Business Plan – Part 6

Today I will continue with defining a simplified business plan that is applicable for a very small startup business. We have previously discussed a vision and mission statement. Today’s topic is the all-important one of defining your market.

Before you can sell anything you need a clear understanding of exactly what products and services you will be offering, and just as important, you have to figure out who will be willing to buy your stuff. A market definition answers the all-important questions about how many potential customers there are, who they are, where they are located, and what needs they have that will be satisfied by your products and services. No matter how unique you believe your capabilities are, the reality is that you are not alone in the marketplace, so you also need to research and describe your competitors, the threats they pose, and how you can successfully compete against them.

Information for everything you need to know about your market and competition is readily available. Start with sites on the Internet like the US census bureau at www.census.gov or the Small Business Administration at www.sba.gov. You can Google to find mountains of information. The reference librarian at your local library will be able to point you toward scads of print and on-line reference material.

A market definition for a small exclusive picture framing shop might be: “Our market is any institution or individual within 100 miles of Philadelphia who collects art and needs to have artwork framed or frames restored. There are roughly 300 museums in this area, and up to 10,000 high worth individuals who collect art. Competition is comprised of museums with internal framing staffs, and three local companies specializing in fine art framing. There are also several dozen small framing shops that do not specifically target this market.”

Business Plans – Part 1

Is either of the following the way you respond when someone suggests that you need a business plan for your business:

“I’ve been running this business for five years without a plan. I know what I’m doing. Writing a business plan is hogwash!”

“Ugh! Why do I need a business plan? I’m just going to be a one person operation providing marketing services. I know what I’m doing. Anyway, writing a plan will take me away from more important tasks.”

These are common reactions. Let me be clear at the outset that a plan is not busy work. For a startup, creating a business plan is a process for clarifying that your great idea for a business is solid enough to financially support you while achieving your goals. For an existing business, a plan will help you crystalize your business goals and point you in the direction of continued growth and success.

There are times when business plans are absolutely necessary. They need to be available when seeking funding or loans. Well articulated plans may help you attract key employees. But the greatest value of a business plan is to you, the business owner. You don’t start on a long trip without a destination, a map, or knowing where you will sleep. The business plan will give you the same focus and certainty of direction for your business.

In writing a plan you force yourself to critically evaluate your business model and think through all aspects of running the business. By writing the plan before you start the business, you may avoid stubbing your toe or even making big mistakes. I have seen seemingly great ideas tabled because the plan proved the business would not be viable. I have seen promising businesses stumble for lack of planning. Once you have a plan, it becomes the blueprint for running the business.

The process of developing a plan will help you clarify your vision, your goals, your products or services, your markets, and your core competencies. Using the plan will help you and your team focus on the strategy and tactics to arrive at your destination without taking needless detours. No business is too small or too large to benefit from the planning process and the resulting business plan.

Once written a plan is a living document to which you should constantly refer, and which you should modify as the business evolves.

During the next few posts I will describe the important elements of a business plan and how to structure a meaningful plan.

The Constant Entrepreneur: Advice for Running a Productive Business

Business Plans

When I talk with a business owner I always ask if they have a business plan. Inevitably the answer is “no”. Which is often followed by a concern that it would take a long time to write a plan, and what good would it be anyway?

Let me be clear. Business plans take various forms depending upon their intended use. When talking about a business plan many people immediately contemplate a thirty plus page book that is required if trying to attract venture funding. Venture capitalists want to know that you have thoroughly thought through all aspects of the business and can make a solid case for extremely rapid growth over the next few years. Now most businesses do not need venture capital, and fewer still qualify no matter how thick the business plan.

A second use for a business plan is to present to a bank to qualify for a loan. What the bank wants to know is a) how much money is needed, b) how will the loan proceeds be used, c) how will the loan be repaid (does cash flow support the repayment), d) what is your record in handling money. So what is important to the bank is a brief narrative that explains your business and a detailed and substantiated financial forecast. Oh, and they will check your FICO credit scores and want to see your tax returns for the prior three years.

The most important business plan is really a roadmap for the business owner. Putting together such a plan is an important strategic exercise for the owner as it forces the owner to really think about the business. The resulting plan becomes a guide, with goals, for operating the business. How extensive should this plan be? In its simplest form, the plan is a single page. What is important is the content, which includes:

1. The vision – What does this business look like in a year, or perhaps three years? What is the annual sales volume? Who are the customers? What services and products will be provided?

2. The mission – What does this business do? What are the core values of the business – of the business owner?

3. Objectives – List the specific goals such as sales volume, new products, number of employees, amount of credit needed, etc.

4. Strategies – List the steps that must be taken, the changes that need to be made, to reach the objectives.

5. Action Plans – list specific actions that need to be taken, who will be responsible, and deadlines

A one page plan like this can be completed, in many cases, in less than half a day. Once it has been completed, review it constantly, and update it as needed.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com
will@limkemann.net