Business Plans

I have often been asked by aspiring entrepreneurs:
– Should I write a business plan?
– If so, where do I find information on how to write a business plan?
– What should be included in a business plan or how detailed should it be?

These are good questions. Let me begin by saying that there are several preliminary steps that should be completed BEFORE embarking on the arduous task of compiling and organizing data into a comprehensive business plan.

Usually, after a process of determining whether a business idea is worth pursuing, entrepreneurs immediately launch into a process. For some entrepreneurs, the process of validating the idea is relatively quick, while for others it is exhaustive in scope. However, over the years, I have observed there are some preliminary steps to be completed before starting to develop the business plan. These preliminary steps are a three step process I refer as the Gut Check Mirror (GCM) Test:

1. Figure out if you really have an entrepreneurial personality profile. Many people assume because they have been successful in the world of traditional employment that they will automatically succeed as an entrepreneur. Wrong! Wrong! Wrong! I am so passionate about preventing entrepreneurs from making this mistake, that I wrote a book on this specific topic called Transitioning From Employee to Entrepreneur – A Roadmap for Aspiring Entrepreneurs.

The premise of this thesis is that success is not guaranteed based on past successes in the employment environment. These are three simple steps to take before making the decision to invest a substantial part of your net worth, commit 3-7 years of your life, and put your future on the line in an attempt to become your own boss. One of the first things you need to do is evaluate your personality profile by taking an entrepreneurial profile test. This beginning step helps to make the determination if you have what it takes to be an entrepreneur.

2. After validating your entrepreneurial profile, the next step is to determine what type of entrepreneur you are. This is another critical step many ignore – at their peril. There are four business models for an entrepreneur to consider in making the decision to become his or her own “boss”:

a. Starting a business from scratch
b. Buying an existing business
c. Becoming a franchisee in a franchise system
d. Becoming a consultant in your area of expertise

Each of these business models has advantages and disadvantages, as well as commonalities. How do you decide which business model is right for you?

– If entrepreneurship is core to your personality, you should probably start your own business.
– If your risk profile is middle of the road, then buying an existing business may be a better fit for you.
– If you like the idea of starting your own business, BUT you do not want to risk starting a business from scratch AND you do not necessarily want to buy somebody else’s business, franchising is probably your best path.
– If you have limited funds BUT you possess a high degree of technical expertise in your field, becoming a consultant might be the best choice.

You need to decide which business format suits you best before deciding on the business you want to either start or buy, or sign on as a franchisee or consultant.

3. After you complete the first two steps, a specific business can be selected and then you can begin the process of developing a business plan.

Business Plan Development

There are five steps to writing a business plan.
1. Format. Determine what type of process or format to use. There are three:

a. Write a business plan from scratch
b. Use business planning software or a template
c. Engage a consultant to assist you in writing the business plan

Each of these alternatives or formats has its own advantages and disadvantages:

Business plan from scratch

The advantages of crafting a business plan from scratch is two fold. First, it is the least expensive way to go; second, although it requires a lot of work on your part, you become familiar with the data because you are the one doing all of the research and compiling all the data.

The disadvantages are, first of all, it is time consuming; secondly, if your business plan is going to be used to secure business financing, it may not be in a format with which lenders are familiar. Do not underestimate this factor. Lenders are lazy. They want facts presented in a format that makes everything easy to see and understand.

Business planning software or template

If you decide to use a template or business planning software, this will streamline the business plan development process. One of the most comprehensive template software programs is from Palo Software: http://www.paloalto.com/. Their software costs $99.95 for the Standard Version and $199.95 for the Pro Version. This platform is especially powerful and can be used for a range of business models, from very simple to the most sophisticated plans imaginable.

There are free versions of business plans provided by www.score.org and on the Internet for basic business planning. Simply go to Google.com and search “Free Business Plans.” You should beware that some of templates you will find listed on this search may be inadequate for your needs, especially if you are attempting to secure financing.

Consultant services

Finally, if you decide to engage a consultant, there are three alternatives to consider.

o Non-profit organizations such as local Chambers of Commerce mentoring programs, Score.org and community colleges
o Paid professionals such as your CPA or financial adviser
o Business plan consultants who make their living writing business plans. These consultants vary in price from less than a thousand, to as high as five to ten thousand, depending on the sophistication of the plan.

