Archive for April, 2011

Five Reasons to Write a Business Plan

Have you heard the ancient proverb, “He who fails to plan, plans to fail”? Well, that sentiment has never been truer than when contemplating a start-up or acquiring an existing business. According to the Small Business Administration’s Office of Advocacy, approximately 600,000 businesses close or file for bankruptcy every year. The facts speak from themselves

  • 85% of all businesses that neglect to plan their business will fail.
  • Interestingly enough, of those that take the time to write a business plan, 85% will succeed.
  • Additionally, 40% of businesses with a strategic plan will double their business within 2 years of writing their plan.
  • And with that plan, greater than 70% will exceed their expectations within 5 years.

With such overwhelming numbers, why would anyone start a business without having a business plan? More often than not, people recklessly fail to see the necessity. And in the end, many entrepreneurs strike out on a venture so convinced of its merits that they fail to thoroughly evaluate the business’ potential. As a result, they are ill prepared to navigate the opportunities, costs, difficulties and requirements needed to successfully run their business.How can you avoid the well-traveled path of those doomed before you? Here are five (5) reasons for you to tackle this time-consuming, but vitally important strategic planning tool:

Financing

Normally, this is the first (and sometimes only) reason business executives think to draft a business plan; often times because they are need of emergency financing. But some businesses such as independent practitioners (i.e., accountants, attorneys, consultants, etc.) may never have reason for significant infusions of capital that would traditionally justify writing a business plan. However, other types of businesses including technology or manufacturing firms, and particularly start-up businesses, may need to establish credibility with financing sources by allow potential investors and/or lenders to understand the viability of their business. Yet that doesn’t necessarily make the need for financing the most important reason to write a business plan.

Feasibility

The Small Business Administration reports that two-thirds of new employer businesses survive at least two years, and about half survive at least four years. That’s a significant amount of time to invest in a venture only to discover its lack of feasibility. But an entrepreneur who takes the time to create a business plan can take an objective, critical look at their business and identify the strengths and weaknesses; and, potential risks and opportunities of the market and the venture, before they incur any costly, perhaps even disastrous, mistakes later.

Communication

Argruably the most valuable resource that any organization has is its people. And as a savvy business executive, you want the best and sharpest employees you can find to keep your company at the top of the heap or maximize your profitability. What better way to communicate your ideas to potential joint venture partners, management and/or key personnel than through a strategic planning document such as a business plan? The fact that you have taken the time to draft and annually update your business plan may be all you need to distinguish your organization from your competitors and sway a critical employee to join your executive team.

Which brings us to two of the most important reasons for writing a business plan:

Roadmap

Drafting a business plan is a time-consuming process and it could take you weeks, maybe even months to prepare. But the real value in creating a business plan is that it makes an excellent benchmark for annual review for you to refer to throughout the life of your business. So don’t just write a business plan when you start your business and place it on a bookshelf somewhere never to be thought of again. Instead, periodically review your plans to determine where you are and what your next steps and/or moves should be.

Focus

How many times have you seen a seemingly viable business go out of business because they have added too many product or service lines and simply gotten too large? More often than not, they have acquired additional product lines, merged with other businesses, etc., all in an attempt to stay competitive. But that doesn’t necessarily mean that they will maintain their market share, especially if they sacrifice things like customer service, product innovation, etc. But by drafting and continuously reviewing a business plan, an organization can stay focused on their vision, operational and financing objectives; long-term goals, etc, and not venture off into other areas because they “sound good”.

So if you are really serious about investing your time, energy and hard-earn money into starting a business, start at square one. Taking the time to write a business plan, think through your idea, study and research the facts; and, critically review the overall picture, may be all you need to build a firm foundation for the future success of your business.

Business Plans – Five Steps To Prepare Yours

You have a fantastic idea for a new home based business. You have decided on your niche and you know who your target market will be. You have an estimate for your income potential and you are ready to start. Now, before you do anything else, you need to prepare a business plan.

Getting a business plan ready does not have to cause anxiety. It is not as difficult as some people think. There is some paperwork involved that is a necessary part of building your plan. Because of this too many new business owners skip this important step. A business plan will greatly help you and should not be avoided. It brings a reality to what you are doing and makes you think about every aspect of your business. A good business plan will help you adjust things, realize areas you need to improve and can help you avoid some costly mistakes in the future.

A business plan is also a very important tool for attracting the interest of people that may be able to assist you. People take you more seriously when you have taken the time to create your business plan. A good business plan makes you look more professional and shows that you comprehend what it takes to start and manage an online business. If you are in need of optional funding sources, then an effective business plan is an absolute must.

A good business plan does not have to be complicated. There are five areas that need to be covered when writing your plan.

1. Executive Summary – It is suggested that you actually write this last. This section will summarize your business plan and it will be easier to write this after you have composed the other sections. This is a very important section since some readers will not read anything else. It really isn’t difficult. Thoroughly read over your business plan before you start writing your executive summary. List the information that you consider to be the most important and that will grab the attention of the reader.

2. Company Overview – Here you will explain what you have in mind for your business. You will present a mission statement of the goals and objectives for your business. The mission statement will answer questions such as: What am I selling, promoting, marketing, etc? Who will I be attracting to my website? Why am I selling or promoting this product or service? Each business will have its own unique questions to answer of course. Your synopsis of these points should be brief and to the point. Be careful not to confuse goals and objectives. When you want to accomplish something then you make a goal. Objectives are the plans you make in order to accomplish your goals.

3. Business Environment – You need to gather some information relating to your industry. You should do some research into your market and competition. This will assist you to offer something that will make you stand out as different. You should also know your future customers and understand what it is that they are looking for. The more you know about them, the more likely they will turn into repeat customers. Take a candid look at the field that you are going into and pay attention to the structure, trends and possible barriers.

4. Company Description – Your company is not just the sum of what you sell or promote. It is also who you serve, what resources you use, the type of people you hire and more. In this section you should give the details of your business. You also need to explain in a one-sentence statement what sets you apart from all your other competitors. This is known as a Unique Positioning Statement (UPS).

5. Action Plan – The final part is the action plan. This outlines the steps you will be taking to make your plan work. These steps should also reflect the goals and objectives that you have outlined in your company overview section.

These are the primary parts of a business plan. You may also need to include a financial section if you are considering the help of a bank, lender or backer to help in your business. A financial section will require more market study, thought and planning than the other areas as it is based on assumptions you make about potential income. Remember the most important thing is to base any estimates that you make on realistic expectations and not overly optimistic dreams.