Running a business without a plan is like rock climbing blindfolded!
Running a business without a business plan is like rock climbing blindfolded.
Your chances of making it successfully to the top are slim. And the process will surely be a death-defying one.
Contrary to popular practice, a business plan is not just a means to secure financing. Instead, it is a step-by-step guide to running your business and creating the product or service that will make it in the marketplace. And like any other map, your plan will have to be adjusted according to your vision for the company, conditions, and opportunities in the marketplace and your business’ current condition.
Whether it’s formal or informal, every business should have a plan. The local hair salon may not have formally written down the plan, but before setting up shop, a smart owner would have assessed the need for a shop in that area of town, the ability to attract clients there, the appropriate amount of chairs, whether to hire someone to do the shampooing and sweeping, the cost of utilities, and the parking availability for clients. The owner who waits to figure these things out using trial and mostly error will be lucky to be left with his/her wits, much less any customers. A business plan helps to minimize those pitfalls and can be used for a new business or changes to an existing business.
To many people, the concept of writing a business plan for their own business is a daunting one. Perhaps it would appear less daunting to view the process as simply writing the answer to four questions, namely:
- Where are you now?
- Where do you want to be at a future date?
- How will you get there?
- What goals will you set to determine if you are there or not, and at what time periods?
THE FIRST QUESTION – “Where are you now?”– must be your starting point. This question seeks to provide a planning base. If you are working on a plan for a new business you will have to create and project all the items listed below. You will want to include the following:
- your business idea
- your current or projected level of sales
- your customer groups / target groups
- your products and services
- your pricing policy
- your distribution policy
- your promotional activity and projected costs
- your overall operation and projected costs
- your team members
- your finances
Answering the question, “Where are you now?” is often a major stumbling block because most people don’t know where to start. However, the answer is surprisingly simple if you divide your business planning into four key areas:
Such a division allows you to analyze your business (or assumed business) to create a solid planning base.
THE SECOND QUESTION – “Where do you want to be at a future date?” is simply asking you to visualize your business operation at a set date or, even better, multiple dates in the future. Typically dates are set at 1, 3, and 5 years in the future. This visualization process is almost identical to the exercise of setting personal objectives. The difference, however, is that the focus here is on business objectives.
THE THIRD QUESTION – “How will you get there?” asks about the steps you need to take in order to achieve the business objectives you have set. These steps, or strategies, can be identified, written down and programmed. Additional things a business plan should consider:
- What is a reasonable expectation of profitability and when?
- How will the business pay you and any team members?
- What are estimated expenses?
- What is the pricing strategy?
- What is the need for what you are offering and what profit margins can you expect?
THE FOURTH QUESTION – “What goals will you set to determine if you are there or not, and at what time periods? Your goals and objectives should be tied to your mission and value statements. Using the SMART Model ensures goals and objectives are SPECIFIC, MEASURABLE, ACHIEVABLE, REALISTIC and TIME-BOUND. This will allow you to see how well you are doing in comparison to your projections. And, if you’re not meeting your goals, you will know to step back and find out why. Revenue goals are important since money is the driving force of the business. An example of a revenue goal might be to average sales in a certain range – between $50,000 and $100,000 for example – for the first three years. To write your objectives, consider figuring how much revenue you would need each month to achieve this goal. Also, consider if there are months or weeks busier than others.
Short-term goals are considered 5 or fewer years in the future. You could also set long-term goals as well.
For more on SMART goals, check out this video by Megan Mimms. There are a number of downloads available to help you as well if you click “show more” below the description of her video.
While much of this may have occurred to you informally, it is very important to write it down. If you ever need to approach a bank or investors, you will need a business plan. Writing it down will reinforce your vision, give you a reference point for checking your business’ progress and will most likely bring up factors you did not consider when creating the plan in your head.
Writing your business plan down:
- Helps you determine and coordinate all aspects of business operations,
- Gives you a means to analyze and determine what might be the best chance to boost your business out of a stagnant situation,
- Assists you in determining the risks and benefits associated with any changes,
- Decreases your chances of making a mistake or not considering important factors in your business, and most importantly,
- Dramatically increases your chances of success!
Business plans are not only for those just setting out their journey in the marketplace. They are useful when acquiring a new business, forecasting growth, introducing a new product or service, entering a new market, responding to changes in the market or changing a significant aspect of your business.
Bressler & Company specializes in helping new businesses get started on the road to success. If you’re considering a new business or need help with a plan for an existing business, give us a call at 559-924-1225 today!