business planning

Our business is growing steadily. When is it right to move into a new facility? How do we find funding?

We are getting close to capacity at the kitchen we rent but we are at a point where we (2 people) might not be able to meet the new volume without a new facility and more employees. The business isn’t grossing that much yet, but won’t unless we can increase output. Asked on MosaicHub by Eric Martin

Mike’s response

How can you increase capacity without increasing overhead?

— Find an “as needed” contract kitchen for the time being. A restaurant I frequent is open for breakfast and lunch, and is going to rent out its kitchen in the evenings for people like you.

— Do a second shift. Hiring a “night crew” is a lot cheaper than opening a new facility. Utilize your existing facility and equipment to the max.

Raise your prices! If you have increasing volume and you’re not yet profitable, you’re not charging enough. Unless you can demonstrate profitable operation, you’ll never be able to raise growth capital.

Get more efficient, and thus boost your labor productivity. I have a bakery client who started tiny, and now she’s at $3 million. It has been very hard for her to make the production more efficient. “We’re an artisan bakery!” she proclaims. But now she’s getting productivity religion, and it’s going straight to the bottom line. And quality is not slipping; if anything, the greater consistency is increasing quality.

Schmooze your bankers. Everybody’s first suggestion for raising money is crowdfunding, but I doubt it could work for you. You want permanent capital–perhaps $50,000 or more. You can’t crowdfund that much. You’d spend a huge amount of time and effort, then probably not make it.

Focus on getting profitable by getting the most from your current facility, get help putting a plan together, impress your banker, and get a legitimate capital loan.

 

 

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Why bother planning? There’s so much uncertainty!

Good article in Wall Street Journal! Will make your blood boil! Or maybe you’ll say, “Hmmm, I see the value in that.” A few key ideas that excite me:

“Many successful business people reject the idea of setting firm goals.” They reject the value of setting big, audacious SMART goals—“specific, measureable, attainable, relevant, and timely.”

Things are too uncertain for this. Instead of choosing a goal and then making a plan to achieve it, look at the means and materials at your disposal, then imagine the possible ends.

Use the “affordable loss principle.” Instead of focusing on the spectacular rewards from a venture, ask how great the loss would be if it failed. If the potential loss seems tolerable, take the next step.

Use “defensive pessimism.” Just thinking in detail about worst-case scenarios can sap their anxiety-producing power.

Since I lead planning workshops, why would this excite me? We try to accommodate these ideas in our planning:

— Get your plan done on just one sheet of paper. If you can’t write it on a page, you can’t do it in a year anyway.

— Focus on your toughest challenges, uncertainties, dilemmas, choice points. Any plan that ignores these is bound to fail.

— Balance between business and the rest of your life is a key goal. Build it into your plan.

— Plan for how you will deal with uncertainties. The more uncertainty, the more flexibility.

— Be steadfast pursuing your goals—until it’s time to shift. When a goal has been left behind by events, change it. It’s deadly to stick with it.

Our Small Business Success plan workshop helps you get your plan for the year done and presented to others for their feedback.

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