Business Plans

I have often been asked by aspiring entrepreneurs:
– Should I write a business plan?
– If so, where do I find information on how to write a business plan?
– What should be included in a business plan or how detailed should it be?

These are good questions. Let me begin by saying that there are several preliminary steps that should be completed BEFORE embarking on the arduous task of compiling and organizing data into a comprehensive business plan.

Usually, after a process of determining whether a business idea is worth pursuing, entrepreneurs immediately launch into a process. For some entrepreneurs, the process of validating the idea is relatively quick, while for others it is exhaustive in scope. However, over the years, I have observed there are some preliminary steps to be completed before starting to develop the business plan. These preliminary steps are a three step process I refer as the Gut Check Mirror (GCM) Test:

1. Figure out if you really have an entrepreneurial personality profile. Many people assume because they have been successful in the world of traditional employment that they will automatically succeed as an entrepreneur. Wrong! Wrong! Wrong! I am so passionate about preventing entrepreneurs from making this mistake, that I wrote a book on this specific topic called Transitioning From Employee to Entrepreneur – A Roadmap for Aspiring Entrepreneurs.

The premise of this thesis is that success is not guaranteed based on past successes in the employment environment. These are three simple steps to take before making the decision to invest a substantial part of your net worth, commit 3-7 years of your life, and put your future on the line in an attempt to become your own boss. One of the first things you need to do is evaluate your personality profile by taking an entrepreneurial profile test. This beginning step helps to make the determination if you have what it takes to be an entrepreneur.

2. After validating your entrepreneurial profile, the next step is to determine what type of entrepreneur you are. This is another critical step many ignore – at their peril. There are four business models for an entrepreneur to consider in making the decision to become his or her own “boss”:

a. Starting a business from scratch
b. Buying an existing business
c. Becoming a franchisee in a franchise system
d. Becoming a consultant in your area of expertise

Each of these business models has advantages and disadvantages, as well as commonalities. How do you decide which business model is right for you?

– If entrepreneurship is core to your personality, you should probably start your own business.
– If your risk profile is middle of the road, then buying an existing business may be a better fit for you.
– If you like the idea of starting your own business, BUT you do not want to risk starting a business from scratch AND you do not necessarily want to buy somebody else’s business, franchising is probably your best path.
– If you have limited funds BUT you possess a high degree of technical expertise in your field, becoming a consultant might be the best choice.

You need to decide which business format suits you best before deciding on the business you want to either start or buy, or sign on as a franchisee or consultant.

3. After you complete the first two steps, a specific business can be selected and then you can begin the process of developing a business plan.

Business Plan Development

There are five steps to writing a business plan.
1. Format. Determine what type of process or format to use. There are three:

a. Write a business plan from scratch
b. Use business planning software or a template
c. Engage a consultant to assist you in writing the business plan

Each of these alternatives or formats has its own advantages and disadvantages:

Business plan from scratch

The advantages of crafting a business plan from scratch is two fold. First, it is the least expensive way to go; second, although it requires a lot of work on your part, you become familiar with the data because you are the one doing all of the research and compiling all the data.

The disadvantages are, first of all, it is time consuming; secondly, if your business plan is going to be used to secure business financing, it may not be in a format with which lenders are familiar. Do not underestimate this factor. Lenders are lazy. They want facts presented in a format that makes everything easy to see and understand.

Business planning software or template

If you decide to use a template or business planning software, this will streamline the business plan development process. One of the most comprehensive template software programs is from Palo Software: http://www.paloalto.com/. Their software costs $99.95 for the Standard Version and $199.95 for the Pro Version. This platform is especially powerful and can be used for a range of business models, from very simple to the most sophisticated plans imaginable.

There are free versions of business plans provided by www.score.org and on the Internet for basic business planning. Simply go to Google.com and search “Free Business Plans.” You should beware that some of templates you will find listed on this search may be inadequate for your needs, especially if you are attempting to secure financing.

Consultant services

Finally, if you decide to engage a consultant, there are three alternatives to consider.

o Non-profit organizations such as local Chambers of Commerce mentoring programs, Score.org and community colleges
o Paid professionals such as your CPA or financial adviser
o Business plan consultants who make their living writing business plans. These consultants vary in price from less than a thousand, to as high as five to ten thousand, depending on the sophistication of the plan.

2. Research. After deciding on the methodology you are going to use to develop your business plan, the next step is to begin the research. This research will encompass the following factors:

a. Competition. It is important that you conduct a thorough study on the depth and scope of the competition, the strength of each competitor, chinks in the armor and how you intend to exploit these weaknesses.
b. Pricing model. What the margins are and what your margins need to be.
c. Real Estate. In many businesses, location is the main determinate of success (Location, Location, Location). If there is a significant relationship between success and real estate, you must research this area extensively.
d. Equipment. If the business requires specialty equipment, then separate financing options may need to be considered, as well as delivery and installation times.
e. Staffing. If the business requires technical expertise, what is the market price for this expertise and what is the recruitment strategy? Inadequate research and understanding in this area can bring a new business to its knees very quickly.

