Re-do the business plan

Get a fresh sheet of paper and do next year’s business plan. Start with a review of all costs, and downsize every projection by 20%. COLIN BENJAMIN

By Colin Benjamin

At a loss doing a plan for next financial year? Don’t know what to do with all this market turbulence set off by speculative investments and government failure to develop an effective fuel costs policy?

Well, get a fresh piece of paper and start planning next year’s business and plans.

Take a lesson from the Kelly gang – Gail and Gary Kelly (the former head of the Dragon bank and the latter head of Southwest Airlines in the US) who have shown that planning ahead, keeping customer service up and costs down represents the best response to the commodity bubble.

Small and medium business leaders will have to accept that real inflationary effects will continue to savage their bottom lines the next financial year.

On top of that, financial institutions are going to be looking for every cent of debt collection and that the RBA is likely to have to raise interest rates at least one or two more times to tame the inflationary tiger.

We are unlikely to see the oil bubble burst this year as speculators and superannuation fund managers continue to see the potential of gold dropping below $US850 and equities continue to trundle along at the bottom of their yield curves.

And don’t expect any more magic tricks from the US. Deutsche Bank economist Joseph LaVorgna has noted that the US Fed’s ability to keep stimulating gross domestic product (GDP) growth with rate cuts cannot continue.

“The record high made in oil prices seriously complicates the economic outlook. Higher energy costs raise the risk of higher headline inflation, lower GDP growth and a Fed which cannot further cut rates for fear of unhinging inflation expectations,” LaVorgna says.

Avery Shenfeld, economist at CIBC World Markets, says: “The Fed has sent a clear message that it’s not inclined to cut rates in June even if the economic picture continues to darken. Such a darkening seems likely in the coming week’s data, with ugly news on house prices, home sales, durable orders and personal income… Add in soaring gasoline prices, and both equity markets and the dollar could be in for a tough week.”

Taken together with an inevitable further collapse in consumer confidence, rising rates of home foreclosures in 47 of the US states and the collapse in the price of luxury boats and premium apartments, any hope of a US-led recovery appears remote.

This can only mean that Australian consumers will also become more focused on domestic business opportunities and reducing their willingness to pay more for imported goods and services.

So the bad news is we are in for a hell of a year.

Now is therefore a great time to review the last financial year and start with a fresh sheet of paper for next year’s business and plans. Start with a review of all costs and downsize every projection by 20%.

Then look at the marketing and service delivery plans and add 5% to costs of doing business so that deals can be done with customers prepared to lock in a price advantage to 2010.

Spend time with key staff to review all operating procedures and find ways to build your brand identity in the Australian market so that the impact of petrol at $2 a litre does not erode your business development prospects.

Dr Colin Benjamin is Entrepreneurship and Strategic Thinking Consultant at Marshall Place Associates, which offers a range of strategic thinking tools that open up possibilities for individuals and organisations committed to applying the processes of innovation, creativity and entrepreneurship. Contact: CEO Dr Jane Shelton.

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