who actually do the work.

So, as we go forward, let’s stop talking about “human resources” and start calling people what they are: people.  People who have real lives and real ideas and real emotions and who, frankly, are doing work that’s often more important than that of the top executives.

Dumb Concept #4: “Empowerment”

Back in the 20th century, there were all kinds of talk about how technology was going to empower people.  Applications like email and, later the Internet, would create a free-flow of ideas, making it possible for individuals and small organizations to counterbalance the power of large institutions.

Today, however, it’s abundantly clear that technology isn’t empowering employees; it’s empowering management to spy upon employees.  And technology isn’t empowering small organizations; it’s making it easier for large organizations to drive the smaller ones out of business.

As evidence of this, look at what’s happening to Wiki-leaks, probably one of the only organizations in the world that’s actually making a stab at the kind of information empowerment that was promised in the past.  The big financial institutions, one by one, are using their clout to shut it down, even though the organization has not been charged with any crime.

Consider as well, the so-called “net neutrality” act recently passed.

There’s a concept in business called “the law of inverse relevance” which can be stated as “the less you plan to do something, the most you must talk about it.”  That generally takes the form of laws and regulations that do the exact opposite of what their title says they’re going to do.

The “net neutrality” act is a perfect example.  Rather than making sure that the net remains neutral, it actually makes certain that wireless companies will be able to throttle any business or business concept that threatens their profits.

The way this “empowerment” concept plays out in business is the insane idea that new technology is going to make people more innovative, more entrepreneurial, more creative, yada, yada, yada.  All those things come from the heart, not from the hand.

So, as we go forward, let’s stop talking about technology as “empowerment” and start talking about what really counts: human creativity freed from the limitations imposed by bonehead “leaders” who think they’re managing “human resources”.

Dumb Concept #5: “Business Warfare”

Many traditional business leaders have a militaristic view of the way the business world works; A glance at the titles of popular business books-Marketing Warfare, Leadership Secrets of Attila the Hun, Guerrilla PR-offer ample testimony for this widely held viewpoint. We’re told that we must imitate generals and warlords if we want to be successful managers.

Taking all this to heart, many executives talk as if they were planning the next world war: “This product will do major damage in the marketplace! We’ve armed our sales force. We’ve targeted the right set of customers! The new ad campaign will explode into the territories! This is going to be a major victory! Our troops are ready!”

Ugh.

Here’s the problem. If a company’s executives really believe that business is warfare, then that dogma will be reflected in nearly everything that goes on inside the corporation. Strategies that don’t fit the dogma-regardless of their potential for success-will be rejected because they are literally “unthinkable.”

For example, executives who believe that business is a battlefield will almost inevitably assume that victory in business goes to the largest “army” and they’ll build large, complicated departments stuffed full of people and resources. Even when customers would be better served by a smaller, more focused effort, there will be an overwhelming drive to build a massive corporate “army” that’s “strong” and ready to “fight.”

Military-minded managers also find it all too easy to become control freaks. Because they see themselves as generals and officers, they tell people what to do. They think that good employees should shut up and follow orders. This behavior destroys initiative as people wait around for top management to make decisions.

And because top management is often the most isolated from the customer, the company loses track of what’s needed in the marketplace. Further, the “business warfare” mentality makes it impossible to put the decision making where it belongs-at the lowest level of the organization.

Military thinking also distances employees from their customers. To the militaristic company, customers are, at best, faceless territory to be “targeted” and “captured” with marketing and sales “campaigns.” This strategy discourages the viewing of customers as living, breathing human beings with opinions, interests, and concerns of their own.

BTW, the entire “business warfare’ concept, with its buddy-buddy, band-of-brothers, shoot-’em-up consciousness seems ludicrous to many women. Not having spent their childhood playing soldiers in the sandbox, many women find it pretty ridiculous that a bunch of grown men can act as if their boring meetings and dry-as-dust ideas were high adventure and global conflict.

The militaristic organization almost always discriminates against women. From time immemorial, warfare has been a male pastime, and though women have often fought and died in wars, they’re generally considered second-class soldiers. Men who think that executives should be generals in three-piece suits find it extraordinarily difficult to envision a woman in a position of power.

So, going forward, let’s deep-six the militaristic jingoism and start talking about business in terms of relationships, agreements and profitability.  Then we’ll all be better off.

The aforementioned is a point of view.  It is generated to make you think, hopefully to add your rebuttal, if you dare?

Your argument can be placed on my blog:

http://businessmanagementcounselingservices.blogspot.com/

Your comments and criticisms are always welcome!

The Seriousness of Making a New Year Business Resolution

Welcome back from the holidays.  Now back to work!

