Strike up a conversation about business plans with a group of entrepreneurs and you will be sure to get a diverse group of opinions about their content and their value. Are there established businesses that have never made a business plan? Absolutely. Is there a business which made a plan that has failed? Many have. That’s just it. A business plan for my business is going to be different than a business plan for your business. These are not cookie – cutter, catch – all blue prints for success. But if you don’t read any further, please remember this popular old computer axiom, “Garbage in, garbage out.” It’s the same for business plans.
There are several business plan templates and outlines that I favor. One is 35 pages long. Another is only two pages. Internet search “business plans” and the computer will explode with options. Some are free. Some are for sale. Some folks claim that they can write a business plan for you for a fee. Other options include customized software to write a business plan for your industry. I have reviewed business plans that were excellent that were over fifty pages and others that were superior at seven pages. If you are new to business or even if you are a veteran, it’s no wonder why you may become confused about business plans. Let’s look at Wikipedia’s definition…
A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. Business plans may also target changes in perception and branding by the customer, client, taxpayer, or larger community.
Often in my presentations, I say that entrepreneurs should write a business plan for their own use first. The planning process is an exercise. Way too many people claim they have a business plan “in their head” – which is understandable but I should also note that it is not yet a plan unless it is written. So why do I mandate that the plan is to be written out? It’s only a true business plan if someone outside the organization can view it and understand the premise of the business. Further, planning is like a muscle in the way that to strengthen it – it must be exercised to make it stronger. When it is written, it means that we must translate what is in our head to words on paper in a way that it makes sense to outsiders. It means that we need to address the important segments of the plan in pieces, with each being wholly thought out.
For example, I may learn that you have a business goal to sell 100 widgets a day. This sounds great, but how will you sell 100 widgets per day? What hours are you open? Who will mind the store? How will you train employees? How much will you pay them? Will you have a point-of-sale system and security cameras? Where is the store? Is it convenient to your customers? What customers are you targeting? How will they know that your widgets are better than your competition? Who are the competitors? Where are they located? How much do they sell widgets for? How many do they sell each day? Where do your customers live? What color of widgets do they like? How often do they buy widgets? Through what media will you engage your customers? I’ll stop at these eighteen questions, but I am certain that it was an adequate amount to make my point.
This exercise of business planning should be thorough enough to answer these and many other questions that arise within a business. Some businesses are very complex. The greater level of complexity requires more explanation which leads to more content. Sending a man to the moon requires much more thought and description than sending a man to Indianapolis. When creating content, I emphasize the “Three M’s” of Money, Market and Management. Money typically is developed in the form of financial statements like cash flows and balance sheets. I have addressed this topic in other blogs, but it’s important to make sure the text part of the business plan correlates with the actual numbers in the financial statements. Thus, if you state that you intend to host a grand opening valued of $7500, then this amount is identified in the cash flow projection for the same amount. A good cash flow with accurate projections will show where the money is going and for what purpose. It will include items like payroll, taxes and insurance and therefore it may be assumed that the company intends to expend money for these purposes and at what level. Market may be further divided into the industry, customers, competitors, and marketing strategy. The eighteen questions written above are primarily market and management related. Management describes the people and how they fit into the operations of the business. Sometimes the inclusion of resume’s for key personnel is a very logical approach. This Small Business Administration web page is a nice online guide to business planning: http://www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/how-write-business-plan
In a new business, the detail should dwell on fundamentals of the industry and what it is going to take to make a successful launch. For an established business, the plan should reveal where the business is now and where it is going and how it will get there. A good business plan will pave the way to success because it will have looked at the proposed business from every angle… And it will also show if a business should not open. While this is not a popular option, a good business plan that indicates the business should not open is very valuable as well. Most businesses that are open for less than a year before they close did not prepare a solid business plan before they opened and thus, they failed.
Most of the time, a lender or investor is going to be presented a copy of the business plan in order to request funding. Most plans are written with this slant from the beginning because a lender will state that a business plan is a prerequisite to a loan. Quality of content is much preferred to volume. There is no reason to explain that a pizza is made from dough, but there may be several reasons why one pizza shop is different than the next.
So now, where to begin on a business plan? Search for sample plans online and see the variety of acceptable versions. No two plans are alike and there is rarely a reason to make an investment early in the process for software. Don’t worry about making the plan look overly pretty or fancy using charts and graphs and color. Do make sure that it is properly organized, spelled and punctuated. Your local ISBDC advisor has tools and resources to aid you. If you are “new” to the world of entrepreneurship, I encourage you to attend an ISBDC “Launching Your Own Business” workshop. Those that have attended the LYOB workshop or are already in business should contact their regional ISBDC office to schedule a counseling session where they will work with a professional business advisor to determine and fulfill business planning needs. Business advisors are armed with valuable tools provided by the state of Indiana that are beneficial to business planning, such as customized demographic reports, prospect lists, and market industry data. Information for workshops and regional offices can be found here: http://isbdc.org/.
I often say that it is an ISBDC advisor’s job to assure that a client’s business plan is as complete as possible so that when they go to a lender, they will be off to an excellent start. This takes a lot of pressure off both the client and the lender and makes good use of time. ISBDC counseling sessions are without fee and our professionals will help you develop a well prepared business plan of which good decisions that will positively impact the future of your business may be made. Utilize ISBDC advisors as an independent and knowledgeable third party resource to grow your business smarter.