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Helping Canadian businesses beat the odds!
Helping Canadian businesses beat the odds!
Hi and welcome to another edition of CPA. Today we’re talking about why business plans are important and it help me today. I have Aaron here. Aaron, thanks for being here. All right, Aaron, I want you to tell me a little bit about your journey to the from here Edmonton Accountant.
Oh yeah, sure, sure. Well, I’m a payroll accountant by trade. I went to the Academy of learning. I got my diploma in computerized payroll accounting with honors. Uh, I was actually recommended to this firm by the head of that school, so I’m really glad that they did because I’ve had a really good time here so far. Edmonton Accountant, I’m thinking of probably working towards either a payroll designation, maybe CPA in the future. I’m really just kind of starting out so far and it’s just kind of exciting right on. I’ve been here for about an almost just under two years so far. So it’s still pretty early on. Yeah.
Great. How are you? So have the statistic about why business plans are important. Is the business owners to do a plan or actually 50 percent more likely to grow the revenue and that’s, that’s the, that’s the statistic. So enormous 30. We get our business owners, they come in and they just don’t understand why their business is not growing and almost always they don’t have a plan or they don’t have a good one for sure. So Edmonton Accountant you’ve visited those who are considering doing a plant or struggling growing their business. What are the questions you think these business owners should be asking your?
Well, probably they would be thinking about, well why is my business failing? And the number one reason that a lot of business owners give for why their business might be failing as well. There’s no demand out there, there’s no demand for my product or services. So if that’s the conclusion they come to us. If Edmonton Accountant the lack of demand for products and services is what they think is the reason for their business failing, how do the stats suggest that a business plan might help in that regard?
Yeah. They’ve actually surveyed entrepreneurs and determined, you know, those separated the ones from, you know, I’ve never done a business plan or I started a business plan and I didn’t finish, believe it or not, those are the probably in the same camp. And then the business owners who actually worked at business planning through to completion and the ones who worked at business plan through to completion are actually, you know, 50 percent more likely to grow their revenue, which is the number one reason why businesses fail, is they experience a lack of demand for their products or services. So actually completing that business plan is the number one thing that they can do, Edmonton Accountant especially when you’re talking about time efficiency of things that they can do it. It should be the number one thing that these business owners should do to avoid the number one reason for failure.
Oh, Edmonton Accountant in that case, uh, I’d, I’d ask what components of the business plan do that specifically? How can business owners can increase their revenue and what components of the business plan to do that?
Edmonton Accountant, there’s a number of components of the business plan that will help them increase revenue. Probably specific. The first thing is, is you know, they understand the pricing. Uh, that could be one, you know, how much they actually do have to charge and make that process. That pricing is a locked down and consistent and sustainable. Um, the next thing is really going through and establishing what your differentiation factors are and where I find a lot of business owners struggle is that they want to assume that they do all of the differentiation factors. They’re in the right location and they have the old, the best team and they have the, you know, the best brand. Edmonton Accountant.
Because why wouldn’t we be, well, why else would you go somewhere else? We’re clearly the best. We do everything.
Exactly. Exactly. But, but they just don’t flush out what are the ones that they do better than everyone else. And if they can flush out those two or three that they do better than everyone else, they can get those differentiation factor.
Yeah. Because because people don’t search that way for a business. They don’t search well, who’s this thing? Edmonton Accountant Who can do everything for me? They search who can do this thing for me?
That’s right. Who’s the quickest, you know, who is the, who has the longest history of success that, that’s exactly true. So you want to flush out what those items are and you know, make sure that you’re there ready to get in front of the buyers. Probably the next thing that you know makes the most important component of the plan that helps them grow revenue is the sales and marketing plan. The marketing initiatives. A lot of times business owners will come up with marketing initiatives, but Edmonton Accountant they don’t quantify them well. They will say that, you know, I’m going to drop flyers or I’m going to run Google ad words, but they don’t understand how many fires they’re going to drop, what their ad word spend is going to be. And then
carrier pigeons, we’ll send that out.
Exactly. Tiny. That quantitative, how many to how much it’s going to translate into increased revenue.
Um, well probably the next biggest reason why a business owner might say that their businesses failing would be just lack of cashflow. Edmonton Accountant, sorry I can’t pay for anything. Um, how would you suggest that a business plan helps an entrepreneur out of that situation? From the running out of cash situation?