2. Research. After deciding on the methodology you are going to use to develop your business plan, the next step is to begin the research. This research will encompass the following factors:

a. Competition. It is important that you conduct a thorough study on the depth and scope of the competition, the strength of each competitor, chinks in the armor and how you intend to exploit these weaknesses.
b. Pricing model. What the margins are and what your margins need to be.
c. Real Estate. In many businesses, location is the main determinate of success (Location, Location, Location). If there is a significant relationship between success and real estate, you must research this area extensively.
d. Equipment. If the business requires specialty equipment, then separate financing options may need to be considered, as well as delivery and installation times.
e. Staffing. If the business requires technical expertise, what is the market price for this expertise and what is the recruitment strategy? Inadequate research and understanding in this area can bring a new business to its knees very quickly.

3. Revenue and Expense Models. Depending on the sophistication of your financial model and your familiarity with Microsoft Office Excel and the creation of financial projections, this component may need to be outsourced to a financial professional. The template business plans have preformatted cash flow spreadsheets, income statements, and balance sheets, all integrated into a smooth presentation format in the business plan. However, depending on the complexity of your financial mode, a great deal of financial acumen may be needed to properly compile these details in a meaningful fashion.

4. Financing Plan. The most useful tool for obtaining financing is a well-crafted business plan with thoroughly developed assumptions and research references. There are four main choices for financing, with a less common fifth option:

a. Personal funds; i.e., savings, retirement funds and investments
b. Personal borrowing; i.e., home equity, family and friends, credit cards, unsecured bank loans
c. Equity, personal or third part angel investors
d. Business loans from institutional lenders
e. Venture capital (usually reserved for high tech businesses and concepts)

5. Exit Plan. All too often, this is not considered in the initial planning process. Yet, it is arguably one of the most important elements of a business plan, because without a successful exit, most of the effort in starting and managing a business is for not.

Writing a business plan need not be an overwhelming task if it is approached systematically and methodically, following a time tested process.

I’ve said it before and I’ll say it again (with thanks to the inimitable J. Woden): ‘Failure to prepare is preparing to fail.’ For most things in life you need a plan – you wouldn’t drive your car somewhere new without a road directory, so avoid heading into uncharted financial territory without a business plan.

When I decided to open my first salon I was flat broke, in debt and had nothing but a great business idea. The bank turned down my first loan application and, because my parents were far from wealthy, my father approached his boss for a loan on my behalf. It was then, at the age of 20, that I learned the importance of a structured business plan. My father’s boss made me put my idea down on paper. At the time I thought this was lame but, as it turned out, he did me the biggest favour of all time.

To succeed in stating a salon, you need a PLAN. It’s your blueprint, a step-by-step guide to fully understanding everything it takes to put your business together, track its growth and ensure its survival. Many stylist’s and therapist’s devote too much time to thinking about (and discussing) their amazing salon or spa concept, while too few bother with the formality of a business plan.

And a plan is absolutely vital if you’re seeking finance. No lender (repeat: NO lender) will give you money without evidence that you’ve done the research and know what you’re doing – and that’s a carefully constructed, well-written business plan. Lenders will interpret your hair salon management skills first with a good solid understanding of your business plan and other current salon management topics such as having good salon management software and so on.

I would never go into business without one. It doesn’t make sense to stare risk in the eye without a plan of action. It helps you set goals, determine the turnover necessary to make a profit, better understand financial systems and procedures, assess your marketing needs and establish operational strategies that get you where you want to go.

At times, putting a business plan together can be the most annoying and frustrating activity you’ve ever undertaken. It will stretch your imagination and test your commitment and motivation. I’ll warn you in advance, if you don’t feel fed up and frustrated at some stage of the process, then you’re not going about it properly. If and when it happens, say to yourself: ‘It’s dangerous when things always go the way I want, because then I’m not being challenged.’ The upside is, you’ll have to take an objective look at your business concept, assess its (and your) strengths and weaknesses and recognise the challenges you’re likely to face in the future and might otherwise have overlooked!

Tip bit:
Don’t employ someone to write your beauty salon plan’ it’s your vision, nobody knows it better than you, and preparing your plan will be a valuable learning experience. This is not the time to be lazy. By all means ask a coach or mentor to assist you, but only if they have the necessary experience.

o Which direction is your business heading?
o Can you tell others where your business is heading?
o Do you have a sense of commitment, as you tell others your business objectives?
o Do you have a sense of achievement, as you see your business progressing in the way you had envisaged?

