Thursday, December 25, 2008

What Is Your Plan?

Do you have a business plan? You might be surprised just how many businesses do not. They may have had one in the past but chances are that the business owners have been so busy that they have not written down much of anything. So if you answered “no” quietly and privately to yourself, understand that you are not alone.

Frequently, a business plan is a necessary evil that rears its head only when the business owner is told that they need one because they are trying to get money through something like an SBA guaranteed bank loan or a private investor. The problem is that the business owner is not in the business of writing such documentation. So what does an owner do?

There is the Internet.
One can search and eventually -- maybe -- find a boiler plate business plan for a company kind of like the owner’s business. A little change here, a little change there and a plan is born. However, banks and investors have seen the boiler plates before and have the pesky habit of asking questions about financial projections, ratios, ROI, assumptions, and the interrelationships between the numbers and profitability. Think of it as part of their language.

There is software.
Plug in some numbers and fill in some blanks and out comes a document. However, in addition to the cost of the program, the time it consumes in learning how to use it and the fact that there is a business to run, what does one end up with? Once again, bankers and investors are going to ask their questions. They will at least be polite when they decline the request for money.

There is the hired gun.
Plenty of ghost writers out there will be more than happy to write a plan for you using boiler plates and software. Just look on Craig’s list under your area, services, and “sm bz ads.” Then type “business plans.” Ghost writers are neither bad nor good, as long as an owner knows that questions will be asked, such as “Did you write this plan yourself?”

There are professional business consultants.
At this point I need to explain that the preparation of a business plan is a process. You should also think of a business plan in similarly to the way one thinks of an owner’s manual. Additionally, I also need to point out that a business plan is a working document, subject to change as times and circumstance dictate. At this time, for example, our economy has entered into a recession which is dictating that businesses need to reevaluate their owner’s manuals to adapt to the circumstances.

The purpose of hiring a professional consultant is to facilitate the writing process, not to knock out a binder full of paper and a PowerPoint presentation. A consultant is going to insist on the participation of everyone involved in the decision making process from owners to managers throughout an organization. A consultant’s job is to help owners think through and understand the concepts and assumptions that underlie a business venture.

A consultant’s role in the production of a business plan also is to teach owners and managers the significance of the business numbers and how those numbers affect profitability of the company, not how to build a spreadsheet. Do not forget that the objective of a business plan is to have a metaphoric owner’s manual that accurately reflects what the business is about. This should be addressed not only to a company’s stakeholders, but to people outside of the company in language that they understand, such as told by Profit and Loss statements and Balance Sheets.

The knowledge an owner derives from the process of building a business plan is empowering. It also reduces the cost of borrowed or invested funds.

1 comment:

Tommy "Mack" McEldowney said...

When I originally posted this article, I had not been acquainted with the Small Business Development Council (SBDC). Funded in part by the Small Business Administration, and by Peralta College in the SF Bay Area, the ACSBDC offers consulting and works with the Service Corps Of Retired Executives (SCORE) and is a great free resource.

Tommy Mack