As in our own lives, the start of a new year energizes us as business owners to sit down and plan out our goals for the coming year. We consider what sales figures we hope to achieve, the many directions we can take our products, and how to tap into any unsaturated markets that we can find. Here are four things that are important to keep in mind while strategizing for 2011.

1. Self evaluations can be very useful and never hurt.

Often we encourage our employees or managerial staff to conduct evaluations on team performance or client satisfaction. However, we often overlook evaluating ourselves as business owners and proprietors. I have noticed this first-hand over the past year. I believe building in a work flow that will provide a system of checks and balances not only on my team, but also myself, will help me make better informed and consequently smarter business decisions in the coming year. While it is never good to have too many people trying to make one decision, one individual with many people’s insight and wisdom can never hurt. Restructuring decision making schemes and organizational workflows are something that can improve the overall efficiency of any business, and more importantly its effectiveness at providing quality products and services

2. Set metrics that you can use to reliably track both successes and failures.

Whether you use a system of quarterly reviews, or weekly debriefs, there is a lot to be said about metrics. That being said, the best metrics are the most unobtrusive, transparent, and seamless to integrate into daily business. Many companies use time tracking software for logging their employees’ work, but that doesn’t always guarantee success. In fact, large companies like Apple and Google have been known to have a more project oriented perspective on getting things done, and favor strict deadlines rather than hourly logs. At the end of the day, how things get done matters less for these companies than the end result, and to a certain degree this is a good policy. Metrics that can be used to take notes on minutes as well as scalable content management systems that allow for better cooperation amongst teams are a must in today’s world. All businesses, no matter how big, should have a consistent manner in which they can gauge the efficacy of their actions and decisions.

3. Desire for growth must be matched with market limitations and innovation.

The companies that fail, or begin to earn significantly less profit are the ones that don’t understand market limitations. Unfortunately, this happens to the best of us. It’s only natural, after all, when something seems to be going well we expect it to continue. We go on our way and fail to notice warning signs that the market and or customer demands are changing, we fail to adapt to new economic conditions. In other words, sometimes we’re not scalable, and we’re not dynamic. A solid company needs to have contingency plans. Furthermore, no company should neglect to have a division that focuses on market research and understanding the evolving consumer market. Whether that person is the single proprietor, or a team of individuals within a large corporation, having people who can keep their heads up when so much is going on around them enables companies to steer themselves in the right direction all while seeing the bigger picture.

4. 2011 is going to be the year that advertising must evolve.

One thing I believe that badly needs even greater attention given to your resolution is new methods of marketing and advertising that are not overly pushy but actually work in a very overly saturated market. Some studies have shown that the average individual is exposed to 3,000 advertisements per day. We hardly remember any of them. Advertising is pivotal to any business, and those who use more effective methods of advertising are often the industry leaders regardless of the quality of their products or services. Many companies are working on coming up with new advertising platforms and new methods to try, but I can’t help but think a major overhaul is needed. The people to figure out how to create advertising 2.0 are going to be the true winners of 2011.


Best wishes for a happy, healthy, and prosperous 2011 to you!

http://businessmanagementcounselingservices.yolasite.com/

Sincerest Holiday Wishes & Appreciation!

As you relish the goodies, decorate every corner of your home and enjoy the get togethers.
May the joy and festivities continue to radiate in your lives long after Christmas is gone.

Merry Christmas!

The New Year lies before you,
Like a spotless tract of snow,
Be careful how you tread on it,
For every mark will show..

Happy New Year 2011!

My sincerest thanks to everyone that has been  a part of BMCS!


click the link below for our Christmas message to you!


Merry Christmas Message!

The Business Expansion Plan

Overview


Small businesses become big businesses through expansion. In most cases, business expansion occurs due to an increase in demand, an increase in efficiencies, new production lines, more diverse or international markets and the need to bring certain functions, such as logistics or manufacturing, in-house. Planning for expansion is a strategic exercise, which involves identifying the exact need for expansion. After this, you can focus on the need and develop more defined estimates of the time and capital required to implement expansion efforts.

            Step 1

                  
              Identify exactly, what needs to be expanded? Expanding for the sake of expanding might lead to increased inefficiencies. Determine exactly what parts of the business you wish to expand. Producing more product does not necessarily translate into a broad expansion across the board. This approach does not take economies of scale into consideration. That is, you may not need to expand administrative functions and/or move into a larger building. Perhaps you need only hire more staff and/or purchase additional equipment.

                   

            Step 2


                                           Determine the effect of the expansion on personnel. Consider hiring part-time workers until the need for full-time work is certain. Also, remember that payroll for increased personnel should come from the increase in revenue, not outside funding.

