Category Archives: Writing a Business Plan

Does Your Business Plan Prove Your Business Case?

soldA little diligence in planning can save time, money and energy as your business grows. Unfortunately, some people back away from business planning because it appears to be a lot of work. Although it can be a demanding task, it doesn’t have to be overwhelming, and the benefits can be remarkable.

In order to be of maximum value, a business plan must prove supply, demand and the financial case.

  1. Demand. Each business has a sweet spot, a certain number of customers to keep the doors open, often referred to as the break-even point. Signed contracts can be the kiss of life for some types of business. Where contracts are not possible, surveying potential customers can help to validate demand. Friends and family promising to buy your stuff forever may be a wonderful indication that people love you, but in no way should their flattering claims be interpreted as a reliable indication of demand. The purest proof of demand is sales of products or services. Regardless of the method used, an entrepreneur must be convinced that demand exists before starting a business.
  2. Supply. Once satisfied there is a demand for products, an entreprenuer will want to confirm ongoing access to the materials and talents that enable the business to serve its customers. A product producing business, such as a furniture manufacturer, needs a reliable supply of wood. A housecleaning service must be able to find and hire suitable workers. Most businesses need a combination of materials and skills. Restaurants, for example, will need a steady supply of food products, a rollicking good chef, and a team of cheerful servers to keep customers satisfied on the front end.
  3. Financial Case. Profit is probably the best measure for proving a financial case. For example, a planner will need to validate the supply costs, determine how much customer’s will pay, and project the quantities of products and services to be sold. Miscalculating any of these items can erode the forecast’s reliability. When building a financial case it’s important to forecast sales a little lower than anticipated and estimate expenses a bit higher than expected. Diligence in confirming financial items builds a reliable profit projection.

Those faced with creating a business plan usually wonder how many pages the plan should be. Paper weight isn’t much of an indication of the value of a business plan. The business information might be summarized for some audiences in a couple of pages, while a business analyst will need more detail and scads of supporting information in order to evaluate a loan request. The same amount of background research is necessary even though the plan’s thickness will vary according to the needs of the reader or audience.

The true value of a business plan arises from what it teaches the owner about her business, and the usefulness is gained from the benchmarks it provides for owners working forward. Businesses really flourish because of the actions the owner takes once the plan is done.

Seven Attachments That Make Your Business Plan More Credible

Business planning workshop participants often ask what sort of attachments should be included with their business plans.

From a high level perspective, a business plan is made up of three main parts: narrative, financials and supporting information. Supporting documents are best attached as appendices to your business plan.

The appendix is where you will place any detailed or complex information that supports all those amazing claims made in the narrative and financial parts of your business plan. The narrative or body of your plan is where you’ll tell your story, and it must be easy to read. Any back-up documents or items that would disrupt the body of your plan should be tucked instead into the appendices.

Here are a few of the most likely documents you should attach to your business plan.

1. Resume. A resumé is a concise inventory of your personal experiences, your educational background, and any personal information that adds credibility to you as manager or owner of the proposed business. It’s an opportunity to highlight your strengths and show how your work experience increases your chances of success.

2. Certificates and Accreditation. Provide any certificates and accreditations that will build your credibility as owner and manager of your proposed business. In doing this, you’re best not to overdo it, just include the certificates most relevant to the business you’re planning.

3. Historical Financial Statements. If your business plan is for an existing business or if you’re planning to buy a business, you’ll want to attach enough financial history to show whether the business has been earning or losing money.

4. References. If you’re starting a new business, and particularly if you’re looking for financing, a list of references or a few reference letters will add strength to your case. Be sure any letters are up-to-date and that those providing the letters are aware of what you’re using them for. A supporter forewarned will be better primed to give you a rollicking good reference, if she gets a call from the lender.

5. Validation of Sales. For a going concern, a list of paying customers enables the reader of a business plan to evaluate the strength and quality of the customer base, and therefore the enterprise’s sustainability. Start-ups with no sales to tout will use other types of validation, such as letters of intent, expressions of interest, or comparisons to similar businesses.

6. Market Research. If you’ve gone to the effort to survey potential customers, you will want to summarize your findings and attach them to the business plan. This is also a place to include items like demographic tables or articles that add credibility to your business case.