3. Revenue and Expense Models. Depending on the sophistication of your financial model and your familiarity with Microsoft Office Excel and the creation of financial projections, this component may need to be outsourced to a financial professional. The template business plans have preformatted cash flow spreadsheets, income statements, and balance sheets, all integrated into a smooth presentation format in the business plan. However, depending on the complexity of your financial mode, a great deal of financial acumen may be needed to properly compile these details in a meaningful fashion.

4. Financing Plan. The most useful tool for obtaining financing is a well-crafted business plan with thoroughly developed assumptions and research references. There are four main choices for financing, with a less common fifth option:

a. Personal funds; i.e., savings, retirement funds and investments
b. Personal borrowing; i.e., home equity, family and friends, credit cards, unsecured bank loans
c. Equity, personal or third part angel investors
d. Business loans from institutional lenders
e. Venture capital (usually reserved for high tech businesses and concepts)

5. Exit Plan. All too often, this is not considered in the initial planning process. Yet, it is arguably one of the most important elements of a business plan, because without a successful exit, most of the effort in starting and managing a business is for not.

Writing a business plan need not be an overwhelming task if it is approached systematically and methodically, following a time tested process.

A business plan falls on the desk of an investor. They pick up the document and begin to read. A few pages in it has become crystal clear that this is the same plan they read earlier in the week, sometime last month, or dozens of times over the past year. While it may be written on different paper by a different management team, the business plan is obviously a “me too” document.

What is a “Me Too” business plan? It is a document that outlines a business model or strategy that closely mimics that of competitors in the market without bringing anything new or original to the table. It outlines a path that is already heavily travelled by competitors. It does not clearly identify why you will do it better than your competitors, or why you are taking a different approach from those that have already tried and failed. It jumps upon the latest “it” business model without directly addressing the issue of how you will differ from the hundreds or thousands of others on that same bandwagon.

In the hyper competitive and crowded business environment in which we all operate, it is critical to create a plan for your company that clearly, concisely and compelling demonstrates how you will succeed by taking a road that is all your own.

• Is it the composition, quality, or pricing of your products and services?
• Is it your ability to provide better value and service to your customers?
• Is it your ability to address a segment of the market which is either not served or underserved by your competitors?
• Is it the depth and experience of your team (be realistic here)?

Why is it so important to avoid a “Me Too” business plan? Because most investors review hundreds of business plans each year and if they can not quickly recognize in your document what makes you better and different than other similar concepts, you are doomed for the NO pile.

Good Luck!

Business plans for small business people is an interesting phenomenon. Most business owners know they should have one but various research indicates only about 56% of small business enterprises has a current one. This article discusses 3 compelling reasons why you should have one if business success is your prime motivation, which is must be for all of us with our own business.

Read on to uncover the myths of business planning and the easy solutions to create one.

MYTH NUMBER 1: Business Plans for Small Business People Seem Difficult to Construct

After personally completing over 146 business plans for many companies big and small, I have seen the difference it can make in a switched on organization. The most effective plans are those that only take about a day to fully construct. Any more than this the plan is likely to be too long, too complex and harder to implement.

So would you take one day a year or even each quarter to construct a relevant specific plan that will provide motivation to you and your team, strategic direction on what you need to implement, and to give you a much higher percentage chance of attaining business success?

Now there are some great resources and tools on the market that makes creating a new plan such an easy way to go. These are neither expensive nor time consuming so really there is no excuse for not doing one.

MYTH NUMBER 2: Business Plans Implementation is often neglected

Business plans for small business are easy to implement if you look at the following structure. The best way to implement your new plan is to complete a yearly one of only 5-12 pages depending on the complexity of your small business.

Then create a quarterly 90 day plan which is only 2 pages long every quarter. This makes planning a breeze.

The longer yearly plan sets the goals and gives more detail but the shorter plan is just as powerful as it is the action plan needed for implementation.

The best results in implementing strategy is when you look at your 90 day plan of action each week and put time aside of about 3 hours a week to plan and take action.

This means you have a yearly focus broken down to quarters but implementation is done weekly. A sure fire rapid way to achieve maximum business success.

MYTH NUMBER 3: To Start Planning Seems Difficult

Planning is essential for success. Even the statistics shows over 70% of businesses that succeed over a 5 year period have a written plan. Conversely the 80% plus statistic of business failure shows a very low percentage of people in this category have a written plan.

Bottom line: You are absolutely more likely to succeed if you have a current written plan or you are more likely to fail if you have not.

To start planning just look for a business planning template online and get started. These days a better option is to purchase for a very small fee planning software that even has what others in your industry have completed before you. This makes it extremely easy to plan successfully as you use the example for a guideline and change it to suit your individual circumstances.

Business plans for small business are easy to implement if you use the right tools, cheap to construct and a vital skill for you to reach the heights of success you deserve. If the fruits of your labour are currently now what you desire, then I commend you for completing a powerful business plan of action so you can rightly reap the rewards of all of your hard work.