You know you have never created a business plan, and now you are wondering where you should start. You have a blank piece of paper or a new page open on your computer and writing the opening sentences will always be the hardest. What do you do next?

You know you can make the plan as complicated as you want, but there are really four elements that all business plans need to cover.

When you write the plan using these four elements you will be able to extend them naturally.

o Why do you have a business?
o What direction do you see your business going?
o How are you going to achieve your goals?
o How much will it cost to reach your goals?

How do you write your plan now? Well, the secret is to keep it short and sweet. If you can’t sum up in a sentence or two what the purpose of your business, then you’ll need to go away and consider what your business is about. You’ll need to keep working at it until you reach the stage where you know exactly what your business is about.

Imagine this situation, when you are trying to explain what you do to friends and family. It is worth sitting someone down and trying to explain to them your business.

The problem is they become bored or worse think you are a scammer, because you are still trying to explain it and it is making no sense to them. It’s time to stop and think again about what you are doing. The solution will be to keep fine tuning what you are saying, until you reach the stage where they understand what you are doing online. That doesn’t mean they won’t think you are mad, but at least they understand the principles involved in what you are trying to do.

Do you know, what a lot of people say their goals are with trying to have a presence online? It is to make money. Now the bad news is that all businesses want to make money, but that is not a good reason to have a business. If your goal is only to make money, then you should take a job. Many jobs will pay you more than you are earning online, especially if you are just starting out.

You see, there has to be another motivation for you to run your own business.

o You might want to be your own boss.
o You want to work at home to be around the family.
o You might want to be able to do some charity work.

Whatever, your goals you need to know what that is, to be motivated when you go through the difficult time. These times will come when you run your own business.

What direction do you see your business going?

Yikes, this is the six million dollar question, because at the moment, you are barely making any money online. If only you knew where your business was heading then you could answer the question.

The simple solution is to start to put more information into your business plan.

You need to know that the secret is to write your business plan the SMART way.

o Specific
o Measurable
o Actionable
o Realistic
o Timed

All good businesses have a solid foundation. You’ll need to have a good foundation for your business plan. Without it, your whole business will tumble and fall.

So your plan is to stop working in a job. Not good enough, you need a specific plan which would say you want to quit that job in 1 year’s time. You need to have something to aim for, in other words a GOAL.

Your plan is to earn money online. Yet, the specific plan says, you want to earn $100 per day and you will reach that goal within 3 months.

Measurable

You’re going to make money but you have no idea when you will reach your goal, because you don’t know what your goal is. The answer will be to have a time scale to reach your goals.

But, you say, you might not reach your goal within that time, what do you do then? Simple solution to this, you move your time scale or your goal. The one thing you don’t do is QUIT.

You set a goal to earn $100 a day in 3 months. 3 months is now over, and you only earned $90 a day. Is that bad? No, it is $90 a day more than if you had never tried. Now aim for that extra $10 a day.
Actionable

You are going to take action now to see your goals fulfilled. Regardless, of the goals, you need to have a plan and then you need to follow that plan through with action.

The bad news is that a lot of people fail online. They tried this product, and that system. Today they try one idea, and tomorrow they move onto the next idea. Everything they do is a failure.

You see there is a moral to this story, and that is unless you have a plan, and you take action then you will fail.

Now read that again.

Unless you have a plan, and you take action then you will fail.

Each person will have different goals, and you should keep updating your goals and carry on taking action.
Realistic

I have some news for you, and that is you are not going to be a millionaire overnight, unless you have a relative who leaves you a fortune.

But, you say, my bills need paying at the end of the week, and I heard that you can earn money overnight, in your sleep online.

The secret here is to be realistic in your goals.

Being realistic is not for a lot of people. Are you someone who has never earned any money online? How long have you been trying to earn and being failing? Do you know the big secret that we are keeping from you? It is this; you will not make a fortune overnight. If you don’t set realistic goals, then you will quit and be a failure. Being realistic is important and you need to start right now. Yes, this is the time to be real, and see what you need to do to earn that money.
Timed

You know, this is going to be excellent training for you, because you need to set your goals with a time for seeing those goals achieved.