7. Legal Documents. If you’re getting into a partnership, you might wish to attach a copy of your partnership agreement. This appendix might also include contracts, lease agreements or any other relevant legal documentation.

When deciding what to include as supporting information for your business plan, keep the target audience in mind. If the plan is for a banker, ask what he or she needs in order to do the due diligence on your plan. While most professionals will want to see the items above, it’s equally true that each person or group to whom you submit your business plan may request a slightly different mix of supporting information.

The key to successful business planning is to do your own due diligence, to ask each person you submit the plan to what supporting information they need, and then include the documents they want.

Shades of Grey in Business Planning

business-shades-of-greyThe world of business planning is haunted by shades of grey.

The benefits of business planning far outweigh the downsides. It is a healthy process for start-ups. Aside from accessing much needed financing, people gain knowledge and confidence as they research and write their own business plans.

Yet, most business start-ups won’t opt to write a business plan until they’re drop-kicked by someone or something. For a young person, it might be an insistent parent; for others, a banker, investor or gatekeeper. Some need to lose assets or go broke before they get the message. Start-ups are inclined to avoid anything that seems like “extra” work, and there’s no question that business planning entails a bit of work. It’s easy to see how a person might cheerfully bypass the opportunity.

Some of the resistance to business planning is due to the shades of grey.

The first glimmer of grey is found in the term “business plan.” An Internet search reveals that the term is used to describe a bewildering embarrassment of products and processes, from your monthly mobile bundle to grandiose marketing schemes, to diagrams etched into squares of high-grade toilet paper and glossy 100-page tomes. How are start-ups to know which system to choose? Those who seek financing will indiscriminately follow whatever path the lender tells them to. Those not seeking money have a challenge in front of them. It’s complicated… and grey.

The next shade of grey is “who to believe.” Google dumps a daily torrent of business planning articles and opinions into my inbox. There’s no shortage of claims that business planning is a waste of time and energy, apparently a fruitless pastime that entrepreneurs should shun. Many of the articles endeavor to pose alternatives to business planning, though I’ve not been able to see how the alternatives are better or different than business planning. They are only business plans with different logos.

Another shade of grey arises from the silly expectation that business planning will guarantee business success. There are no guarantees of business success. While a business plan will arm a start-up with more accurate knowledge and eliminate false assumptions, it can never make up for one’s inability to sell, a chronic propensity to procrastinate, or a knack for peeing in customer’s corn flakes. Anyone who confuses business planning with conducting commerce is doomed to a wild face-plant once in business.

Adding to the shades of grey is the difficulty in quantifying the benefits of having a business plan. From start-up onward, business owners are engulfed in risk. There are many factors that can take a business down, but absent are the charts and graphs that show definitively that a business plan helps keep a business alive.

The ultimate shade of grey is heaped onto business planning by the televised Dragon processes, where entrepreneurs get 7 minutes in the national limelight to pitch their business cases and field a few targeted questions from seasoned angel investors. Those who walk away with offers make it look quick and easy, right? It takes only a few minutes; why would anyone need a business plan? Lost in the floodlights and glamour is the fact that the entrepreneurs who get offered deals have done their homework, probably in the form of a business plan.

All but the tiniest of businesses are stronger with a business plan. When it comes to flushing out risks and mitigating liabilities, even mired in its shades of grey, I haven’t found anything as effective as a business plan.

How to Write a Business Plan: Six Webinars to Guide You

Only Six days left to access your $100 Early-Bird Discount for the Business Planning Online Workshop!

Ready to start a small business? Wondering how to write a business plan?

This is a terrific opportunity to access six webinars that will help you master business planning, market research skills,  and 3-year financial projections, so you can write a business plan for any small business and launch with confidence. These six webinars (plus business planning worksheets, a business plan example and template, and resources and checklists) will guide you step by step through the process of writing a business plan.

Here is a quick breakdown of the 2-week workshop (remember it all happens online so you can join from anywhere!)

Webinar 1-3. September 24-28, 2012 (self-directed, you get unlimited access to the videos so you can watch at times that fit your schedule)

Live Phone Call. October 1, 2012 (If you’re not able to make the call time, you’ll have access to the recording afterwards)

Webinar 4-6. October 1-5, 2012 (self-directed, you get unlimited access to the videos so you can watch at times that fit your schedule)

Live Phone Call and Wrap Up. October 9, 2012 (If you’re not able to make the call time, you’ll have access to the recording afterwards)

Here’s a look at the Six webinars that will help you write your business plan and get your business off to a successful start!

