A Staples Survey Explains Why You May Soon Go Bankrupt

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(This post originally appeared on Inc.)

Last week, office products supplier Staples released a survey that focused primarily on technology. It revealed a few not-so-surprising facts about small business owners.

For example, 47% of small business owners consider email to be their top business application and 71% say the computer is the most important piece of office equipment. No big news there. 96% of those surveyed admit that they are involved in the big business decisions. Of course. And 62% are looking forward to the fall as the start of the holiday season. Ho-hum. None of this comes as a big surprise, does it? (Staples, by the way, is a client of my company but I have received no compensation from them for writing this).

However, read a little closer and you will find a surprise. A big surprise. A revealing bit of information that’s important to every person who runs a business. It’s this: 63% of the small business owners surveyed by Staples said that they do not have a five year plan. Seriously?

In the past two years close to 100,000 businesses have filed for bankruptcy. And that doesn’t include the number of businesses that were just abandoned, sold off or wound down. We hear about the high failure rate of startups which, according to some reports, are as much as 75% to 90% within their first five years of existence. Many, like investors Marc Andreesen and Bill Gurley, are worried about how venture capital backed startups are burning through their cash. In fact, Gurley says that companies can’t just sit back and play conservative with their money, they are compelled to spend and attempt to grow business with the venture money, even if that isn’t the best business decision.

Oh, all these smart people. Entrepreneurs. Leaders. Visionaries. And yet they don’t have a plan. Not even a five year plan. They’re just spending and spending. Hoping for the best. Keeping their fingers crossed. That’s no way to run a business. But according to the Staples survey, that’s exactly what two-thirds of business owners are doing. Not smart.

I haven’t raised zillions in Silicon Valley. My little ten-person company’s entire valuation can likely be added up on one hand. I’m not saying I’m the greatest business person in the world either. But I’ve survived. I’ve managed to run a fairly profitable (given the month) business. I do have a five year plan. And I think it’s a big reason why we’ve stuck around for more than 20 years.

My plan is simple. It’s a spreadsheet. On this spreadsheet I have 3 worksheets. The first is for quarterly objectives. On the second is annual objectives and the last is five year objectives.

The quarterly objectives are pretty detailed. I list the product licenses we sell and the overall sales I project (or hope?) to do this quarter, along with new client signups. I project my cash, receivables and backlog for the quarter end. I project the quarter’s chargeable hours. I keep the columns for each historical quarter there too so I can compare progress. I list some intangible goals too, like reviews for people, upcoming events I plan to do, certain marketing activities or internal projects, potential spends and even personal goals (like keeping my weight under 150 pounds!).

The annual objectives are a little broader. I use many of the same numbers as above, projected out and updated based on how things are going so far. I decide on other goals like launching new services, doing annual marketing campaigns and tasks for each person. I think about where I want to be with certain clients and new partnerships by the end of the year. I determine this around Christmas time each year.

But my five year objectives are the heart and soul of this exercise. I think about this a lot. It’s big picture. Where do I want to be in five years? What are my professional goals (for my business, which is all service, I’m focused on building cash and annual client revenues). What are my personal goals–college funding, retirement savings, hitting a certain skill level at squash (don’t ask). Everything we do annually and quarterly is all about the five year plan. I often ask myself: “is this activity helping me reach my five year goals or not?” If it’s not, I seriously reconsider. For me, it’s whatever needs to be done to hit the targets set for the next five years.

I actually do this. I am not kidding. I actually schedule a task to remind me to check these goals mid-quarter and then at year end. I discuss them with others in my company. I take an hour or two out each quarter and update the data. I carry around the spreadsheets with me and glance at them occasionally just to remind myself of the plan. I’m watching, fretting, panicking, celebrating. I’m just trying to navigate things to where I want to end up. Captains do this. Business owners do this.

What kind of business owner doesn’t do this? Oh, I know. The ones who will probably be out of business before I am.

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