Dr. Rick Franza, Professor of Management at the Hull College of Business, discusses a different, timely business topic each Monday in this column. This week, he gives tips on planning for a new year in your business. The interview has been edited for clarity and impact.
ABD: In just a few weeks, we’ll be starting a new year, likely to be filled with a variety of challenges for businesses. How important is it to plan ahead in your business when the future is unknown?
Rick: You need to plan a year ahead, even if you know things are going to change. The longer you plan, the more unpredictable things get. But the key is proactivity rather than reactivity. At least by planning, you set some guardrails. You can be specific in wanting to grow but still be flexible with your plans and goals.
Last week, we talked about looking back and evaluating the past year. Now, after you’ve done that postmortem, is the ideal time to plan for next year because you have the most recent data.
ABD: You mentioned flexibility with goals. How often should you examine how you’re doing with them?
Rick: You set parameters for the year, and then you should revisit that plan at least once a month. My younger daughter is in sales and that’s a career that is very competitive and quota-driven. She starts with annual goals, but the quotas are updated every month.
ABD: When you sit down to plan the next year, what are the important categories to consider?
Rick: There are a bunch of important categories. One is to evaluate your team, and human resources in general, to see if you have the right people on your team, do you have to make adjustments, let some people go, or hire new ones.
Related to that is growth. How much can you anticipate growing your company in the next year, and how much do you want it to grow? If you grow, what are your hiring goals and what skillsets do you need from new employees?
Another important category is your supplier relationships on both ends of the supply chain. It’s proved especially important following the pandemic to have a good supply chain coming in. The more suppliers you have, the better. And on the other end, you need to understand your distribution and whether you have the right people to get out your products.
Budgeting is also important. You need to plan not only for if things go bad, but what are you going to do with the extra cash if things go well? Part of that is also having a longer-range plan for equipment and facilities, for upgrades and maintenance.
ABD: Last week, you said that after your evaluation of the year, the tendency is to want to make all the corrections and changes at once. But you don’t think that’s a good idea.
Rick: You can’t do everything at once. You have to set priorities of what to do first and then map out when you’ll do the rest during the year. How you manage that will depend on when your busy season is. You don’t want to mess with processes in the middle of your busy season. You can make note of issues, but the time to change things is when you’re not as busy.
ABD: In times of uncertainty in the economy, as we’ve experienced this year, should you be more conservative in your outlook?
Rick: Now is a good time to be more conservative. But your plans should be scenario-driven. What’s the most optimistic scenario, what’s the most pessimistic scenario and what’s the most realistic scenario? And what are the probabilities of each of them happening?
We tend to spend more time on the downside, the pessimistic scenario, but planning should be for the most realistic or expected outcome.
ABD: Good planning usually involves good input. How important is good information?
Rick: The better informed you are about where things are going, the better you can plan. One of the best ways is to watch a business program in the morning, while you’re eating breakfast or getting ready for work. It’s a great way to start your day.
I watch CNBC in the morning and listen to NPR in the afternoon. And I read the Wall Street Journal. The Wall Street Journal and NPR both have political agendas, but they’re transparent about what their agendas are. But there’s a lot of information out there, radio programs, podcasts, and even on X (formerly Twitter), depending on who you follow.
The important thing is to find people you can trust. It’s vital for business people and business owners to understand where the economy is going and to be aware of the trends that could affect their business.
