|Small Business Start-Up: Creating Business Plans
Why Plan Your Business?
Source: Adams - All-In-One Business Planner:
How to Create the Plans You Need to Build Your Business
by Christopher R. Malburg, CPA, MBA
(Adams Expert Advice for Small Business)
The owner of a small sheet-metal fabrication company once told me, "Why plan? It only gets in the way of what would have happened anyway." That's a fatalistic notion often held by managers of small businesses. Too many believe that they're totally at the mercy of larger competitors. In fact, for many, exactly the opposite is true.
Think of the reasons for your company's success. You'll probably come up with a series of traits that are uniquely yours-characteristics that your larger competitors can't begin to duplicate. That's why you're in business.
Of course, you may already believe in the idea. However, you may have to sell it to the others in your company. This ammunition may come in handy.
RECOGNIZING USES OF THE PLAN
For many of us who left corporate America in favor of a smaller work environment, the idea of drafting a business plan may seem offensive. After all, isn't frustration with all that busywork one of the reasons we left in the first place?
We all have an aversion to doing anything on our job that doesn't immediately help the situation we're now experiencing. However, isn't it also true that a little foresight and action before the fact can help eliminate many of the problems we face each day. Wouldn't it be nice to anticipate something like a price cut by your major competitor or a rise in the interest rate on your credit line? Of course it would. And with that anticipation comes an organized and effective response. That's what planning does. Additionally, we prepare a workable business plan to:
Planning for Promotion of the Company
Though the techniques may be similar, the purposes are entirely different. So are the results. Promotional plans are often untested, pie-in-the-sky theories of what someone thinks will work. The goals, objectives, and numbers are usually unproven. Detailed departmental plans for hitting targets are frequently hazy-if they exist at all. Promoters don't want to burden their investors with the mechanics of execution. That comes later, after the money is in the bank.
Think of a start-up's promotional plan as concept-driven. It's more general in nature. The presentation leaves many questions of practical execution unanswered. These plans are fine for their purpose. However, most aren't intended as a blueprint for running the company.
Planning for Operational Purposes
Our focus is on practical solutions to everyday business objectives. We design these to work in concert with one another. When they do, the company moves from where it is today to where its owners, investors and managers want it to be.
Why establish goals?
Companywide goals established in the business plan move the company into the position where it needs to be.
A good example would be in the area of finance. Say the firm needs additional funds to buy the machinery needed to expand its manufacturing operation. This will generate the sales revenue needed to meet overall profit targets. Here are examples of specific department goals.
Failure to reach of any one of these department goals could jeopardize reaching the overall company's target. Additionally, within every department, it's easy to identify exactly what that department must do to further the company's cause.
APPRAISING YOUR CURRENT POSITION
The question here, however, is why do this? After all, most managers of small businesses are close enough to their everyday operation to know where they are, aren't they? Not necessarily. At least few take the time to think about where they are, then write it down so that others can judge its accuracy. We're talking about things like:
Often the hardest part of starting a business plan is honestly determining your current position today. It's not always so obvious. Take the case of Domino's Pizza Corporation. What business is it in? Of course, it sells pizza. So does every one of its competitors. The Domino's planners decided that differentiating Domino's product based on higher quality was too hard a sell. Besides, it wasn't necessary. So what business is Domino's really in? The convenience industry. Its pizza isn't any better or worse than most of the competition. However, the niche Domino's chose for itself in its plan was the business of selling convenience. For a while it had that entire market to itself. Another example is that of a payroll processing service. Its current position is that of providing financial convenience to its clients. The company performs a task that other companies would rather not do. While assessing the current position, someone came up with the bright idea of expanding the services offered. After all, financial convenience extends beyond simply doing the payroll. Why not add bookkeeping, tracking and collecting receivables, and personnel consulting? See how the planning process not only answers a lot of questions you may not have thought about for some time, but prompts questions that may turn into opportunities? That's the kind of penetrating thought that goes into assessing your firm's current position.
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