But, there is more to it than that. Time management is essential for any business. If you are providing a service you need to know how long a job is going to take. You see, if I ask you to write me some articles, and you think I can do that in a couple of hours, you will charge me for a couple of hours work. Now, listen carefully, because the problem is this, you had to take twice as long to research and then write them, than you first thought. That means you worked twice as long for the same amount of money.

The answer is to learn to manage your time, and be able to estimate how long a job is going to take.

If you are going to be serious about your business, then knowing how long every job is going to take will be important.

There is an added bonus here, and that is once you know how long it takes to do a job, you will know how long you have to surf the web, and visit your favorite websites.

Need some help with questions, try these.

o How much turnover and net profit do you want to achieve and by what date?
o You want to be the top of your niche by what date? How would you like to see that achieved? This needs to be included in both the long term and short term plan.
o You need to increase your products and services to what? When is that going to happen? Creating your own products then be realistic, it might not be possible (unless you outsource) to write 100 ebooks each month.
o Increase in traffic to your website is something we all want. How much extra traffic do you want to see and what date would you like to achieve that by? Do you need to change you marketing to get this extra traffic?

Now, you want to have a business which is selling to other Internet Marketers, and this is the problem you are new and nobody knows you. Guess what, the way around this is to do some research. It is a simple solution, but if you can do this, you will learn lots of secrets that you thought were hidden.

o What motivates them to buy?
o What are the trends in Internet Marketing?
o Who are your competitors?
o Why would these people buy from you?
o What are you offering that is different from the rest?

You see, you need to ask many questions as you research and then you should analyze all the research material you have. You see, there is no point in spending valuable hours researching if you are not in a position to use that information.

SWOT

Strengths
Weaknesses
Opportunity
Threats
You see, you as you analysis your research you need to consider three questions.

Who is my market?
Why will they buy from me?
How will I provide the products for them?
One problem you face when you start a new business is being in direct competition with other established businesses. You will be trying to sell your product alongside well known Guru’s. Your name isn’t going to be well known and people will want to know they can trust you.

All around you people will be asking questions even if they are only in their mind.

o Is it a new or unique product?
o Is the price cheaper than other people’s products?
o What is the guarantee with the product?
o Is it a better quality product?

Summary of Your Business Plan

By now your business plan should be focused on two periods of time. You have the present time and the future which should be between one or two years only.

You have included some good information into the plan.

o What type of business you have, and include both the products and services you have available.
o Include information about your business, how many employees, turnover, profit margins and location of any offices you have.
o What is the growth and expansion of your business?
o What niche do you market?
o Have you identified your competitors?
o Do you know how long it will be before your plan will become a reality?

Three Stages to Preparing Your Plan

Do you realize there are only three simple stages to be used when you prepare your business plan?

o Research
o Draft the Plan
o Action
Research

You see, you will need to do thorough research. This isn’t only true when you start your business but you should do research at different stages during your time in business.

Why is this important? It is only important if you want to stay at the top.

“But it is time consuming,” you say. Well, it can be, and you might need to take a couple of days away from the business to do this. If you are running your business single-handed then schedule the time into your day to day routine. It might take time, but think about the benefits to you and your business.

Now, yes right now, take a good look at where your business is today; be honest with yourself because if you are not making any money then you will need to know why that is happening.

You see, there is no benefit for you to inflate your earnings to what you want them to be, because only you are seeing them at the moment. If you want to reach your goals then you need to know where you have been; where you are; and where you are going.

Now if your business is selling digital products, then evaluate which ones sell well and which ones are not making you any or very little profit. If you look at each product carefully, you might find that a certain niche isn’t selling well. Dig as deep as you need to go to find out where your business is at.

You see now you are making progress, you now know where you want your business to be, in the next quarter, or year. You know you need to give yourself a time scale.

Ah! But what if you discover the business is doing badly, you might want to have the challenge of turning it around quickly. The solution will be not to set the deadline too far in advance. If you do, then you might fail to take any action until the last minute.

Look at every area of your business, and see if it is producing the best results possible. Is there a new niche you want to add to your business?

And finally, you’ll need to find a way to get from where you are today to where you want to be in that allotted time period. It might mean dropping some products; updating others or even find new products to market. You’ll need to know exactly and clearly what you need to do and how you will achieve those goals.

You see, this is what a business plan is all about; it will give you the map for your business to follow.

