Basic Business Cents: Business planning process a great learning experience
The question I hear most often from people who want to start a business is, “Where can I get the money to fund it?” A friend says the only free money comes from the three “Fs”- families, friends, or fools.
I submit you are endangering your relationships if your dreams do not come to fruition. The truth is, there is no free money. If the business is not successful, you can expect a financial cost and/or a relationship cost.
For other sources of funds such as banks, you will need a sound, complete business plan. This is where the rubber hits the road; it demands that you think. The hardest part is getting started.
A good source to find guidance is to go to www.score.org where you can download business plan templates for either startup or existing businesses.
The business plan according to SCORE should consist of a combination of narratives and worksheets organized into sections. They should look something like the following:
n Table of contents -
This is done simply to make it easier for the reader to find the section of most importance to them.
n Executive summary -
This section should be written last after the thought has gone into developing the other sections. It should be concise, one page preferably, and positive.
n General company description - This defines the business that you are in, its industry, your vision, mission, goals, objectives, and why you are positioned to succeed. It will detail the strengths and core competencies of you and your company. It will also include the type of ownership.
n Products and services - Included here are details on what you plan to provide, what need/want that it serves, competitive advantages and pricing logic.
n Marketing plan -
No matter how good your service or products are, you cannot succeed without effective marketing. The field of marketing is changing rapidly, so you will need to do market research. Include both what you learn from studying data from industry reports, library, etc. and what you learn firsthand from talking and listening.
The economics of the industry should be detailed, including size of the market niche, your target percentage and how you are going to become a market factor in that niche, growth potential, barriers to entry and how you plan to overcome those barriers.
Detailed information on your competitors, strategy, promotion of your products/services and distribution channels, and sales forecast are required.
n Operations plan -
Included here are your plans for how your products/services will be produced, your location, legal environment and personnel.
n Management and organization - Here you will talk about the company personnel and their credentials, board of directors or advisory board, attorney, insurance agent, banker, accountant and mentors.
n Personal financial statement -This is key; any investor will want to see the extent of your commitment.
n Startup expenses and capitalization - These are usually much higher than expected, so plan accordingly.
n Financial plan - The financial plan consists of a 12-month profit and loss projection plus two years by quarter. In addition to revenue and expenses, predict cash flow. This will probably prove the most effective management tool that you will have if you update it every month and make it a rolling 12-month forecast. You will be able to predict what will happen to your cash flow if you make a change or alter plans along the way.
n Appendices - Include bulk items such as brochures, studies, contracts and any other materials to support the assumptions made in the plan.
Always remember, the real value of creating a business plan is not in having the finished product; rather the value lies in what you learn through the process of researching and thinking about your business in a systematic way.
The act of planning helps you to think things through thoroughly, make sure of your facts and assumptions and look at your ideas critically.
Knowing that you have done your homework and have a sound plan, you will have the self-confidence to lead the organization to a successful endeavor.
Louis Schultz, managing director of Process Management LLC, has assisted organizations worldwide with performance improvement. He currently works wit h area business owners as a SCORE counselor. Email him with questions or comments at lou@process