  1. Jumpstart Your Business Plan
  2. Business Plan or Bust!
  3. Research Business Ideas Without Going Crazy
  4. Tell Your Story – Make Your Case
  5. Take the Fear Out of Forecasting
  6. Present Your Business Plan To Different Audiences

Continue reading How to Write a Business Plan: Six Webinars to Guide You

Win With a Business Plan

No matter how small your business idea, a business plan can help you build the confidence you need to get to opening day.  Business planning is not just for large or high-growth ventures, and it really shouldn’t be put off until you need to borrow money.

As healthy as the planning is, many small and micro-business owners will put it off as long as they can. And it’s easy to understand why. Business planning involves the tedious process of organizing your thoughts and getting them onto paper, or more likely, into a word processor. It includes a whole whack of potentially unfamiliar activities, such as researching, writing and building a credible set of financial projections.

Indeed, why would anyone knowingly put themselves through such pain? Thankfully, the benefits far outweigh any negatives. Here 11 ways you will win by taking the time to develop a business plan:

  • You know where you’re going
  • You will have a roadmap or blueprint for your business
  • You will have a document to look back on in order to measure your progress
  • A plan will help protect your investment and equity from loss
  • You will find out if your idea will work
  • You can discover and solve problems before starting the business
  • You will build confidence in your business idea
  • The plan can help you get financing
  • You become the expert for your business
  • You will prove your business case
  • You will have a document to use for communicating with others, family, partners, investors, bankers

Business planning can appear larger than it really is, until you step up and embrace it. Think of it as a cost-effective learning process for anyone aspiring to operate a successful business in today’s complex global work environment. A business plan can be a giant step toward making your dream business a reality.

Planning your business doesn’t have to take up a lot of your time or money. Whether you are thinking of starting, buying or growing a business, I urge you to first develop a business plan. Once you take the plunge, you might just have fun doing it!

After all, it is you who really wins with a business plan.

Make a Plan to Succeed in Business

The most important reason to write a business plan is probably to save your house, or grandma’s nest egg, or whatever investment you are putting at risk. A business plan will help you learn more about your business and serve as a tool for communicating with others, such as bankers or investors.

Here are seven things to know about business plans:

1. Most businesses are started without written plans. For the most part, plans only exist on a napkin or in the owner’s mind. Business planning is an unfamiliar trek for most people, and too often the task is avoided until they are urgently needed to get a loan.

2. By the time a business plan is printed, it is probably already out of date. Enterprises continually adapt to their surroundings and the plan is a living document that gets updated at strategic times.

3. Business planning is an organic, non-linear process. At any given time, you will be more knowledgeable in some areas than others. Effective business plans arise from building on strengths, developing strategies to mitigate weaknesses, and innovating as you learn more about your business.

4. The further a business plan projects into the future, the less reliable those projections will be. It’s entirely likely that year five predictions will be less accurate than year one.

5. A professionally prepared plan does not guarantee a business will succeed. A picture-perfect business plan is not worth the paper it’s written on unless the owner understands it thoroughly. The real value of a business plan is the knowledge you gain by doing it.

6. Plans that call for aggressive early stage spending will meet with resistance, especially where the shopping spree is predicated on using borrowed money. It’s usually healthier for a new business owner to solve problems through innovation, ingenuity and frugal investment of available resources.

7. While a business plan will help to increase your knowledge about your business, it will not do much toward helping you develop business trade skills, such as how to handle money, how to buy, sell and pay. Business trade skills are more likely to be learned from managing a paper route or operating a lemonade stand. Owning a business is the best way to learn the basic survival skills like knowing how to read the market, how to learn from it and how to change your mind.

Your business plan is more for you than it is for your banker. It will enable you to prove your business case, and to be reasonably sure that your venture can survive.

Once you’ve debunked your own assumptions and gathered enough evidence to demonstrate viability, you’ll have more confidence in your business idea. Armed with a better understanding of your business and realistic financial projections, you will be much better positioned to discuss your business with those who might help you.