Many small-to-medium ecommerce businesses do not employ sufficient long-range planning as part of their business culture. The old joke about the definition of long-range planning is operative in some companies, “Where are we going to eat lunch?”
Large businesses have comprehensive processes necessitated by owners and investors and the need to communicate objectives and results to various stakeholders.
While long-range planning can be time consuming in larger companies, smaller businesses can benefit from adopting some of the key best practices. Advantages include:
- A top-down and bottom-up planning process that can act as a guide to achieving business objectives with expense control and profitability
- Planning cash requirements for inventory purchases, payroll and expansion that are in line with projected sales and resulting gross margin
- Broadening the analysis of results to include merchandising, marketing, fulfillment and accounting in addition to standard ecommerce metrics
- A quarterly review of goals and financial plans and discussion about adjustment if necessary
Start Planning on a Longer-Term Horizon
What length of time is realistic? Most SMBs have an annual sales goal but may not have a detailed plan of how to get there. This includes month-by-month goals for sales, gross margin, major expense categories, acquisitions and profitability. At what periods during the year do you expect to have a greater need for cash, and will you need temporary borrowing to purchase inventory?
From our experience, planning is difficult beyond two or three years, as ecommerce businesses grow and change so fast. We use the word “longer” with the idea it’s a longer time horizon than many smaller businesses currently employ. Extend your planning for the current fiscal year forward to a second year as a series of realistic benchmarks, if you reach the current year’s goals. The second…