One of my firm’s specialty services is providing CFO services and financial coaching to small and medium sized businesses. When entrepreneur’s walk into our office, they are often stressed and operating in chaos. While their problems may be numerous, I often find that they have one thing in common. They have no business plan and have not thought out either strategic or tactical strategies to guide them in running their business.
In some ways it's easier to have no written plan that holds the business and the owner accountable. The reality is that if a business has no real plan, they can use any strategy since they have no expected destination, and they can change everything on a whim. Every business, whether it is a mega company or a small business, should create a written plan, execute the plan, and monitor the results. As a business owner, how will you know when you’ve succeeded or failed, unless you have clearly outlined your vision, long-term and short-term goals, and strategies to meet or exceed those goals? It’s important that a plan is in writing and not just in the entrepreneur’s head.
Below are a few reasons why I believe a business plan is critical for a business.
- A business plan gives the business and its leaders, a cohesive roadmap to run the company, and a path to success if used properly. Business owner’s who stay true to their vision and objectives, have greater success than those who don’t.
- For businesses that are seeking loans or investors, it may be a requirement or at least make obtaining financing or capital easier.
- When creating a plan, you test of the feasibility of your ideas, by researching the market, competitors, industry pricing and margins, and project expected financial results. This results in a reality check for the business model versus just feelings and assumptions.
- The process of creating the plan, including the research, often gives entrepreneur’s ideas beyond their own, improving their business model.
- You will probably go through several drafts of the plan. Every kink in your plan that you catch before going live, will save you real dollars.
- By monitoring actual results to plan, the entrepreneur has an honest, objective measurement of success. They are held accountable. Where goals have not been met, the business can make changes or change the plan.
Remember, for a business plan to be effective, you must use it on an ongoing basis. Don’t put your plan in a file and ignore it. You should be evaluating your business weekly, monthly, quarterly, and annually on different levels.
There are many formats that you can use for a business plan that can be found online. My template came from a template provided by SCORE online, which I've tweaked to work for me. However, just knowing where to start is where most business owner’s drop off and having a template can get you started. While you may find the recommended plan to be too time consuming, I recommend that you have at least the following:
- Identify a philosophy and vision and if you have employees, communicate and hold everyone accountable to your vision.
- Identify short-term and long-term goals.
- Clearly identify your industry, the market, your customers, your products, suppliers and competitors. Complete as much research as possible.
- Create a SWOT analysis. Be realistic.
- Develop financial projections, being as realistic as possible with sales, pricing, margins, cost to obtain sales, etc…. If you can find industry information for start-ups, use it. My experience is that entrepreneurs tend to be optimistic. While this is a wonderful attribute to have in life, over optimistic projections can harm a businesses opportunity for success.
- Budget for both profitability and cash flow. You need acceptable profits in the long-run but you need cash flow to survive in the short-run.
I hope that you found this helpful. If I can help you with creating a plan or budget for your business, or need help from an experiened CFO with financial coaching, please give me a call at (972) 821-1991 or email me at bob@jablonskyandassociates.