                   

            Step 3


                             Develop training programs for employees. Communicate expansion efforts and goals with employees through training sessions. Train a few of your best employees and then have them train others. If purchasing new equipment, have the seller provide training to staff.

                   

            Step 4

                  
             Consider expanding through the Internet. Brick and mortar (traditional building space) costs a great deal more than the cost of maintaining a website. This is also a great way to reach overseas clients while extending your hours to 24/7.

                   

            Step 5

                  
              Purchase or lease additional space only if necessary. This poses a significant investment and should be analyzed carefully. Until then, consider efforts to maximize the physical space of your current location.

                   

            Step 6


Determine new routes and plans for logistics. With additional customers comes the need to service a broader customer base. Identify those logistical needs that need to be augmented.

How to Create a Business Plan for Expansion

          Expanding your business is an exciting proposition. It means it's doing well and ready to grow to the next level. But often a business needs financial support to implement expansion ideas. A professional business plan that outlines the expansion details can earn the money needed to grow the business.

o   Write an executive summary that outlines the business' history, including its successes and accomplishments. It should also cover the business' goals, current facilities and equipment, and employees. Include information on the proposed expansion, such as a larger facility or new equipment.

o   Describe your target market by demographics, such as age, gender and socioeconomic status. Indicate your current marketing tactics and how they are implemented. If you'll be changing your marketing plan with the expansion, outline these changes.

o   Provide details about your competition, including differences and similarities in services, target market and marketing tactics. Focus on how your business is unique from others that offer the same type of service or products. Elaborate on how your expansion will set your business apart from the competition.

o   Provide information about your management team. Give their names, duties to the business and information about their skills or training as it related to the business. If you'll be taking on new partners or managers in the expansion, provide details on the duties and attributes to the business.

o   Outline the daily operations of the business. Describe the day-to-day activities; such as providing services and marketing, as well as who is responsible for assuring these activities are completed. If the daily activities will change with the proposed expansion, provide information on what will be different.

o   Provide financial details about the business, including current statements that show expenses and income, and net worth. Outline the costs related to the expansion as well as projected profits over the next year.

o   Include an appendix for supplemental materials that don't fit in the other sections. For example, if your expansion is adding on to or building a facility, include blueprints of the proposed project. This section is also used to provide other documents, such as permits.

o   Create a professional business plan document to show to bankers and potential investors. Use quality paper and binding, and make sure it's easy to read and free of errors.

http://businessmanagementcounselingservices.yolasite.com/

stevehomola@gmail.com

The Essentials of the Business Plan

A Business Plan represents an essential document for any company regardless of its stage of development. It is a crucial first step for an entrepreneur when moving from a business concept to the realization, funding and development of the venture.

A plan achieves multiple objectives. Most importantly, it requires management to carefully think through the company's purpose and goals and articulate how such objectives will be met. As the business develops, the plan can guide decision making on operational and financial issues.

In addition, a well thought-out, comprehensive and credible business plan is almost always required in order to obtain funding from capital providers such as banks, angel investors or venture capital firms. Entrepreneurs should therefore always assign the necessary time and resources to produce a thorough plan as evidence of their commitment and professionalism.

Prior to writing the business plan, management needs a clear vision of the following core elements: the company's products or services, the target customer base, the firm's marketing strategy and competitive advantages, and how the venture will be financed.

The business plan will identify the strengths and risks of the business, provide an overview of the market, set out financial projections, articulate long-term goals and define key targets to be achieved. Such goals and targets should be both realistic and quantifiable. The plan should serve as a reference document in the future for determining if the business is growing and evolving as anticipated.

There is no single template that is appropriate for all business plans, although companies should aim for a clear and concise document of 20-25 pages plus an Appendix, if required, that contains additional information or financial data. Although business plans have many common elements, the content will differ depending its aim (e.g. attracting venture capital funding vs. an internal operational plan). However, a comprehensive plan will likely incorporate the following sections:

•                Executive Summary. An interesting and concise overview;

•                Company Description. Details of company's products and services and stage of development;

•                Market and Customer Analysis. Identification of target market and client basis and company competitive advantage analysis;

•                Marketing and Operations. Plans for production of goods, provision of services, sales and distribution.;

•                Company Organization. Overview of key employees, organizational structure and anticipated staffing needs;

•                Key Objectives and Timeline. A schedule of quantifiable goals and associated timing. Identification of critical elements necessary to achieving these objectives;

•                Financial Data. Historical and projected financial information and statements based on company's business goals and current and anticipated funding; and

•                Appendix containing supplemental information, if required.

The process of producing a business plan is invaluable. It requires entrepreneurs and management to focus on all aspects of the venture's goals, operations and funding requirements. In addressing these fundamental elements, the business is then better able to communicate the company's vision to outside parties including investors, lenders and customers.

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