Business Planning Help

Whether or not you realize it, your life is filled with “plans”, road maps, etc. These few examples illustrate that point:

Picture this: you’ve decided to start a small business of your own for one of a variety of reasons – you’re replacing a lost job, you’ve always wanted your own business and now that the children are on their own you think the time is right, or maybe you’ve come up with a great idea! (If the latter, be sure to read the next issue for ways to protect that great idea from those who don’t have one of their own so they want yours!) You’re procrastinating because you’re not totally sure just where to start or what you need to do to get it going and keep it going.

And this: You’re on your way to a family vacation or a business trip or a funeral in another state. You jump in the car and start driving. Where are you going? What route should you take? How many miles is it? What weather conditions can you expect? Are you aware of any major detours that could affect your arrival time? And, especially these days, how much do you have to budget for fuel?

And this: You’re going to the grocery store for a few items you really need. You grab a cart and start down the first aisle you see. You get up to the checkout with a full cart, you pay your bill, drive home, unpack the groceries and discover that you bought everything in the store except for the items you actually went to get!

Do these scenarios sound familiar? What do these – and others you could surely name like a recipe, a budget, a To Do List – all have in common? What was missing? Each of these situations needed a plan of one kind or another. One required a map, an inquiry into detours and weather, and some calculations and maybe even some calls to your roadside service provider. I would call that a Plan. The second one, to the grocery store, might seem like a frivolous example, but we’ve all done this – gone to the store without a written list! And what would you call that list? I would call it a Plan!

The point is that pretty much everything we do in life, if we want any measure of control at all, requires a Plan of one kind or another. Can you imagine a wedding without the months of advance planning? The first example, starting a new business, is no different.

What is the purpose of a business plan? Think of it as your “road map”. Like taking the trip without a map, starting a business is pretty much the same: Ask yourself: How will I know when I get “there”, if I don’t even know where I’m going?”. A business plan is used for any number of reasons. The most familiar, of course, is to seek funds from a lender or investor. Even if your business idea doesn’t require money (Wanna adopt me? Then I could inherit that rare bird!), or you have all the money you need without OPM (Other People’s Money), you would still need a business plan because whether you’re using OPM or your own money, you still need to know what you want to do with it versus what you need to do with it. You absolutely MUST plan. In short, you need to know where you’re going and how you intend to get there. Any lender or investor will require an in-depth presentation of that financial study with projections, usually at least three (3) years forward. In the business plans I prepare for my own clients, I prefer to project out five (5) years. The lender is interested in how you’ll repay your loan. I’m interested in how my client’s business will look farther out so they can plan more specifically and be able to make appropriate adjustments before they become problems. “Fore-warned is fore-armed”.

A Business Plan is filled with confidential information – money matters, research, information on your market and competitors and, yes, your idea as well. For that reason, you won’t want to show it to anyone who doesn’t have a specific need to know. In another issue, we’ll discuss how to protect that information, but for now just remember to keep it to yourself.

In another issue, we’ll discuss some of the specific financial areas to be explored for your business planning project, but for now just be sure that you cover all the bases. There’s a statistic that tells us that most new small businesses fail in about the first two years! I know that sounds discouraging, but after ten years in the business planning field myself, I would bet that a further study of those failed businesses would reveal that the majority of them started their businesses with either an inadequate business plan or with no plan at all! For some, it’s a matter of not knowing about business planning, for others it’s about thinking they know it all so they don’t need to write it down, and for still others, it’s a case of what my Mother used to call “being penny wise and pound foolish” – they simply weren’t willing to invest in their own business and their own future. To my way of thinking, not being willing to invest money in my own business yet expecting it to pay off is like the lottery: I never win anything in the Lottery, but I do know that I CAN’T win if I don’t have a ticket. You could say that your business plan is your “ticket”. I’d say there’s a hint in there – think about it.

And while you’re thinking, remember this:

 When You Fail to Plan, You Plan to Fail!

This entry was posted on Monday, October 20th, 2008 at 10:21 am and is filed under How to Use a Business Plan. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.