Business Planning

As a kid, I remember my dad--the quintessential methodical, organized engineer--sitting me down at the kitchen table for his favorite bi-annual lecture: "Planning For Your Future."

His yellow legal pads would be filled with charts and diagrams and statistics illustrating how I needed to start investing immediately and planning for a lucrative professional career (preferably a sensible one such as engineering), as studies showed that government funds would dry up before I retired, statistics predicted my marriage would end in divorce, leaving me to support myself and my children, and pundits speculated that the price of housing would explode, rendering me destitute and homeless, begging for change to feed my three starving children--all of which could be prevented if I started planning for my future right now.

Of course, I didn't listen. Between my weekly allowance and part-time summer job, I was flush. I was living high on the hog for a 16-year-old. Years later, I realized that his advice was prudent. I didn't end up living out of a cardboard box (although my first apartment in New York came close), but I would have benefited from starting to plan a little sooner.

The same rings true for many small businesses, which often fail to implement formal business-planning processes in the first few years of their growth, or ever, but which would likely benefit from starting the planning process earlier.

Most solution providers agree that setting and managing goals is the best way to ensure growth and success, yet more than half of them, many of which are smaller businesses, operate without a formal annual business-planning process, according to the 2007 VARBusiness State of the Market survey.

As expected, the smallest VARs are the most likely to lack formal planning processes. About 60 percent of companies with less than $1 million in revenue operate without them, according to the survey. Still, that figure only drops to 50 percent for companies with $1 million to $10 million in annual revenue. And even 20 percent of companies with more than $10 million in revenue lack a formal process.

"When you're trying to just bring in revenue every month, formal business planning seems like something you don't want to spend a ton of time on," says Steve McGovern, CIO of Practice Wise, a consultancy for ambulatory medical firms in Tualatin, Ore.

Business planning, though, will eventually become essential for many IT solution providers, which tend to specialize in providing tailored solutions to local and regional businesses and can quickly tap out their immediate markets, McGovern says.

"VARs are very niche-focused; you take someone else's products and find a niche. It's easy at first, and then all of a sudden you realize a niche is a niche for a reason--there aren't a ton of customers," he says. "Then you have to sell them something different that you think they need or you have to find somewhere else to apply what you have learned."

Practice Wise is now looking to expand its market reach and is formalizing its business-plan process to help provide a road map for its growth.

Most solution providers seem to agree that if a business wants to grow or expand, a formal planning process is essential.

"If you're serious about solving problems and growing to be profitable or to be bought or to achieve an IPO, a business plan is the first thing anyone wants to see. It shows how professional an organization is," says Mike Johnson, director of the Western U.S. region for systems integrator QStar Technologies. "It shows if a company knows what they're doing or if they're just content riding on the coattails of vendors. Unfortunately, a lot of solution providers and systems integrators live hand to mouth, not looking past a 30- to 90-day window."

Often, businesses write their first plan when they're seeking external funding and need documentation to present to investors and banks. But business-planning experts say a formal planning process that involves a written plan and a consistent review of that plan can benefit businesses internally, as well, by helping them set goals, allocate resources, handle obstacles and measure growth more effectively.

"Given the way we as humans work, it's hard to review what you were thinking six months ago, or even three months ago, because our mind plays tricks on us," says Tim Berry, president of Palo Alto Software, a provider of business-planning software.

NEXT: Excuses, Excuses