If you think writing a business plan sounds about as appealing as spending a Saturday in traffic court or letting Great-Aunt Gertrude set you up on a blind date, you're not alone. When you've got a great business idea, why sit on the sidelines dealing with piles of paperwork? You'd rather just jump into the game. But even Mark McGwire prepares before he steps up to the plate. And rushing into business without a business plan is about as smart as heading into the Major Leagues without spring training. If you believe the myths about business plans, you could strike out big-time.
Debunking the Myths
�Myth #1: Business plans are boring. Not so, says Vicki L. Helmick, a CPA and business consultant in Orlando, Florida. "If you're excited about your business, you should be excited about doing the planning that will make it a success," Helmick points out. "Your business plan is where you articulate your vision of what you want your company to be, and then outline a strategy to make it happen."
�Myth #2: Business plans are complicated. A good business plan doesn't have to be formal or complicated, Helmick says, but it must be thorough and in writing. "For a simple business, you may only need a page or two," she says. "Or you may take 20 or 30 pages and include charts and graphs. The key is to make it as detailed as necessary to give yourself a road map."
�Myth #3: I don't need to write my plan down. Many solo operators don't bother putting their plans in writing, but it's not enough to just have the information in your head. Besides making it easier to remember, committing the plan to paper forces you to think through each step of the process, consider all the consequences and deal with issues you might prefer to avoid. It also increases your sense of accountability, even if it's just to yourself. After all, once you've written the plan down, you have an obligation to either follow it or come up with a good reason for doing something different. Plus, if you have partners, a written business plan reduces the risks of misunderstandings or conflict.
�Myth #4: I only have to do it once. Writing a business plan is not a one-time exercise. "Don't write your plan, pat yourself on the back and then stick it on the shelf," Helmick says. "This should be a tool you use to run your company every day. If you want to obtain loans or attract outside investors, either in the start-up stage or down the road, you'll need to show them a strong plan that you've kept current to demonstrate the viability of your company."
Your plan should project at least five years into the future. "Under the umbrella of the term 'business plan,' you need a one-year plan, a two-year plan and a five-year goal," Helmick says. "Each year, update your plans and goals so you always have a focused, long-term strategy and short-term plans."
Parts of a Business Plan
This brief overview of the business is a synopsis of your entire business plan. State the business concept, basic financial points (such as sales projections and capital requirements) and current status of the company. Identify the owners, key personnel and what each brings to the table. For example, you may have previous industry experience, or maybe you've hired someone with a notable track record or connections. Finally, state what your company has achieved so far. Even a start-up can list things like patents, prototypes, contracts and test-marketing results.
First, look at the entire industry and the markets it serves. Then describe your company, including operating structure (retail, wholesale, manufacturing or service provider, for example), legal form (sole proprietorship, partnership, corporation or limited liability company), customer base, products or services, and distribution methods. Emphasize what sets you apart from competitors and others in the industry.
Define the total market in terms of size, structure, growth prospects, trends and sales potential. Then estimate what you realistically expect your market share to be and how you will capture it. Outline how you'll position your company and product in the market, how you'll set prices, how you'll promote your product, how you'll distribute it, and the roles these things will play in your marketing efforts. You could use this section to develop your marketing strategy, or you could develop a separate marketing plan and just refer to it here. Either way, you need a comprehensive marketing plan that includes such elements as sales, advertising, public relations, special promotions and community activities. The plan should outline what you intend to do, assign a budget and a schedule to the various activities, and include a review process so you can evaluate your efforts and make adjustments.
Identify current and potential competitors and analyze their strengths and weaknesses. Understand the reasons behind their successes and failures so you can fine-tune your own marketing approach. Be specific, detailed and brutally honest; don't let unrealistic optimism, personal bias or wishful thinking affect your view of the competition.
Design and Development Plans
Describe the design of your product and how it will be developed within the context of production and marketing. If your company is built on a new product you've invented, include a plan for testing, incremental reviews and a thorough final evaluation. Be sure your budget includes materials, labor, overhead, equipment, professional services and administrative costs.
Operations and Management Plans
Demonstrate how your business will function day to day. Who is responsible for what, how will their duties be carried out, and what are your capital and expense needs? Show that you have enough resources (facilities, equipment, materials and labor) to operate as planned.
This is the backbone of your plan and should include an income statement, a cash-flow statement and a balance sheet. These reports show a historical perspective, a forecast for the future and your current financial situation.
