A Few Facts about Business Planning
About one million new businesses are started each year in America; of those, approximately two hundred thousand will survive five years. This translates into one in five businesses making it to their fifth anniversary. This is an alarming statistic! Why in the world would only one in five businesses in the "Land of Opportunity" survive for so short a period of time? There are several reasons, but the most common also happens to be the most controllable. There is no magic equation for success, but one basic rule holds true: A business owner who fails to plan also plans to fail.
Be Unique
When it comes to writing a business plan, most people think it's about as much fun as taking a trip to the dentist. They usually focus on the pain rather than the results. Let's face it, writing a good business plan takes a lot of time, patience, and thought, and many hours of research, writing, and editing. But think of the results! You will know your business (and yourself) better and be better assured that it will flourish. In addition, you will have a better chance of getting financing. Most importantly, you will know how to conduct business and compete at a more sophisticated level. The time invested in developing a business plan can make the difference. Also consider the edge you will have over your competition. Countless businesses do not have a business plan. They are simply reacting to the conditions that exist, much like a sailboat haplessly setting out on a windless day-or, in other cases, a stormy day. The point is that when you take the time to fully develop a sound business plan, you will have a greater advantage in maneuvering and changing your course when the climate is not to your benefit.
Think Outside the Box: Advice about starting a business and developing a plan to help oversee it can come from any of a number of sources. Consider going to trade shows and other networking opportunities in your field and make it a goal to meet as many people as you can. You never know what might come of it.
A business plan helps entrepreneurs and business managers think through their strategies, balance their enthusiasm with facts, and recognize their limitations. It also helps avoid potentially disastrous errors like undercapitalizing, creating negative cash flow, hiring the wrong people, selecting the wrong location, and pursuing the wrong market. See Figure 1.1 below for a list of questions to ask yourself (and your partner, if you have one) when choosing your market.
A winning business plan requires time: fifty to one hundred hours to write an effective business plan, which would include research, documentation, analysis, and review. Keep this in mind, and remember that entrepreneurs should start planning at least six months before they initiate a new business. This takes into consideration the time you need to devote to startup while working another job. Six months gives you time to sharpen and focus your business ideas, test your assumptions, and improve your management skills. So dig in and begin your journey. This chapter gives you an overview of the essential elements that must be part of your task.
YOUR NEW ENTERPRISE-BEFORE START-UP
The type of business you pursue depends on a few important factors:
• How much money do you have to invest?
• Can you attract other investors?
• What return do you expect?
• Where is your expertise?
• What do you like to do most?
• Are you willing to work hard and long hours?
• What are prominent consumer trends in your industry today?
Consider a Start-Up's Impact on Your Life
Before venturing full-force into your start-up business, consider these possibilities. Your income may suffer, your work hours will multiply, and your family relationships may be strained. You will have expended your personal cash and possibly assumed a fair amount of debt. Most of the time, you may feel like you're running behind, and you may become more irritable or critical with people around you. You will see less of your friends and family; you may get more headaches, backaches, or stomachaches. You may feel guilty at times when you take time off from work. Your life, for a time, may truly be all work and no play.
Don't despair! These feelings and circumstances are a normal part of starting a business or embarking on a new project. Just don't give up. Developing a business plan is going to be very hard work, but if you do it right, wonderful things may result. So begin your research earnestly and objectively. Figure 1.2 on the next page alerts you to some good starting points.
The Nuts and Bolts of a Business Plan-Think about a Mission Statement
Once you have completed a good amount of research, you can begin to define your business, and writing a mission statement is an important step in further cementing your idea. A mission statement should be fifty words or less and outline what you will sell and to whom, and what will make your business different. (This is called your "Unique Selling Proposition," or USP, which we describe in detail at the end of this chapter.) Here is an example of a mission statement:
Mission Statement
To provide useful, applicable solutions to business owners and managers in the areas of marketing, business planning, finance, accounting, and promotion, and to fully use our management team's experience and knowledge to increase the revenues of each of our clients' enterprises and companies.
Name Your Business
A compelling component of your business idea is the name you put to it. You may already have an idea for your business's name, but also be sure to think and rethink that name once you have conducted market research. Our advice is to keep the name straightforward and descriptive, and make it as distinctive as possible. Avoid grandiose, overworked adjectives. Your business name should be like a headline to an article. It should describe who you are and what you do. A dangerous marketing mistake is to make your prospects and potential customers guess what it is that you do. For example, Bob's Hardware Store says so much more than Bob's Enterprises. Ambassador Pizza works much more effectively than Ambassador Foods. You end up spending much more time and precious capital marketing your product or service when the customer has to guess what you do. Most businesses do not have that luxury, so have some type of descriptive word in your company name that will benefit you. Let the companies with deep pockets promote ambiguous names to create their own identity.
Consider All Uses of a Business Plan
Your business plan is the heart and soul of your operation and the most important document you provide to any lending institution or potential investor. It explains all the financing you need and, most importantly, it will give your financial sources persuasive information about your venture.
