Whether you are an entrepreneur, a President and CEO of a mid- to large-sized business or a one-person shop, do the plan. The Business Plan that is. Without it, the chance of your business ending up dead increases to a probability not worth the risk. If you never create another plan, the Business Plan is as important as anything you will ever do in your business.
Building a business requires more than a dream and hard work. Both are necessary ingredients for achieving success. But without strategic, planned and disciplined growth, businesses usually fail to achieve their goals—assuming, of course, that they slow down along the way to create those goals. No matter the size of your business, keep in mind that it takes capital to grow. If you plan to use your savings, your business plan had better be on target to make all that money back plus a substantial return on your investment, assuming, of course, that you enjoy having a roof over your head and eating regular meals.
If, on the other hand, you plan to raise capital from outside sources, understand that a reputable bank or investor won’t invest in your business unless you have a well-thought out business plan that proves you worthy of investment. Investors tell us most business plans fail that test. A surgeon doesn’t operate on himself, and you shouldn’t either. Business plans are complex. Hire someone skilled in the specific areas and content needed by your organization to build the plan. Hire a CPA, an attorney and a business planner or a business consultancy that understands investors and can manage each and every ingredient of a business plan, driving and executing it so that you reap the benefits of the consultancy’s experience and talents.
Here's a story of two clients--the first a year old and struggling to survive; the latter with a 20-year-old current business who just hired us to develop its business plan for expansion into another state.
In the first case, the owners mortgaged their home and took out a small loan. Together, the monies equaled about $400,000, barely enough to launch the business, not nearly enough to survive three years without profits and cash flow. That three-year average is critical, as without enough capital to make it for three years, your business likely will struggle ti survive. Is that always true? No. But on average it takes a new business a minimum of one year and a maximum of five years to become profitable. If it doesn't happen by the 5th year, it is time to execute on your exit strategy. In this example, the monies ran out after about six months--normal for a B2C business with this kind of expenses. Now the owners are struggling to stay in business.
They brought us in three months ago, in an effort to make things happen quickly. We explained in detail that we would do our best but that we believed the task was nearly impossible to meet their cash flow and capital needs. With direct marketing, we created an instant spike in business, which has now plateaued, as is normal. Tomorrow, we advise that without a business development budget, there isn't much more we can do. We will carefully lay out their options, which are essentially the same ones we described three months earlier. The outlook, in our opinion, isn't good.
In the second example, the business owner has grown its first location and maximized its revenues, profits and growth potential. Last week, he brought us in to build a business plan for his second business. The objective is to raise $3 to $4 million dollars before he launches. Very smart and more than enough to get him through several years of growing pains, which because of the plan will mostly be averted. Here's what many don't understand. A Business Plan is much more than financials with projections. It is in every way a Business Development Plan. Here is the outline we will be working from for this client.
- Front Matter (loan request statement—amount requested, client assets, use of loan; confidentiality agreement;table of contents)
- Executive Summary
- The current state of the health care industry in the geographical area where this business will reside
- Market Research & Analysis (competition, strength of market, opportunities, etc.)
- Economics of Health Care (costs vs. revenues)
- Marketing Plan
- Health Care Center Opening Schedule
- Management Team
- Risks & Assumptions
- Exit Strategy
- The Financial Plan
- Layout, Design, Printing and Delivery of Plan
Bottom line: Without a business plan you won't know
- How much capital you need
- How and when to use it
- Where you are going
- How hard or easy it will be to get there
- How you will get there
- And how you will know you got there
Lesson to Remember: Don't get caught being Under-Capitalized, Without a Plan and soon to be Dead.
