SCORE's Top Business Planning Tips
Before you write or update your business plan, consult these tips.
Grow Your Business, Not Your Inbox
6 min readBrought to you by SCORE
5 Tips for Effective Business Planning
- Clearly define your business idea and be able to succinctly articulate it. Know your mission.
- Examine your motives. Make sure you have a passion for owning a business and for this particular business.
- Be willing to commit to the hours, discipline, continuous learning and the frustrations of owning your own business.
- Conduct a competitive analysis in your market, including products, prices, promotions, advertising, distribution, quality, service, and be aware of the outside influences that effect your business.
- Seek help from other small businesses, vendors, professionals, government agencies, employees, trade associations and trade shows. Be alert, ask questions, and visit your local SCORE office.
- Take the long view and do long-term planning. Map out where you want to be five years from now and how you plan to get there.
- Write the plan yourself. You'll learn more about your business by doing so.
- Think of your plan as a living document. Review it regularly to make sure you are on track or to adjust it to market changes.
- Share the plan with others who can help you get where you want to go--such as lenders, key employees and advisors.
- Understand that you might pay a price in the short run to obtain long-term business growth and health.
- Volunteer your company to be a business school case study. You'll learn much about your company in the process and get good ideas for the future.
- Obtain management and technical assistance from one of more than 50 Small Business Development Centers. Check the U.S. Small Business Administration website for locations.
- Participate in special programs. Many colleges and universities sponsor venture capital forums, entrepreneurship centers and family business programs.
- Work with the business school to offer internships to graduate students.
- Find out what expertise is on a business school's staff. You may find just the right person to hire as a consultant or serve on your board.
- Think of a budget as a useful tool--a written financial plan that helps you set goals and measure progress.
- Start by coming up with a sales revenue target. Make it your best estimate.
- Based on past experience, estimate your cost of goods sold (e.g., 70 percent of sales) and subtract it from the sales revenue to come up with your estimated gross margin.
- Forecast variable expenses (items such as travel and commissions that vary according to the level of sales) and fixed expenses (items like taxes and rent that stay the same, regardless of sales). Subtract these expenses from your gross margin to arrive at your estimated net income (before federal taxes).
- Break your annual budget into quarters and monitor your progress every three months to detect problems and make corrections.
- Write a business plan with a complete financial and marketing plan.
- Your marketing strategy should be built around your strengths, your competitor's weaknesses and your customers' desires.
- Test the reality of your business--know why it'll work and how you'll make it work. Think your business through step by step.
- Allow at least two hours every week for thinking and planning. Don't allow anything to interfere with this time. You run the business. Don't let it run you.
- Establish an annual operating plan. Review it and update it monthly with appropriate employees.
- Think ahead. Establish policies before you need them. Doing so helps avert crises and awkward situations, and helps solve problems before they arise.
- Determine what policies you need. Some you'll want early in your business include a mission statement, as well as compensation, performance evaluation and employee policies.
- Get input from key employees, as well as from members of your advisory board, your board of directors, and/or your professional advisors and consultants.
- Communicate policies to everyone in your business.
- Review policies on a regular basis--once a year, for example--and revise them as necessary.
- Plan your exit when you start the business. Will you sell your company, pass it on to children, or take it public?
- Take time to understand how your chosen exit affects business planning. Will family members need to be trained to replace you, for example?
- Consider the cost of each strategy--loss of the ability to keep financial information private if you sell or go public, for example.
- Be aware that your investors will have their own exit strategies. Be prepared to discuss their desired timetable for exiting your business, how they see it happening and their expected return on investment.
- Plan well ahead for a satisfying life when you leave your current business. Consider starting another business, teaching, volunteering--or becoming a philanthropist.
- Examine your corporate culture to discover any impediments to change. Some traditions and practices may need to be revamped to meet new needs.
- Keep talking about change so employees think in terms of change and help make it happen.
- Make expectations clear. Key employees should know that embracing change is part of their responsibility.
- Plan far ahead for the biggest change of all: your retirement or exit from the company. Develop new leadership.
- Create a master plan for technology, just as you would draw up a business plan, a budget or a marketing plan.
- Design the plan so it supports your business strategy and goals. Use it to guide technology buying decisions.
- Think of technology purchases as investments, not costs. And, remember, when you have an overall plan, your company avoids wasting money on unnecessary purchases or quick fixes.
- Start by determining your company's needs. Look at what problems need to be solved and how technology can help.
- Get expert help to guide you. Check your Yellow Pages under "Computers-System Designers & Consultants," or ask your local chamber of commerce. As always, get references.
- Get outside help. Growth is tricky and stressful, so smart business owners rely on outside assistance--such as consultants or SCORE volunteers--to get them through it.
- Hire ahead of the need. If you're growing fast, add a chief operating officer and/or chief financial officer--even if only on a part-time or consulting basis.
- Change your own role. Stop "doing everything yourself." Delegate day-to-day operations to others and become the leader, the strategic thinker and the planner--in other words, the CEO.
- Weed out customers that don't contribute sufficiently to your bottom line. Let go of those who distract you from your goal--for example, because they are outside the area in which you want to work or take too much of your time.
- Have reserve capital to weather growth's inevitable bumps. Reserves don't have to be all cash--they can be excellent receivables or something else that can be turned into cash quickly.
Brought to you by SCORE , "Counselors to America's Small Business."