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 Business
Plans -
Failing to Plan is Planning to FailBy Daniela Hops of Padgett Business Services You are excited. You have a great idea for a profitable business. Maybe it’s an original idea that has never been marketed before or maybe you have come up with a new spin on the ordinary. Whatever it is, slow down! No matter how good your idea sounds bouncing around inside your head, it is vital to do some essential background work before investing too much time and money in its execution. Remember, your success lies not in what you think of your idea, but what the buying public will think. Many entrepreneurs find out too late that the public’s opinion of their idea differs greatly from their own. So, whatever your passion, you must be sure that you have done some research before you get started. Writing a business plan will dramatically increase your chances of success as an entrepreneur. As stated in Natural Born Winners by Robin Sieger, “Planning is as natural to the process of success as its absence is to the process of failure.” The process of writing a business plan will help you to more accurately calculate your initial startup costs, determine how long it will take to make a profit, and what size of profits you can hope for. It also helps you to acquire business financing or investors, analyse your competition, evaluate their successes or shortcomings and develop a growth strategy by anticipating problems before they occur, understanding your market and your customers and identifying your strengths, weaknesses, opportunities and threats. A business plan helps you to define clear goals, and even an exit strategy. To give yourself the best chance of success, do your homework ahead of time and you will find yourself way ahead of most new entrepreneurs. You will find it helpful to study other business plans to provide you with the necessary framework and show you all the angles you need to consider. This will help you to identify gaps in your planning, and will provide you with a solid understanding of what makes a good business plan. As you start out, your business plan will necessarily be a work-in-progress document. In the early stages, a lot of the information will be based on best estimates and assumptions, but as your business matures, the information in the plan should be replaced by actual data and experiences. Here are five helpful hints to remember when preparing a plan: 1) Be Complete - Business plans do not have to be long or complex, but they do have to be complete. Take some time to define your business and your market - which is not always as clear as it first appears. Consider here that McDonalds is not really in the hamburger business, but rather the franchise and real estate business. Your plan needs to contain a thorough analysis of your business, your market and the competition. Include details of how you will sell and market your product; how you will organize and operate your company and how you will manage the finances. 2) Beware Assumptions - Much of your initial financial data will be based on assumptions and estimates. Consider carefully your source -- what the internet offers in convenience can often lack in reliability. When assumptions are unavoidable, make it perfectly clear that you are making an assumption and explain how you arrived at it. Always remember that too many assumptions will bring both your competence and your credibility into question with lenders and investors and, perhaps even more dangerously, you may find that you are actually deceiving yourself. 3) Be Brutally Honest - No one reading your plan will expect you to be perfect. However, they do expect that you have a thorough and mature understanding of your limitations and plans to overcome them. Clearly state what knowledge and experience you bring to the table and what you lack. What are you prepared to do to close the gap? 4) Focus on Cash - Everything impacts cash. The number one determinant of your business long term success will be your ability to generate a positive cash flow. The industry you work in will determine the average number of days before your customers will pay and its impact on your cash flow. What about payment to your suppliers, your employees or contractors? Develop a detailed plan for anticipated income and expenses, and also for how the timing of these will affect your cash. 5) Spend More Time Planning than Regretting - It might seem tedious and feel like overkill to prepare a business plan, but planning ahead for lean months and unexpected costs can help to determine your longevity as an entrepreneur. More than 50% of all new businesses fail in the first 5 years, but some time spent doing your homework and planning now can help to ensure the future success of your new venture. In conclusion, you must have a very strong reason for being in business. The reason “why” will keep you going in the face of fear, and keep you motivated during the trying times within your business. In the face of frustration, stress and fatigue, your “why” will pull you through and help give you the strength to keep going. The more powerful your “why”, the more of a motivating factor it will be. In fact, the importance of your business plan as a motivational factor in running or starting your business cannot be underestimated. You will find that your commitment continues to build as you collect information, research and write each section of the plan. Daniela Hops, CMA of Padgett Business Services, has 10 years expertise with small businesses in personal & corporate tax, payroll & other financial aspects. Call 403.220.1570 or visit www.smallbizpros.com |