How’s your vision?
Why you should have a business plan
Without a vision the people perish; when they obey, they are happy and fulfilled.
It would be great to claim authorship for this verse, but its origin is the book of Proverbs in the Old Testament of the Bible. As it was written, it was not intended for yours, or anyone else’s, small business. However, it is very applicable for all of us.
Think about when you first decided to go into business. Perhaps you purchased an existing garden center. You observed how the current owner operated the business and began to think about how you could use your skills to make changes. The changes were because you wanted to put your own personal stamp on the business. Likely, the changes were also because you believed you could make the business more profitable than the current owner.
The individual that is going to open the garden center from the ‘ground up’, saw an empty piece of land, perhaps with a building on it, and began to formulate ideas as to how the business would evolve.
Having enough cash that you did not need to borrow money from anyone or lending institution means there would be a lot of paperwork that could be eliminated. In that situation, some potential owners would take that paperwork elimination to mean they could eliminate a written and detailed business plan.
When the potential owner is borrowing money, there is frequently a request by the lender to see a business plan. The logic is that the lender wants to know how the business owner is going to utilize the funds being loaned. While that makes sense, the reality is that the lender wants to make sure the loan is secured by something the business owner has.
As an example, if the loan is for $250,000, the lender wants to be sure that if the business fails they have first access (that means the first lien) to assets of the business owner. The lender will likely want these assets to far exceed the $250,000 so they can easily get their money back.
All of this is said to illustrate that the business plan is not for the lender. It is instead for the business owner. The business owner that has a detailed, written business plan will make fewer mistakes in the choosing of products or services offered. They will make fewer mistakes with regard to the staff they hire. The owner will find themselves making decisions in which they are deciding what they buy as compared to being sold to by someone. Because of the business plan, the owner will more easily and quickly see the opportunities to grow the business.
Most likely, this article is catching few people at that moment in time when they are first starting the decision process with regard to purchasing or opening the business. Anyone, at any stage of their business life, will benefit from the creation, and usage, of a written business statement for their business. Simply because every business owner knows they can make more money by eliminating mistakes.
Creating the business plan is not going to be a one day, or weekend project. While you may create a business plan that you will consider complete, your business plan is a continual work in progress. This is because with every day in your business, hopefully you learn something that will help you improve your business, and eliminate mistakes.
Consider starting your business plan with a three ring notebook and a number of dividers. The first item to be created for your business plan will be a mission statement. This is where you state the purpose of your business; why you want to open your garden center. You tell people how you want other people to see and think of your business. You make points about the customers, the products and the services you are going to offer.
As you hire staff, select products and determine the services to be offered, you look at the mission statement to see if what you are considering is consistent with the mission statement. If it is not, then you stop to ask yourself why you are considering moving away from your ‘game plan’.
A second component is a vision statement. Hopefully, every business owner stops occasionally to think about the future. While they may be thinking about themselves, this is where a statement is written as to what the business will be like in the next three to five years. This document is for you and perhaps your staff and vendors.
As you look to increase revenues, you will look at the vision statement as it will be the guide to the products and services you will add, delete, and change so that your vision is fulfilled. Your vision may state a certain amount of revenue or number of locations. Planned growth in your business cannot happen unless you can ‘see’ it and share it with those necessary to make it happen.
The third component is the statement of purpose. This is taking the mission statement from a less loftier view. You state who you are and how you are going to use your business plan every day.
The next aspect you will write is the company description. Now you add how you are going to run your business and what makes your business unique. Think of this as being your opportunity to brag about what makes you and your business so different. Just make sure that the bragging has a lot more than ‘great customer service’ and that you are going to have ‘competitive prices’. Those two phrases have been greatly over used.
Tell about who the target customer is and how you have identified that customer. Speak about that customer in specifics of the demographics and not on the basis of a certain geographical area.
You will want to include a marketing plan. Too many businesses wait for the salespeople for television, radio, newspaper, magazines, websites, and other forms of advertising to find them. Your business should have a plan of what media you want to buy as compared to being sold to by these various companies.
For any business, new or existing, a competitive analysis should be included. This is where you name all of your competitors followed by the strong points and weaknesses of each. Performing this exercise can show you the opportunities for adding products and services to your business as well as show you the areas that are so competitive that you may want to reconsider getting into a price battle with other businesses.
While you will have briefly mentioned your staff in the company description, you should create a section where you expand on this with a management and personnel segment. What would the ideal manager look like in your business? How would you like all of your sales staff to perform? Describe these people; how they take care of your customers and how they work with each other.
This is not daydreaming, but is setting a standard to measure yourself as you hire people. For the proposed business, this is also where you tell about yourself. If someone is considering investing in your business, they know they are also investing in you. They will want to know you have the skills and talents so their investment has the best chance of succeeding.
The financial management is where you are telling yourself, or investors, what financial information is necessary for your business. Surely you are going to state how a budget, inventory plan, cashflow plan and balance sheet will be a part of your management tools. If this is a proposed business you will also be including a personal financial statement and a break even analysis.
This final item is one in which you have tabulated how much revenue you have to produce so that all of the bills are paid. It is only after reaching that point that your business begins to make money.
When initially completed (Remember you are never done with a business plan. It is always a work in progress.) you will have a valuable document. You have a document that demonstrates self disciple in being able to create this necessary management tool. You have a tool that you help you to stay on task and a document that will give you a ‘warning’ before you stray from the path you have set for your business to grow and be successful.