Business Planning With Sigma

  • Define. During this phase it is necessary to consider VOC (Voice of Customer). In this instance the customer is not necessarily the people to whom you sell products and services. In this process you are the major customer. If you are the business owner then the business plan is to serve you. What is it that you want to achieve with the business in the year(s) ahead. Of course it will be necessary to also consider the needs of other customers such as other shareholders, partners and government since they can have an interest in your business.
  • Measure. In this phase, for business planning purposes, the best place to start would be your last set of accounts and last year’s budget. Here we have a baseline. Typically, we look at last year’s profit result both in dollar terms and gross margin and from that we are able to determine the target that is to be achieved.
  • Analyze. At this point it is necessary to start to breakdown the process into more discrete activities since the overall business objective is to be achieved through a variety of different actions. Of course this, what these activities are will depend on what your business actually does but there are some common ones that will help explain the process.

Say you that your objective is to deliver an EBIT profit of $1mil with gross margin of 15%. In order to achieve this it is going to be necessary to map out the activities that can support this. A great tool for doing this is a fishbone diagram. It’s a simple graphical tool that will provide a structure for you to consider the interrelationship of the various aspects of your business. This chart will then allow you to methodically review the different aspects and analyze the information to determine what to improve. You may have to use some other analysis techniques to help you delve deeper into certain aspects but the fishbone diagram should be the main place of reference to keep the analysis plan on track.

Most effort goes into this stage since it is where you begin to look at your business critically to examine areas for improvement by analyzing different aspects in detail.

  • Improve. After carrying out some analysis it is then necessary to put in some actions to improve. For example you may have decided that you need to improve your sales revenue by conducting a marketing campaign. The improve stage is where you determine how you are going to do this. These activities become smaller improvement activities but as you can see they are all tied back to the fishbone diagram and this in turn is supporting your overall objective. Having this reference document helps keep you focused. In our example we would then begin to detail exactly how the direct marketing campaign would be structured. Identify the targets, the message and the vehicle and timing. That is who, what, how and when.
  • Control. This step is about monitoring and is where you would list the activities that you will undertake to ensure that you are tracking your progress and taking the necessary corrective action if things are going off course. Normally this involves some form of monthly reporting of factors such as sales, lead/prospects conversion, production, service delivery or cost reporting. The key factor is to have a review mechanism that works for you!