Who Needs a Business Plan?
Ask yourself this: Would you set off on a journey to a place you have never been without first consulting a map?
I’m guessing that most of you would respond: probably not. The same rationale for wanting to consult a map when traveling should be used in regard to developing a business plan for your venture. A business plan is in many ways the map for your business prior to start-up and for the first few years of operation. It is a document that contains all the pertinent information about your business. It highlights and differentiates your business from others. It gives you, the owner, a clear strategy for launching and growing your business. It gives potential outsiders (like bankers or investors) a complete picture of what your company is, where it intends to go, and provides details to back up your business goals and financial projections. Furthermore, the business plan serves as an operational guide for the running of your business. It helps you focus on what your primary goals and mission are, and this is especially important when your company faces uncertainties and challenges once up-and-running.
What should a business plan include? While no two people will agree on exactly what is vitally important, it is safe to say that there are some common elements that are present in virtually all business plans. Usually there is a significant section devoted to introducing what your company’s goals and objectives are. You should be clear from the outset what is your company’s reason for existence. You need to follow this up with an analysis of the overall industry in which you will be engaged in and demonstrate how your business is situated within the industry as a whole. You should be able to differentiate your product or service from that of any competitors and also be able to demonstrate that you really do understand the market you will be engaged in. You should be able to identify your customer profile and have some preliminary figures as to the size of the total market for your product or service. From this you should then be able to come up with an estimate as to your expected sales in your first three years of business. You will also need to put on paper a clear marketing strategy, demonstrate how and why your management team is suitable for running this particular business, indicate exactly how many and what kind of people you will need to work with you, and provide financial forecasts demonstrating the ongoing liquidity and profitability of your business. In addition, you will want to provide some concrete procedures or steps on how to carry out day-to-day operations for your business.
All of this brings up another good question. If making a business plan is so important, why don’t all small business owners make or have one? While there are examples of people who have developed successful businesses and did so without having a detailed plan, I can assure you there are even more examples of people who have failed miserably because they had no plan. But even so, there are some very real reasons why it may be difficult for some to develop a detailed plan from the outset. One reason is that if you haven’t made a business plan before, you may not know how to get started crafting one. It is easy to say you should have a business plan, but putting one down on paper can be a challenge. A second reason is time. It takes time to develop a business plan, and some entrepreneurs are convinced they need to move fast and don’t have the time required to prepare a business plan. I would bet that most entrepreneurs who start without a plan wish they had one soon after. When I opened my business in the Philippines, I spent close to 6 months preparing a comprehensive business plan. Some businesses will not require that long to develop a plan, but others may very well take longer. But time is a real issue, and if you find yourself spending all of your time completing daily errands it can be difficult finding the time needed to make a comprehensive plan. If you don’t have experience developing a business plan or have limited time to devote to crafting one, don’t despair!
Where can you get help writing up a business plan? If you are located in a larger municipality, then you may want to consider approaching the local business college for help. Often one of the major requirements for completing a MBA is developing a business plan for a possible new venture. The director of graduate programs can probably help you find a student wanting to put their new knowledge to test. You can work with a student who will happily go through and assist in developing a business plan with you. They get real-world experience, and you get help drafting the plan that you may otherwise not have time to do or experience in doing. If you can’t find a student you can always talk to people at your provincial office of the Department of Trade and Industry. The DTI has resource people who are tasked with working with small and micro enterprises and they should be able to help direct you to somebody who can assist in developing a simple plan or carry out basic market research for you.
Finally, you may want to think about a back-up plan in the event your small business does not take off as planned. I don’t know of a single entrepreneur who ever set out to fail in business, but the stark reality it that many businesses do not succeed. I find it strange that so many entrepreneurs give little attention to developing back-up plan, but ask any firefighter on the importance of one and they will probably tell you they don’t go into a burning building without having one! It makes sense to sit down and make sure your own back-up plan outlines two important things: (1) how you will get the emotional, intellectual, and financial support you need to get you through the aftermath of a failed venture; and, (2) how you will position yourself to regroup and learn from that experience so that you may use the lessons learned at a later time or place.
Good luck with your own business planning!
Hi Martin. You covered it all so there’s not much to say.
“…indicate exactly how many and what kind of people you will need to work with you…”
This is a very important statement. Emotions need to be tempered when hiring. There is always a tendency to hire family and friends who some end up as freeloaders if they don’t have anything to contribute.
Also as the business grows family and friends need to be primed right from the start that their skill sets that were adequate when the business was small may no longer be true….and they should give way for new hires who will end up their bosses.
Hi Dr. Sponk Long,
I am currently undergoing an expansion of my business, and I couldn’t agree more with you on your points regarding emotions and staffing responsibilities. In the six years we have been in business, it has become apparent who among our staff are capable of accepting new challenges, and who have ‘hit-the-ceiling’ and will be unable to take on additional responsibilities. The key is, as you say, keeping your emotions out of the equation and focus on promoting the ones that are prepared and able to advance.
Thanks for your contribution. I am certain we will be touching on a number of topics related to family-based business and staffing issues as the weeks roll by. Cheers!