Micro Business PlanningScott Williams
A micro business (1 to 4 staff) is often the first time the business owner has needed to manage people; other than themselves. While the owner was doing everything by themselves, not much planning was necessary because things could be changed easily.
Once the owner has staff, there are new responsibilities on the owner to ensure that the staff in the business are working efficiently towards the destination that the owner has in mind.
Following, some of the issues around planning for a micro business are discussed.
Planning for Two Types of Work
Micro business, effectively, has 2 types of work:
First, routine work refers to the work that is necessary on a day to day basis in order to generate the Income for the business. It certainly requires planning, but that planning is usually on a short-term basis and tends to be the same routines repeatedly. With skilled staff doing work they do on a regular basis, the amount of formal planning required is low. Regular meetings and good communication (discussed below) can manage this type of work.
Second, innovation tasks tend to be the first time that some activity is undertaken. This occurs as the owner works to grow the business. As a consequence, there is often little prior experience in the particular area of innovation to work with.
This article looks at ways of planning innovation work at a micro business level.
Micro Business: Planning Horizon
It is often difficult for a micro business to have a long planning horizon; say 1-3 years. This is because everything the business is doing is new, there is no guide to how much might be achieved and how much time it might take to achieve it. Larger and longer established businesses can work on an incremental planning format similar to “increase Profit by 10%”. The new micro business does not have that luxury.
However, it is critical that the owner does have a clear general “destination” in mind for the business. Without having a clear understanding of the direction that they are intending to take, the planners do not have anyway of deciding what routes are better than others.
The destination can be expressed fairly generally and without a clear time frame.
Expressing the destination as “make a million dollars in 12 months” is pure guesswork on the part of the owner.
The business activity will be expressed as a general direction. For example a destination might be to:
- Become a plumbing business employing around 20 people.
- Cover a certain geographic area.
- Generate around 1 million dollars per year in Rewards (Salary and Profit) for the owner.
This destination explains what type of work the business intends to do (plumbing), some idea of scale (20 staff), an idea of the catchment area for the business and a target Reward for the owner.
Notice that, in this example, no time frame is given. This is because there may be insufficient data available to the planner/owner to calculate how long it is going to take to achieve those goals. The micro business needs to improve its ability to execute work and to grow its Revenue to afford more staff. But also, it will have other constraints like, available cash to fund growth, that are difficult to predict much in advance. As the business grows, a time-frame will become clearer; but that could take a couple of years.
If that approach proves to be too hard to picture at the moment, there is another way that will give you a working destination until the picture clears.
That approach is:
- You already know what you are taking home as your Reward (salary + benefits + profit) from the business. Let’s say that is $50,000.
- You know what sort of lifestyle that amount of money gives you right now.
- Based on that, what Reward would you want to take home to give you a comfortable lifestyle. Let’s say that is $150,000.
- So your destination is to grow the business to a Reward of $150,000; thereby achieving a comfortable lifestyle.
It is a clear cut, and mission critical, task for the business owner to have a definite destination in mind. This is before starting to employ staff and focusing on how to grow the business. If you do not have a target destination, the business will progress by accident. Consequently, it will easily wander around in the wilderness chasing the next “bright shiny object” that catches your eye.
As your experience grows, there will be changes to the detail of the destination. This is a healthy response to your improving understanding of how the business can go forward. As some of the detail about the destination will be shared with the staff, the destination should not change too frequently or they will be confused.
Micro Business: Planning Period
In the same vein, older and more stable businesses have a planning horizon for a minimum of a quarter and possibly a year; or longer.
A new micro business is changing so quickly it does not have the ability to make good estimates for more than a quarter in advance.
Therefore, rather than having quarterly and annual plans, the micro business is more likely to have a series of “sprints“. These are short planning horizon periods of, typically, 1-2 weeks. Read more in the article: Business Success with Sprints
The advantages of sprints, for the micro business, are that it is:
- Easily possible for the owner to see one or two weeks ahead.
- Possible to pivot off in a different direction, or re-prioritise work, at the end of each short time frame. This is without wasting a substantial amount of time and other resources on something that turns out to be less than optimal.
Any sprint can be made up of a number of “tasks“. These can be done in a particular sequence and by different people.
- A sprint to improve the marketing.
- Tasks within that sprint could include:
- Changing the webpage
- Developing a customer on-boarding process.
- Updating the accounting system for invoicing the customer.
- It is the job of the owner – possibly in conjunction with the staff – to specify, and allocate, these tasks to the right people.
As well as the sprints, most micro businesses will benefit from having a “ToDo” list. These are one-off micro tasks that are things that pop up during the business operation. They are collected and prioritised for each member of staff. Ideally, they can be created by any staff member to pass work to other staff and to collect topics for discussion at team meetings. They can be for both routine and innovative work.
