Funding Is Not the Only Reason for a Business Plan

Startups are born from ideas, but it is the business plan that provides form and structure to them. While a fledgling venture can have a one page executive summary, mature companies can have plans that run into a dozen pages.

Every business needs a plan, whether or not they seek funding. Writing a plan not only helps you determine whether your business idea is feasible, it also establishes a map for your company’s future. Without it, your business is likely to drift along without direction or parameters for measuring progress.

Here are five good reasons why you should write a business plan:

1. Will your business idea actually work?

Instead of starting a business just to find out after a while that your business idea is untenable, just write a business plan initially. Writing a plan is the only way to test, without spending money or time, whether your business idea will actually work in the real world.

The industry analysis will reveal how trends in the industry, the market analysis will reveal the need for your product/service, the competitors profile and the financial section of the business plan will reveal the financial viability of your idea. At this stage you will be in a position to decide whether to go ahead with the idea or to waste no further time on it.

2. A roadmap to success

Although ‘sixth sense’ is the driving force behind entrepreneurship, ‘failing to plan is planning to fail‘. Without an indepth research, sound analysis, clear projections, and well-thought out contingencies, businesses tend to become hostages to fortune.

Proactive management is replaced by reactive coping, and instead of following a well-thought-out plan, owners and managers are reduced to responding to unforeseen events, or trying to catch up on missed opportunities.

A business plan gives direction to the business and helps you manage roadbumps. The planning process helps you learn about the different forces and factors that may affect your success. It helps you to learn about your industry, your market and competitors and any challenges you may come across.

3. Blueprint for your business

The plan is the blueprint for your business and it’s going to change a million times as you progress, because that’s what building a business is really all about – it’s about evolving and advancing a central idea through continually changing circumstances. The company’s original business plan needs to be revised as new goals are set. Reviewing the business plan will help you see what goals have been accomplished, what changes need to be made, or what new directions your company’s growth should take.

4. Show me the money!

Your business plan is very often the first impression potential investors get about your venture. But even if you have a great product, team, and customers, it could also be the last impression the investor gets if you make mistakes. You need more than a great idea to get funding.

Banks have a lot of knowledge about the success rate of small businesses won’t even talk to you without a business plan. They look for a viable financial plan and owner’s background in the industry in case of start-ups and cash flow projections in case of growing companies. Investors want to see a return on their investment. Financials projection is THE most important part of the business plan since investors will not invest if the business is not financially viable.

Established businesses often need money, too, to expand their business or because of market downturns. Having a business plan gives you a much better chance of getting the money you need to keep operating or to expand.

Conclusion

Too many businesses run into serious problems because they waste time trying to make their circumstances fit their plan rather than changing their plan to fit their circumstances.

A model or plan doesn’t necessarily get you to the truth. Eventually the “math” stalls out and something more human and personal takes over. Great entrepreneurs are pioneers. They embrace change so quickly that their decisions will never be totally justifiable by the numbers.

Critical ‘Must Haves’ When Starting A Small Business

Starting a business has been an integral part of the American dream for hundreds of years. This is the segment of the business world that has helped this country grow during its infancy, and it has been a mainstay in helping to keep the American economy afloat ever since. With all of the changes that all of this growth during the years has brought, the most important thing a person needs when starting a small business is knowledge. The amount of training and assistance that is available is staggering to say the least. What you need is to focus on what type of business you plan on operating, and find the assistance and training that is applicable to that field.

The time involved to get trained will depend on the type of business you want to have, and whether you plan on having someone train you or you plan on training yourself. Either way, you want this to be comprehensive in that it should cover everything from starting your business, maintaining it and then possibly selling it out when you want to retire. Everything involved may seem overwhelming at first, but it will all be worth it when you see the success starting to overtake the hard work you put in to make it a success.

The training you get and any assistance that comes with that training is going to be the foundation on which your business is built. From here, what you will need to get is a business plan. You can keep the plan in your head and just do it, or you can write it down in a professional manner. The latter of those 2 options is preferable for at least 2 reasons. One, having it all written will keep the ideas you have fresh for years to come. Your business, be it large or small, is going to be complex because it involves so many things. From where the business is going to be, how many employee’s you plan on starting with, advertising, marketing, and the list goes on.

The second, and possibly most important reason, is that a professionally written business plan is key to getting a loan to help get your business up and running. Now, if you have your own capital this isn’t going to be necessary. Nor would writing down your plan for the purpose of securing a loan, but again, writing down your plan is beneficial. There have been many times when people start their own business with certain things in mind, only to have those certain things change in time. The business world can be very fickle and your own plans may have to change to keep up with the external changes that have a direct or indirect influence on your business.

Having all of the applicable business licences is a legal necessity and something you definitely need to plan on getting. The reason this fact is being pointed out after the financial aspect is that some people tend to put the cart before the horse. Securing a loan is typically not contingent upon having the required licences to legally operate the business. However, getting the required licences would be pointless without the cash to get the business up and running. If need be, if the licensing procedures are costly, you can always take out 2 separate loans. One to get the licensing you need, and then when that is taken care of, secure a second loan for the business itself. With small businesses though, this is typically unneeded as many licences can cost as little as ninety-nine dollars.