Yeah. Running out of cash. Number two reason why businesses fail and business plan. It’s like a budget for your business. So you would think if you were struggling, um, you know, in your personal life with your budgeting that you would actually go through renewal budget and calculate how much things are expected to cost and try to stick to that in a business. It’s much more complex. Do you have a lot more expensive generally than a personally. So, you know, Edmonton Accountant your business plan is the budget for their business and without that they really have no baseline and know is the spending appropriate or is it spending unsustainable?
Yeah, it’s kind of right there in the name. It’s a plan plan out your spending. Um, so for the business plan, Edmonton Accountant would you say it, we should charge extra for doing a business plan for their firm, but it seems like a lot of work, right?
It is a bunch of work and you know, we did make the philosophical shift a couple of years ago to say that no, we’re no longer going to charge extra for business plans because you know, business owners, when they’re struggling, the last thing they to do is say I want to spend more. It’s counterintuitive it to them, but the problem is, is that without that plan, they’re there, they’re going to continue to experience those pain points. Even if they don’t go out of business, they’re going to keep having the same issues crop up. So, you know, we made it, we made the shift to say that that’s a necessary investment in our clients and we say that the success doesn’t cost extra. So Edmonton Accountant because it’s such a central service, it’s just built into our monthly fees.
Yeah. Like would you, would you rather charge extra and get a little bit extra for doing that business plan or the client was the claim? I go out of business if they don’t do a business plan, so exactly where they’re getting no money or some money Edmonton Accountant.
I can spend my time looking for new clients or I could spend my time helping my existing clients succeed Edmonton Accountant.
Edmonton Accountant, so we kind of gone over the, the overview of what the business plan does and why you should do it. What would you say are the three main top reasons why you should do a business plan? Just generally?
Yeah. So normally what you’re going to see why entrepreneurs should be doing a business plan is your number one, Edmonton Accountant, they’re making major changes in their business. Um, you know, the, they want to make some major changes in the um,
so what do I adapt to this thing that happened
that’s right, a new revenue stream, you know, the big a technological advancement that they’re trying to navigate. Edmonton Accountant, number two is they’re struggling. They’re actually struggling to, you know, hit the objectives that they have.
Yeah. Again, I’m, I’m running out of cash. This thing is not available anymore. This supplier went out of business, that kind of thing. Edmonton Accountant like I just don’t know how to business.
Yeah. And the, the number three is probably the looking for financing, um, because our, our annual plans are super successful at actually getting financing and getting the best rate on that financing. So it’s, it’s those three things. I mean, if you’re a status for business and all you’re trying to do is eat, go to another three percent either, probably not going to get as much business as much benefit out of that business plan. It’s, you know, they’re making major changes, they’re struggling to hit their objectives or their, you know, Edmonton Accountant seeking financing. And I say making major changes, that means they might, they want more than, than just cost inflation growth or a marginal increase in growth. They’re looking for better growth. So those are the three things.
All right, so in that case, what do you think about a business plan helps on an entrepreneurial focus on their objectives? It as part of that planning process?
Yeah. So as a business owner there, they’re going to learn that they’re going to get pulled in multiple directions and you’re normally going to get pulled in directions that aren’t really created by yourselves. There you, Edmonton Accountant lots of times they’re created by your suppliers or your customers or your employees and the pull you off course and sometimes you actually can almost forget what the vision is and what are the things that are actually important. You get lost in the weeds. What’s going to actually drive the. So it’s that reference point to know when my mind was clear, when I was well thought out, these were the things that I believe we’re going to move my business forward. Edmonton Accountant so it’s that reminder of, you know, this is
what is, that is this thing that I’m focusing so much on right now working towards that? Or is this just fluff? Edmonton Accountant Is this out on the side somewhere?
Yeah. The prietos eight or 80 slash 20 principle is, is this, is this item responsible for 80 percent of my success or not? Right. Edmonton Accountant, so it’s, it’s that sort of written documentation that gives that, that guide.
Alrighty. Then, um, how many meetings would you say it takes to create a business plan? Just with our firm as an example Edmonton Accountant.
Yeah, so I’m normally a business plan, you know, we do a financial plan and a business plan and for meetings. The business plan normally being two meetings.
Yeah, right. Like maybe the tail end of the second meeting and then the two meetings. Edmonton Accountant.