Fairly quickly, a micro business will need a tool to manage the sprints, tasks and ToDo’s, so that all staff are clear on what to do and when. This need for co-ordination will be required for the rest of the life of the business. Therefore, it is good to start to develop a process early in the life of the business. Tools for this are discussed in the Communications section below.
Using a PDCA Process With Planning
Even a work activity as short as a sprint should have a routine to it. This will ensure the best outcomes and capture lessons learned.
12Faces uses, and recommends, the Plan, Do, Check, Adapt (PDCA) process that made businesses like Toyota such successes. Read more in the article: How the Plan, Do, Check, Act (PDCA) Cycle Builds Important Routines
Each sprint cycle should be planned in advance (Plan), executed (Do) and then checked (Check) to see what the outcomes are. Depending on the outcomes, the business can be adapted (Adapt) to take advantage of what was learned. This might indicate more sprints in the same direction. Or it might mean that area is ok for now and another area needs to be worked on.
With scarce human, and other resources, in a typical micro business the owner has to be fairly ruthless in what work is undertaken in the next sprint.
Prioritisation of Effort
The one thing that any micro business owner can be confident of is that there will be lots to do!
For this reason, the owner will need to be disciplined about what activity is undertaken by the business.
We have written about prioritisation, and especially about the 80/20 Rule. This rule teaches to focus on mainly the 20% of things that are important rather than on trying to address everything (100%). Read more about 80/20 in the introductory article: SM2.0 80/20 Principle – Double Sales, Triple Profits
We also encourage the use of the Theory of Constraints. Which points out that it is most productive to focus on whatever is the current constraint, or limitation, that is controlling how quickly the business can grow. Nothing can improve until the constraint is improved. Read more about this theory in the introductory article: SM5.0 Theory of Constraints
Micro Business: Vision and Culture
It is undoubtedly important, at some point in a small business life cycle, to have a clearly written set of goals or vision. This is so that all staff can be on the same “wavelength”. However, a micro business has minimal staff and its final direction may not be clear. This final direction is evolving as the micro business grows and stabilises. Therefore, the goal/vision step could be left to a later date.
In a similar vein, it is useful for a business to have a “culture” that is passed on to all new staff. A business culture can incorporate many things and is custom designed for that business. It might cover things like:
- The desire for two way communication.
- Equal opportunity for all staff.
- Profit sharing schemes.
- And other similar topics.
Once again, with minimal staff in a micro business, spending time on developing a written culture document may not be a high priority at this stage. Also, the business is still evolving rapidly and elements of a written culture document may become outdated, or superseded, fairly quickly.
Micro Business Communications
It is critical that the lines of communication in any business are clear and well managed.
The micro business owner will be working “on the business“, by doing the planning process. In addition, all staff who are working “in the business” need to be kept abreast of what tasks to do and when. This needs a good communication system between management and staff and between each other.
This is a useful skill for the micro business owner to begin to develop as it will be a necessity throughout the entire period you operate businesses.
A suitable communication system will have at least two elements; software and meetings.
Micro Business Communications Software
In today’s environment, it is likely you will use some form of software to manage the non-face-to-face aspects of your communication.
This ranges from email and texts to mobile phone apps.
Communication needs to flow from management down to the workforce. And ideally feedback and ideas will flow back from the workforce to management. This way, everyone’s brains are engaged; as well as their hands.
Therefore, it is a responsibility of the micro business owner to install a useful communication system. Such a system should have, at least, the following characteristics:
- Easy to learn and use.
- Be able to communicate both up and down the chain of command.
- Easily accessible on desktops and mobile devices. And accessible to all staff and possible key external staff, like a bookkeeper.
- Clear in the allocation and priority of work to individuals. This is so that any member of staff gains a clear and unambiguous idea of what they are to do next.
- Be able to set the completion status of that work so that everyone can see progress on the tasks.
There are many project management tools available on the market. But, we didn’t find one that provided access to all staff, via desk tops and mobiles, and covered the various task related planning issues. For this reason, we created our own and called it “Mission Control“. So named as it is the tool that manages the day to day pulse of business activity. Mission Control is available to your micro business as part of your 12Faces subscription.
Read more at the article: Mission Control
Communication Meeting Cycles
Besides communication software, you will want to build a schedule of meetings, at different frequencies and for different purposes.
As a micro business, this does not need to be too elaborate, but is an important aspect of your business. It is in the person-to-person sessions that you have an opportunity to display your company culture and to encourage contributions from all your team members. Therefore, a daily or weekly session would suffice early on. The meetings can be co-ordinated with the “sprint” cycle. It follows to use them to review the sprint just finished and plan the next one.
There is a separate article on meetings that discusses the topic in detail. Read more at the article: Meeting Cycles
In summary, the planning activity in a micro business has quite a short time frame. This is because the learning curve about how to run the business is very steep.
However, it is critical that the business owner has considered the foreseeable destination of the business so that the planning activity can be focused on eventually reaching that destination.
It is also critical that the planned work can be communicated to the staff without constant demand on the business owner with ‘ what’s next’ questions.