How is the recession affecting your business? Do you have more business or less? When do you expect the economy to recover? Initially, the recession caught many engineering firms unprepared for the rapid decline in business. Are you sure that the current and expected market changes are reflected in your business plan? These are all questions that need to be answered in your business plan; your company’s business road map.
It might surprise you that most business owners know that they need to have an up-to-date business plan. But many entrepreneurs can not seem to find the time required for reviewing and making the necessary analysis to keep it current. So if you have not already, now is the time to review your plan and periodically make modifications.
During a slump in the economy it is imperative to manage your business as proficiently as possible. Most engineers have extreme technical skills, but not necessarily the same level of business skills. An engineer will have spent 8 to 10 years in college and post graduate training before being licensed as a Professional Engineer without ever taken one class in business.
When the projection of incoming revenues slow or stop coming in the door your first reaction is to find more clients from the same source and second to cut costs by downsizing. This may not be the right business steps to take. Usually the better action is to re-examine each of your markets and clients in those markets, and to determine if those markets change in direction is temporary or long term, and then to careful review your company’s services and products. Operating any business should be a constant review of the process of that business, and whether it is operating at its best. Mistakes in the operation of the business during the good times are easy to compensate, but during the not so good times the same mistakes can close the business. A careful review may also show that your company is relying on one market to heavily and may need to diversify into other markets.
The kitchen table sketch may have been the beginnings of an engineering business plan, but as the company continues to operate and grow, the business plan needs to be formalized and updated periodically. The engineering business plan is nothing more then an outline, summarizing how the company will operate to be a successful business. Within the plan there are estimates based on industry research and personal experience which determines how much the company can expect to profit. This is established by quantifying the amount of services and products to be sold minus the expenses. It is one of the business owner’s primary responsibilities to work on the business through the process of reviewing and updating the business plan.
A business plan describes the direction and purpose of the engineering firm. Without a plan the company can and often will wonder aimlessly, and may eventually fail. A slowing economy can be very damaging to poorly structured companies whether they are large or small. These companies are usually not in a position to handle the changing market conditions, and end up closing their doors. The stronger companies are usually better managed with an operations plan in place to handle the ups and downs of the economy or the changing target market conditions. Companies following good business plans whether small or large tend to survive a recession, and are set to expand during the economy’s recovery period.
There are numerous sources of information, including books, computer software, and websites on the subject of business plans. Unfortunately most of these sources address the generic business such as retail or service businesses. There is no business like a professional service business like engineering.
A very good resource is the United States Small Business Administration website www.sba.gov. According to the website, the minimal requirements for a business plan are as follows:
1. Description of the business: What is the structure of the business, and what are the services and products it provides?
2. Marketing: What are the potential clients and how will the business communicate with them?
3. Finances: What are the expected revenues sources and what are the expenses? Also what are the potential profits and losses?
4. Management: Who are the key personnel and who is responsible for the various functions of the company?
Making good use of a up-to-date business plan is on of the best ways to attack the recession. It is no time like now to review and, if necessary, update your business plan. Write out the strategies that will improve all four areas of your business. Next implement those strategies, and monitor their daily, weekly, monthly, and quarterly results. And lastly, make adjustments in those areas in the plan that are not meeting your expectations.