Use Your Business Plan

Kevin and his brother built a startup to a multi-million dollar firm. Local business associations awarded them recognitions of their business excellence. They told everyone their business plan drove their success. Unlike many business owners, who write a business plan to impress funding sources, they wrote theirs to define what they were going to do. They kept their business plan in the bookcase behind their desks. They took it down and referred to it multiple times a day.

They updated their plan regularly. They recorded major strategic, and some major operational, decision in their plan. Each quarter, they updated the graphs comparing actual to planned production, revenues, and profits. The operational plan listed in the overall business plan guided their actual production. Their plan listed the management team. They updated it every time a major member of the team changed. They followed the exit strategy outlined in their business plan.

Interestingly, they still received all the funding they requested. The financial institutions lending them money were loaned the very copy of the plan the brothers used to run the company. They recognized the validity of the plan and rewarded the business accordingly.

Importance of Business Plans

Too many business owners neglect business plans. They follow the “Ready, Fire, Aim” business model. They come up with a business idea (Ready), they start the business (Fire), and years later—when the business flounders—they create a plan establishing where they want the business to go (Aim).

Successful business owners recognize the importance and wisdom of planning what they want the business to do, produce, grow, and accomplish. They realize that they can refer to their plan when they write it down. Successful business owners repeatedly refer to their plan. They modify and adapt their plan based on successes and failures. They know that making a mistake on paper is always cheaper than making it in reality.

Simple Outline for a Business Plans

A simple business plan would contain the following elements:

1. Executive summary: business summary, keys to success, key objectives, key principals and investors, legal entity, quarterly and annual sales and profit projections, and other summary items.
2. Market analysis: analysis of concept , summary of the industry , research about competitors, estimates of cost and price, and profiles of your target clients
3. Operational plan: how you will produce and distribute your product or service, what equipment or facilities you will require, simple technology design of the production flow, how many people will you need to produce and deliver your product or service, how long will it take from order to delivery, what vendors or suppliers you will use, what operational support (purchasing, human resource, information technology, and accounting) you will need, complete human resource plan and other items necessary to the operation of your business
4. Marketing plan: (I like Bryan Walden Pope’s The 7 Pillars of Successful Marketing) market research, the right message, marketing strategies, campaigns, methods and vehicles, sales, and client retention
5. Finance plan: cost analysis, one-time startup costs, ongoing operating costs, tables of accounts, financial records/statements, budget, budget forecasts, emergency funding, cash on hand, funding needs,’’ accounting personnel (including bookkeepers and CPA firm), audit and reconciliation schedules, insurance and liability coverage, and tax implications
6. Exit strategy: what is the plan for current principals and investors to exit the business, how does a principal sell his/her portion, how long do the the current principals plan to stay involved, how will the firm be dissolved, and what milestones trigger the exit

You should cover at least these basic elements in your original business plan. You not only need to outline them for the startup of the company, but also anticipate each section at the end of the first, third, and fifth year. Your plan will detail processes, procedures, tables, statements, and graphs. You may create your business plan in a word processing document.

The Small Business Association (SBA) web site contains several free tools to create your business plan. They also co-sponsor Small Business Development Centers that offer free to low cost classes on business planning. The SBA also provides free consulting through the Service Corps of Retired Executives (SCORE). Several religious organizations also offer training to current and prospective business owners. Finally, you can pay business coaches or consultants to help you develop your business plan.

You will consult your plan regularly. You will modify it. In other words you will use your business plan.