Just imagine you’re taking a car journey and you’re going to somewhere new. Nobody in the car knows the way either. You see most motorists would look on a map or use their computer to get the route needed to be taken. But, you are not like most people, because you don’t want to be told what to do. You know you can find your own way there without any help from anyone else.

Well, you might but it is likely you will get lost many times, and you might never reach your destination. However, if you do reach your destination you will find you have spent many more hours on the road than you needed to get to the destination.

Listen carefully here, only if you are stubborn will you say you don’t need a business plan. You know you can make that decision because it is your business that will be affected, and you will get lost time and time again. You’ll be the one who is trying to get to a goal and not reaching it. You’ll be the one who won’t make any money and be able to run your own business. You’ll even get added to the statistics of businesses that fail.

We all like to know secrets, well here is another one for you, if you don’t want to be a failure with your business, then you will start to plan today what you business is going to be like in twelve months time. Not only that but you will have your route map and you will follow it until you see the goals achieved.

You see all the time you need to consider where you are going because without a destination, you will keep going around and around in circles.

You’ll need to consider how you are going to sell your product before you spend hours creating it, and then you need to decide how to deliver that product.

Draft the Plan

Let me tell you there is no format for writing your plan. You should find your bank or financial institute have ones available for people starting out in business. But, you’ll need to find what works for you and your business.

You see, as you start to write the plan you’ll realize what needs to be added which is exclusive to your business and strategy. Remember, it doesn’t have to be perfect. Always, give yourself room to expand the plan as you find out more information from your research.

Listen, you might start to do a basic financial statement and realize that you have to change your opinions about certain areas of the business, based on what you are now seeing. That is a good way to progress your plan.

Keep in mind these points.

o Where your business is today?
o Who works for your business?
o What are the turnover and the profit?
o How does you business compare to your competitors?
o What is your profile like?
o Where will your business be by a given date?
o What is the vision of the company?
o How many people do you need to fulfill the vision?
o What turnover and profit do you need to achieve?
o How can you improve your business to overtake your competitors?
o What do you want your profile to be like?
o How you are going to get there?
o If you need staff, do you have any idea whom will you hire?
o How can you increase both your turnover and profit?
o How can you change your marketing and image?
o How can you increase your profile?

You see, keeping the plan simple is all that is needed. You can use these bullet points and add in any other information as necessary.

Now, you might think the more complicated the plan the better it is, but that isn’t true. The more complicated the plan the less likely you’ll implement it.
Action

You see, there is no point in spending time analyzing and researching your business if it ends there. Too many will do the groundwork and then quit. You know what will happen then, these businesses will fail. The best business plans are from those people who take action.

Here is the real secret of any successful business, whether that is online or offline, you need to take action.

You know, there is nothing worse than talking with a person who has a problem, who doesn’t want to take any action. How many times have you seen a person ask a question on a forum, only to come a week later asking the same question? At some stage, another person will ask did you read and act on the advice given.

Now if you are dealing with a person on a one to one basis, and they ask for your advice and come back time and time again with the same problem, what do you do? You ask if they put into practice what you suggested. They then say, “No!”

You are frustrated because you are unable to help them. But until they are prepared to do anything to get out of the situation, they will remain in exactly the same state that they are in. Until the person puts into practice what they have learnt they will never, ever leave that situation behind.

Now you know that this is true with some people who want a business. They want the financial benefits without having to do any work, and because they don’t want to work, they won’t take any action.

As your business expands, you’ll need to have a good idea who is going to do each task, or know what type of person you are looking to employ. You might need to find a good writer for articles and ebooks. You could have a target of a certain number of articles which need to be written each week. You’ll need to set the tasks, the deadlines, and the person to do the job.

Now this is important, as you build your business, you will come across people of excellence and you’ll want to hire, employ or outsource to them.

You should keep a record of their details, name; email; phone and any other details you might have. When you need to have a job done you already know which people you’ll want to work with.

And finally, you should keep you plan handy and use it on a regular basis. Let it influence everything in your business especially as you expand.

Can you see you business rapidly expanding, do you really want to have to spend time writing a business plan or trying to work out how the business should run?

Now, if you have the plan written, then it is simply putting it into action. If you need to expand, then add to your existing plan.

Always, remember to review your plan on a regular basis. Don’t wait until a crisis comes to try and work out what you should do. Be prepared before the crisis happens. You business plan will keep you on track to remain in the group of people whose business survive.