Once you have the capital and the legal obligations taken care of, you need to come up with a name for your business and register that with the state where the business is head-quartered. When starting a small business this is kind of a no-brainer because you, typically, will only have one location. Some people though, when starting out, will have their main offices in one state while having another portion of the business, like a distribution centre for example, in another state. With this being the case, you need to register your business name in the state where the business originates from.

Your business name needs to be filed for the obvious legal reasons, but it also needs to be filed because it would be rather hard to advertise and market your business without one. Hopefully, this aspect of your business is a part of your plan because, without it, no other part of your plan is likely to work. This should also be a part of the budget that was included in your start-up loan. The main reason new businesses fail is because they fail to get the word out. Focusing on the best ways to do this should have been a part of the training you received at the outset.

Adding to these musts when starting your new business, is to actively retain legal advice. You will want to do this to get advice on contract and documents, as well as ongoing consultation and representation as you build and protect your business. One way to do this, without enormous cost, is to purchase a small business legal plan. You can usually find one that will provide the essentials for a start-up business, as well as ongoing advice as your business matures.

Aside from the training, the business plan, the loans, the licensing, and the small business legal plan, perhaps the most important thing you need to start your own business is patience. The old parable about the tortoise and the hare is true. Especially in the business world. No one gets rich quick, at least not legitimately, so slow and steady really does win this race. The rule of thumb to go by is to expect to be in business for 5 years before turning enough of a profit to live comfortably on. This is why many financial institutions that give out loans to small businesses like to see a 5 year plan. They know as well as anyone that 5 years is typically how long it takes to turn a liveable profit.

If this all sounds like a lot of work, well, it is. But with education, planning, organization and patience it doesn’t have to be hard. The rewards of owning your own business and being your own boss far outweigh the time and effort it took to become successful. There are many places online and, you can go to get testimonials from people who have “been there, done that”, and succeeded. I wish you good luck and much success with your new business.

5 Business Development Don’ts

5 Business Development Don’ts

In my over 25 years experience in business development for Financial institutions, IT enterprises, Law Firms and Medical Practices there is an unfortunate, common repetitive pattern/tendency that costs unnecessary money and reduces efficiencies considerably.

This tendency can simply be defined as “unproductive” business development practices. While it can be stated simply it is NOT a straightforward problem in the least. Not appropriately, consistently and diligently creating and implementing a business development plan can and does cause significant financial and productive leakages to a business entity. For a small or growing company, business or practice, such a business development oversight can and often is very detrimental in many ways.

I have identified 5 of the most common unproductive business development practices. I hope that, if you can identify any or all of these within your business entity, you recognize the red flag and take heed.

The 5 Major Business Development Don’ts are the Following:

1) Don’t Randomly Advertise. Sounds weird, but it is NOT. One of the most common mistakes and seemingly harmless ones is to advertise a company, product or service without a clear target.

Unless you are a large entity, advertising expenditures should be seriously confined for specific targeted campaigns. Brand recognition advertising for smaller and or new practices is NOT an optimum use of resources.

2) Don’t Just “Get” Business- Instead Get the Right Business.

A common mistake in small to medium size companies is to “accept” any client even if the fit is not perfect, i.e. a client project that is not cost effective or a “difficult problematic client” or a client whose request is out of the range of expertise.

This can be a seemingly difficult situation, especially, if there are cash flow issues within a company. However, ultimately, saying no to these clients is the most cost effective solution.

3) Don’t Leave Your Business Growth to “Chance”

Many small businesses and medical practices get “caught up” in servicing clients when ample clientele is at hand, thus, ignoring future business needs. For small to medium size businesses this is one of the major causes of cash- flow problems. There should always be a consistent everyday effort to bring in new clients. This ensures a constant source of new clients as they progress through the customer life cycle.

4) Don’t Ignore Your Previous Clients

One of the biggest sources of potential revenue for any business, medical practice or law firm is satisfied past clients. There are three ways that these clients can generate new revenue for a business: firstly, by cross-selling other products or services that are complementary to what they bought last time; secondly, by up-selling services or products that enhance their growth or customer satisfaction; thirdly, referrals. Satisfied customers are one of the greatest sources of new business. However, in order for this to be successful you must cultivate a “relationship” with your clients via warm calling, holiday cards, emails, gift certificates etc and you must ASK! Previous Clients are the quickest most effective way to gain new clients… do not ignore this financial resource at your fingertip!

5) Don’t Confuse Business Development/Sales/Marketing

Sales and Marketing are quite distinct from Business Development. Simply put Sales represents the completion of a client prospecting stage, Marketing is the means to communicate value and awareness of a product or service, while Business Development represents the holistic/big picture for business growth. More specifically, business development concerns the tasks, processes and preparation for business/opportunity growth. Business Development is in essence the means to obtain the plan and targeting for growth. Having this plan/bigger picture helps to refine the client/service/product penetration and thus expedites and streamlines the sales and marketing efforts.

Ironically, most sophisticated and large companies have well funded business development departments, however, it is the start-ups, small and medium size enterprises that actually need a business development team or process the most.

It is my sincere expectation and desire that should you identify any of these “red flags” in your business it will start a thinking process and adjustment of your entity’s activities and strategies.