Yeah. Usually in that tail end of the second financial planning meeting, you know, we, we tell them, we explained to them our template and how we’d like the information organized and then the next meeting is just all about us understanding their patient, you know, we, we, we can’t just give you a business plan that’s disconnected from your vision. We need a meeting to completely after you’ve thought it out and put it down on paper to understand the vision. And then the next meeting is really just us tweaking that, Edmonton Accountant plan you’ll still in accordance with your vision, but just using the tips and tricks that we picked up from other clients in your training that is going to help you execute on that vision. So. Awesome.
And how many hours do you think it should take to hash out that vision, would you say like, uh, like a month, a week, a two years. So it seems like it could be a very volatile Edmonton Accountant
process. What do you think? That’s a great question. And I think that’s one that intimidates a lot of business owners. Why they don’t think it’s 40 hours or 80 hours are going to invest in this thing now it has to be perfect. No you don’t. You can do this in basically the two meetings that are affirming for hours. So after we explained that template at the tail end of the second financial planning, we will explain to you how we want the information organized. And it’s really just a brainstorming, storming dumped into the document. It’s really just dumping your vision into that document. And some people think that it has to be a literary masterpiece. It’s never. So it’s not going to take a significant amount of time. Yeah. You’re saying this never gets in front of a customer. I tell them no more than four hours. You put a four hour block on in one evening or a Saturday or something. That’s all you. You. You put that information. Edmonton Accountant,
I would guess if it takes more time than that, it’s probably not the most important components he would have been thinking of. Like the most important stuff is the stuff that comes to mind first.
Yup. Yup. If you’ve thought it out, those are the you. Edmonton Accountant You’re very right.
Any more than that, you’re probably overthinking it. Yeah,
And how often do you think the plan should be updated, would you say? Does that, does that take a similar amount of time? Edmonton Accountant Less amount time?
Yeah. Really you could look at that four hour block in in perpetuity every year and some business owners think that they should spend an inordinate amount of time up front and then they never do the exercise again. You’d be better off spending four hours a year than 40 hours in your first year because you’re going to learn so many things every year of your business. Whether it’s year one or year 10, you’re going to learn so many things, so Edmonton Accountant
yeah. What happens if something catastrophic happens and everything changes?
Yeah. You want to adjust your strategy and your vision according to that every year. Um, you know, uh, you know, we plan on know two or three years for business owners. I see small business plan on five or 10 years. Sometimes I laugh because Edmonton Accountant
if you’re coca cola, maybe you can play it for five years, but if you’re a joe’s plumbing or Tim’s dentistry too much has been changed in that time period. Yeah.
Whether it’s like subtle changes in the markets or like, oh, no. Edmonton Accountant Global warming and has put the entire world underwater. How will you adapt to this new ocean based economy?
I haven’t seen anything that drastic yet. Nope, not yet. Mainly just like the, the former, a little bit of that. Yeah. Someone changes the tax rate or a little bit they build, they build a road in front of my business. Yeah.
Um, I mean, can we kind of went over how much time it takes to update the plan? Edmonton Accountant, how about, um, getting the plan reviewed? Um, how, how does having a second set of eyes look at the plan help boat in that, in that respect. The thing that’s so cool
he is having that second set of eyes, you know, I’ve been doing business plans for a decade and I’m the first one to tell people that I always want someone else to look at it because I want someone to poke holes in what I said to you. You might end up going with, you know, your, your, your first intuition anyways, but Edmonton Accountant if you have someone poke holes in it, you know, when you have the business owner go through it and then you have your accountant go through it and knowing that your accountant is actually going through it with their team rather than just one person. Because the point is we want to poke holes in that before money is on the line. Indeed. Before we made decisions that have had costs us money and sometimes you know, maybe irreversible decisions, right? So
like part of the business planning and of itself is determining the risks and also determining the strengths of the competition. Edmonton Accountant You have to evaluate like what could go wrong so that you don’t run into that problem or at least not into that problem as severely as you could later on down the line.
Exactly, exactly. Having more than one set of eyes and especially eyes that you don’t have experienced that on not just a half dozen businesses that experience on hundreds or thousands of businesses. That’s what really adds value to these plans and helps you make the right decisions because the decisions in the business, they’re not like the video game decisions. There’s no reset button. There is no safe point g back, right? Um, they’re, they’re kinda final sometimes. So, um, that’s all we got for today. So Edmonton Accountant thanks so much for joining me, Erin, and uh, you know, if you guys have any questions or comments, you don’t feel fee to, to write them below and we’ll try to address the subscribed to that. Excellent. Yeah, yeah. And if you have any questions, leave them below and we’ll address them in a future video. Thanks very much.