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Monday, October 26, 2009

The annual planning meeting

Today is our annual planning meeting. Things are a far cry from last year, when we rented a Quebec chalet for $1,000, and employees flew in from North Carolina, Sault Ste. Marie and Toronto. I shudder to think about the overall budget for the event, including consulting fees, travel, and time.

The recession had just started hitting, and we spent a fair bit of time discussing whether it would hit us. In fact, we made some strategic decisions to bolster our position including a rather creative one to raise our prices. (This actually proved to be wise; sales certainly dropped, but I don't think it was the price increase that caused the decline -- and the yield on sales we achieved obviously was better.)

But I didn't realize how much I had allowed costs to rise, and the thinness of the ground. Sales for the December issue were fine, but dropped through the floor in Jan 09, to create the worst monthly loss in years.

Initially, I didn't worry -- sales seemed on track for February, and the team had a cohesive, positive outlook. Besides, the business plan and projections seemed overall to be healthy.

But things started going very wrong in late January. As cash dried up, key bills could not be paid in a timely manner. Worse, we were preparing to add two new employees and expand the business. Then the February sales figures arrived. They were good, as expected, but with rising costs, the break-even point had increased to the point that even with the good sales we were treading water.

We lost money in March.

Now I knew we had a crisis, and pulled out all the stops. Things became really messy as the business suddenly went into survival mode. Sheesh, where did the business plan go?

We fought through the crisis, and things look much better now. Lots of cuts, lots of painful changes, and the real world of the business now is nowhere near what I thought it would be a year ago.

Does this suggest business planning is folly? You can argue that you can't control the variables and circumstances can change rapidly; as they did this year. In fact, the business plan fell off its tracks right at the beginning of the year.

But the plan also provides a cohesive benchmark, and clear indications of where we thought we should be, and when we weren't heading in that direction, gave me enough insight to do what needed to be done.

So we have simplified things and cut costs, but will still spend an intensive day planning the future. Some out of town employees will join by teleconference, and our venue will be comfortable but not the big chalet we used last year. We'll get the job done.

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