Practical Tips and Strategies
Writing a business plan isn't necessarily sequential; for example, when you develop market strategies, you'll need to consider both the competition and your finances, so you may move from one section to another and back before you finish.
Each section of your plan should include goals and strategies. Helmick recommends setting a large, long-term goal, then breaking it into manageable chunks. "You may decide that in five years you want to be generating $2 million in revenue," she says. "Now start backing up. What's a realistic annual growth rate for your business? If it's 20 percent, then to be at $2 million in year five, you need to be at $1.6 million in year four, at $1.3 million in year three, at $1 million in year two and at $800,000 in year one. What do you have to do to reach those numbers? How many units do you have to sell and what do you have to do to sell them? Break that down into quarterly, monthly, weekly and even daily targets and task lists, and incorporate that type of planning into your business plan."
Business plans aren't written in stone, and even the best plan needs to change as circumstances do. Just be sure to think your changes through and see how a change in one area will affect the rest of the company. For example, if you change your product, will that affect packaging? If you shift your marketing strategy, do you need to adjust production to meet greater demand? How will either of these changes affect your financial situation?
Finally, Helmick advises, use your business plan to build value in your company. "Approach this process as though you're building a company you intend to sell, whether you are or not," she says. "Look for ways to increase the company's value, whether it's in hard assets, inventory, customer goodwill or intellectual property, then periodically assess what you've accomplished. You may never sell the business, but this technique helps you create a solid, viable company."
(http://www.bplans.com/): Writing a plan for a start-up is different from creating one for an established business, and this site knows it--it's a key resource for start-ups who want to know more about financing.
Â·CCH Business Owner's Toolkit (http://www.toolkit.cch.com): This Web site features free sample business plans tailored for retail, service and manufacturing businesses, all in downloadable files.
Â·Lansing, Michigan, Community College Small Business Development Center--Business Plan (http://www.lansing.cc.mi.us/sbdc): A free business plan template.
Â·Ohio State University Fact Sheet: Organizing a Business Plan (http://www.ag.ohio-state.edu/~ohioline
/cd-fact/1101.html): Want a no-nonsense overview of business plans? Head to this site for a terse look at planning for a small business.
Â·Sample Business Plan/Canada (http://www.sb.gov.bc.ca:80/smallbus/workshop
/sample.html): Developed by the British Columbia Business Service Centre, this model plan works for most types of businesses. There are some differences between how Canadians and Americans do these things, but this document is useful for any North American.
Â·SBA-Business Plan Outline (http://http://www.sba.gov/starting_business/planning/basic.html): See a detailed business plan outline, compliments of the SBA. For free, personalized input from SBA staff, find your local office in the White Pages under the "Federal Government" listings, or call (800) 8-ASK-SBA.
Â·BizPlanIt.com (http://www.bizplanit.com): You've drafted your plan but want pro input before showing it around? Check out consulting firm BizPlanIt.com's "business plan review" service. For $750, you get a section-by-section critique. The same firm will draft your plan from scratch for a jaw-dropping $8,500. The Web site, however, is rich with freebies-advice, links and a newsletter.
Â·Business Plans Made Easy (Entrepreneur Media Inc., $19.95) walks you through every aspect of creating a business plan. Real-life examples, sections on tailoring your plan to different audiences and a list of resources are especially helpful. Sold at http://www.entrepreneur.com and at major and online bookstores.
Â·The One Page Business Plan (One Page Business Plan Co., $19.95) takes 97 pages to tell you how to put your plan on one sheet of paper, but author Jim Horan's received rave reviews from entrepreneurial luminaries such as Paul and Sarah Edwards.
Â·The Successful Business Plan: Secrets & Strategies (Psi Research/Oasis Press, $27.95) Written by Rhonda M. Abrams, this book is a thorough look at how to create your own business plan.
Â·BizPlanBuilder (Jian Software, $89.95) Flexible and easy to use, this program has a document creator that leads you through writing your plan. Both Windows and Mac versions are available. Call (800) 346-5426 or visit http://www.jian.com
Â·Business Plan Pro 4.0 (Palo Alto Software, $89.95) Use this program to write a plan complete with tables and charts. Split-screen interface lets you see what you're working on in half of the screen while viewing instructions in the other. Both Windows and Mac versions are available. Download a free demo from http://www.pasware.comor call (800) 229-7526.
Freelance writer Jacquelyn Lynn writes about business, management and marketing issues. Although half her business plan is still written on Post-it notes, she refers to it at least once a month and updates it twice a year.