Your business plan should include a number of other considerations in looking forward to the coming years.
The last couple of weeks we discussed opening new markets and spent some time discussing the Chinese market. Your business plan should also include a number of other considerations in looking forward to the coming years.
Cost reductions and cost controls are always keys to ongoing success. Too often cost reduction is thought of as something we always do, so we give it little specific attention. In these days of competitive pricing, that has to change. To get the maximum from your efforts, you need to make it a specific operational plan designating specific products and goals. A plan of reducing costs by 3% per year should be an achievable goal.
Purchasing activity can be a major opportunity for cost reductions. Purchasing is a critical function in your organization and has to be controlled at the highest levels. I’ve seen operations where purchasing authority is dispersed throughout the organization with many different departments having purchasing authority. That will not give management control over costs. Centralize your purchasing and give it management authority. A purchasing strategy with key suppliers is as important as a sales strategy.
Cost control is also essential. If you don’t have a good cost-reporting system for every product manufactured, be sure you include that in your planning. Out-of-control costs must be contained immediately. Every day lost can never be reclaimed.
Product pricing, as an integral component of your marketing plan, must be done at the highest levels. Too often it is left at a low level. Pricing is a marketing strategy, not a sales strategy. Therefore, it is a management task. All price decreases are subtracted directly from profits. Conversely, all price increases go directly to profits.
Your plan should include activities that will help improve the motivation of your people. Plans that will help motivate everyone to achieve higher performance must be an integral part of your goals, even in these difficult times. Layoffs and cutbacks have by now already taken a toll on your company morale. So, put in plans for next year that will help restore that morale. Make sure that the improved results can be monitored so that you can give credit to those responsible.
We will continue with more ideas next week.
Business Planning (Part 5)
By Jack Marino
Report Abusive Comment