Small Business Planning: What to Consider before You Invest
Whether you are ready to step out on your own and start a business for the first time, or you want to reorganize your small business for growth – a sound business plan is the foundation for making your dream a successful reality.
That’s a big deal right? So why is it that so many business owners function without this foundation? And if they do have a plan, often it’s just seen as a simple tool used to seek investment or communicate the company’s direction to others. Of course those are two important ways to use a business plan once it’s created, but back up a minute. The real purpose of developing a business plan in the first place is to determine if your vision is realistic and feasible for your own acceptance. It’s the framework for your thinking & your decision making process, not the aftermath. Your business plan should prove to you that your opportunity and strategy are actually viable. In addition, it should empower you and your team with a realistic roadmap to implement your dream.
Forget about filling in empty spaces on a template to the best of your ability. Instead, take the time to work through each and every business plan topic and build a systematic, multifaceted approach to achieving your goals. Think about your business as a machine, every component must be turned on and aligned in order for the machine to produce its intended product in good condition. Your business plan is your machine’s blueprint. It allows you to design the machine, build the machine, as well as run the machine. It also serves as a reference point to go back to if one component is not functioning properly. It allows you to adjust what’s necessary without reinventing the wheel.
As many of you know, one of the services offered through MangingAmericans.com is to determine the feasibility of business plans. It’s very common for us to send plans back with a laundry list of questions before we can even begin to grade the plan itself. That’s because the logic is missing; there are missing components to the “machine.” In order to speed up this process we took the time to teach the meaning of those components in our new book “Small Business Planning Made Simple: What To Consider Before You Invest.”
Small business owners have great ideas and big dreams, but that doesn’t mean they have experience or knowledge in managing all aspects of a successful business. Their plans tend to be focused around what they know, and what they don’t know is often brushed over. Unlike larger, more established companies that have employees with expertise in every area to pull from, small business owners are left with fewer resources and less multi-functional knowledge – that’s one reason many businesses fail to succeed, because their owners don’t fill the gaps. Another reason is that the business owner spends too much time fixing gaps that were never addressed in the beginning, and in turn, neglecting the area of expertise that he or she actual has… leaving the mojo of the business to suffer. A sound business plan addresses those gaps and preserves the company mojo, allowing the company to move forward and grow successfully.
During the Small Business Planning process there are 15 components to think through before you invest.
1. General Business Information:
This section of your business plan is meant to define basic information about you, your business and how you got to this point in the first place.
2. Business & Financial Objectives:
This section of your business plan is meant to define the financial investment required to start up or expand the business, the sales estimates and growth patterns over the course of the business plan, as well as the break even point for the business (how long it will take to make a profit).
3. Business Systems:
This section of your business plan details the tools you will use to manage the day-to-day operation. A system can be as simple as a pre-printed notebook, an excel spreadsheet, or as complex as industry specific software that can be used to create a competitive advantage. The point is to define what your business will use so those costs (if any) can be incorporated into your plan. If a specific system requirement does not apply to you, just be clear on that point. For example, if you don’t plan on having employees, you wont need a payroll system to manage them!
4. Operating Costs & Organizational Structure:
This section of your business plan defines who will be responsible for each job in your company, as well as how your operating costs will be structured.
5. Business Ramp-Up:
This section of your business plan defines the starting point of your business and its progression over the course of the business plan. It also provides an opportunity to outline future growth strategies (phases two or three) that would take place beyond the initial business plan, once that plan is successful.
6. Business Metrics:
This section of your business plan is meant to define the key parameters that will track and measure the plan’s success. Business Metrics are essential to keeping you, the business owner, focused on achieving your results. It is so easy to get sidetracked and distracted by opportunities, new ideas, or just the chaos of the day-to-day. But by defining and visually focusing on your key results, you open the door to understanding what’s working and what’s not, as well as provide yourself with insight to modify your activities if your current activities are not working well enough to achieve your plan. This visibility increases the likelihood of business success because you can see in advance if problems are coming down the road…and fix those problems before it’s too late.
7. Marketing Plan:
This section of your business plan defines the group of people that you believe are (or will be) interested in purchasing your products or services. It details the actions you will take to proactively communicate with those people, and the key messages you will use to convince them to do business with you instead of your competition.
8. Startup Resources:
This section of your business plan details how you will pay for your business and support yourself until your business can make enough money to do both on its own.
9. Administrative Resources:
This section of your business plan defines outside services required to support the business, as well as the monthly or yearly fees associated with those services.
10. Employment Plan:
This section of your business plan defines the employees necessary to achieve your goals. If you are forming a company that will not have any employees, then you can skip this section.
11. Future Expansion Plans:
This section of your business plan defines how your business structure may change over time. Examples of expansion include moving to a larger location, entering into additional geographic regions, as well as adding additional products/services to your mix. Expansions typically happen once growth milestones are reached. This is the longer term, strategic plan for your business – your vision beyond the startup period.
12. “Gut” Check:
This section of your business plan defines potential startup risks, how to avoid those risks, as well as a short-term action plan to ensure you succeed in doing so.
13. Investment Breakdown:
This section of your business plan defines the specific items you need to purchase in order to start your business. It’s important to itemize costs and timelines for each purchase, as well as consider more than one investment path so that you have options just incase adjustments need to be made.
This section of your business plan defines the income and cash flow projection for your business startup. It will tell the story of your business in the form of a spreadsheet, showing the sales evolution of specific products or services, the operating expenses in relationship to sales, and most importantly, when and how much profit your business will make.
15. Executive Summary:
This section of your business plan provides an overview of the Who, What, Why, How & When of the business. It is the first section you read at the beginning of the plan, however it is the last section you write when preparing the plan itself. The Executive Summary is just that, a summary of the business plan. Everything in the summary should come from the plan itself, don’t reinvent the wheel.
For each of the 15 Business Plan Components, the book is designed to guide business owners through the thinking process to develop each part of the plan so you can logically and effectively build your own working machine. We include examples, as well as explain how to use the information to make important decisions about the feasibility of dream.
There is also a section of the book titled “Common Risks & Opportunities.” Once you’ve finished writing your plan, you can use this information to go back and improve upon some areas that have a tendency to be weak points. Learn from our experience and overcome these hurdles during the planning process, rather than many businesses before you that have had to spend time and money correcting them in real life.
At the end of the book we’ve included a template to allow space for notes and jotting down ideas as you go. However, you can still use any business planning software on the market to build your plan any way you want it to look, using any format. Our goal is to teach what is important, why it’s important and how to use the information to run your business…so that you can build a sound business plan that is the foundation for making your dream a successful reality.
Here is the link to our new book available on Amazon:
Written by Lisa Woods, President ManagingAmericans.com & Lisa Woods Consulting. Lisa, a thought leader in Business Management and Leadership, founded ManagingAmericans.com in 2011 after 20+ years successfully leading and driving growth in the corporate world. Her objective is to help mentor and develop professionals to be better leaders, managers, team players and individual contributors in a “do-it-yourself” learning environment using unique & practical tools to support the process. Lisa’s career spans from Global Sales & Marketing to General Management of Multinational Conglomerates. Today she continues to consult small business owners through her private practice. Lisa’s publications include: • 4 Essential Skills for Leaders, Managers & High Potentials © 2013 • The Cross Functional Business: Beyond Teams © 2015 • Action Item List: Drive Your Team With One Simple Tool © 2016 • Small Business Planning Made Simple: What To Know Before You Invest © 2017