Every business needs a strong plan — one that outlines goals, develops strategies, and maps contingencies for both the best and the worst. A business plan answers the questions who, what, when, where, how and why, and diagrams an operations scheme to organize tasks needed to achieve a set goal. It can be a few paragraphs or a few dozen pages. What is important is not length, but rather understanding. A business plan can determine where your company needs to go, forewarn of possible roadblocks along the way, formulate responses to contingencies and keep the business on track to reach its planned objectives In a nutshell, a business plan is a road map. But whether that map is leading to Success or failure is entirely up to you.
The hardest part of crafting a business plan is often gathering the energy to get started. It is seen as such a daunting task that far too many businesses skip it altogether. This is a mistake that could cause your business its life. Part of the reason a business plan seems so daunting is the perceived complexity of the process. But a complicated plan is almost as useless as no plan at all. Your plan Should be clear and concise in its language, it should summarize where appropriate, and it should truly describe the business.
Four critical functions are served in the preparation of a written business plan: to help clarify, focus and research your company’s or project’s development and prospects; to provide a considered and logical framework within Which a business can develop and pursue strategies over the next few years; to serve as a basis for discussion with third parties Such as shareholders, agencies, banks, etc.; and to offer a benchmark against Which actual performance can be measured and reviewed.
Clarity, Focus & Research
Planning does not necessarily mean Predicting the future, but rather being aware of a range of possible contingencies and being prepared for them as they occur. Your business plan should contain an explanation or definition of its purpose, as well as your corporate vision, mission objectives, values, strategies, goals and programs. Know your product. Be able to describe what you make or offer and how it is special. Know your market — its size, segments, trends, competition and user/customer profiles.
Another area of outside influence — both good and bad — of Which the savvy entrepreneur stays vigilant is the political arena. Warren Hardy, State director of the National Federation of Independent Businesses, says, “It’s important to be aware of what’s going on at the local government~~ level, and have a willingness to get involved.” You don’t want to be surprised by new regulatio5 or laws that can hurt your business. Being involved with the Political process allows your voice to be heard before the decisions are made. Also, become knowledgeable about factors such as enterprise zones, redevelopment areas, tax credits and incentive programs.
As With all areas of your plan, it is important to formulate the ideas before you begin to crunch the numbers. Ed Joyce, a professor at the University of Nevada, Las Vegas, says that’s one of the biggest mistakes he sees — hiring someone to do the numbers before the words are in place. “Words drive the numbers,” he says. It doesn’t have to be complicated —just a mission statement and outline of objectives should be enough to get you into the math.
A Framework for Your Strategy
Often the toughest part of writing a business plan is the section mapping your strategy for success because it entails drafting a marketing plan for your product or service. You will need to explain: how you intend to promote your product or service; what sales goals you expect to achieve for your target markets; how you plan to succeed over competitors; and how you propose to contain costs. Highlight any technological advances that give you an advantage, and don’t forget to outline the major elements of your distribution and service activities, as well as covering overhead costs.
This is also the time to introduce the proposed management team and its structure. Many unsuccessful companies blame their business failures on money woes, but it is more often the fault of poor management skills, says Sharolyn Craft, regional director for the Nevada Small Business Development Center hosted by UNLV. Explain the major decision points, time scale and actions required by management and others to advance the plan. Your management staff should be a team, and involving them in the preparation of a business plan will help them develop a sense of ownership.
It is also at this point that assumptions— in the form of educated guesses — come into play. In order to create market projections, you will need to make certain assumptions, but don’t just pull them out of thin air. According to Dr. Tom Gutherie, president and CEO of the Southern Nevada Certified Development Company and the Nevada Women’s Business Resource and Assistance Center, a common mistake made in business plans occurs when making cash flow projections and analysis. “When you project income,” he says, “those projections have to be based on assumptions and you have to be able to articulate what those assumptions are. Otherwise, what good are the projections?”
Third-Party Discussions
The financial positions and projections found in the typical business plan are often used as a tool to help acquire funding. You will need to know your funding requirements, possible sources, likely terms and, for investors, the projected return on their investment. But be realistic. You will also need to explain to financiers why the business will succeed and why it should be supported.
According to John Norton, economic development specialist for the U.S. Small Business Administration and the Nevada Small Business Development Center, many people believe the only time it’s necessary to write a business plan is when applying for a loan. “That’s categorically untrue,” he says. “The reason for a business plan is to understand the details of how you will go from point A to point B.” However, he notes that a well-executed business plan serves as a fundamental platform from which you can make financing requests from banks or investors. Without a business plan, most lenders are unable to even discuss the merits of your idea. Even after you receive a loan, you might want to expand or change the terms and your historic plan becomes a base for revisions.
Performance Measurements
Comparing your projections to the actual numbers will help you measure performance, as well as help you refine your plan. A business plan is a living, organic document, that will change over time. Rod Jorgensen, director of counseling for the Small Business Development Center, emphasizes that the plan is never truly completed — “It is a work in progress forever.”
Practical Tips
If you really are lost when it comes to the plan, don’t hesitate to get some help. There are Web sites with samples and worksheets and even free programs to help you. The Southern Nevada Certified Development Company (702-732-3998) offers outlines, as well as full courses for free, as does the Nevada Women’s Business Resource and Assistance Center (same number). Or call the Small Business Development Center (775-784-1717 or 702-734-7575) for a free business startup packet which includes a work book and pointers explaining how to write a business plan.
The most important and difficult sections to prepare relate to marketing and sales, so give these sections priority. Don’t be afraid to hire professionals where you lack expertise. You don’t have to do the whole thing yourself, though the more you do on your own, the more familiar you will be with your business.
Always be positive but realistic about your company’s prospects. Respond honestly to shortcomings and risks. As for the actual language of the plan, avoid unnecessary jargon, economize on words, use short crisp sentences and bullet points and check your spelling. Remember not to get too complicated, and concentrate on relevant and significant issues.
When the whole thing is done, let someone take a look at it. Contact one of the organizations listed above, tap the expertise at the Service Corps of Retired Executives (score.org), or enlist the help of a friend who has a good understanding of the issues at hand. Then be ready to adjust your draft in light of their comments. If you aren’t willing to see imperfections in your plan, don’t bother giving it to anyone to read.
Remember, the preparation of a business plan is not the end-result of the planning process. The realization of that plan is the ultimate goal. However, the writing of the plan is an important intermediate stage. Just as you would not embark on a long journey without a map, you shouldn’t embark on your business without a plan.
