Read these articles and use the
advice from the pros to help you organize and plan your new business or
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cash flow.
Design Your Plan to Fit Your Business
By Palo Alto Software, Inc.
Business planning is about results. For every business plan, you need to make the contents of your plan match your purpose. Don't accept a standard outline just because it's there.
In the United States business market there is a standardization about business plans. You can find dozens of books on the subject, about as many Web sites, two or three serious software products, and courses in hundreds of business schools, night schools, and community colleges. Although there are many variations on the theme, a lot of it still falls into the same standard.
What is a Business Plan?
A business plan is any plan that works for a business to look ahead, allocate resources, focus on key points, and prepare for problems and opportunities. Business existed long before computers, spreadsheets, and detailed projections. So did business plans.
Unfortunately, people think of business plans first for starting a new business or applying for business loans. But they are also vital for running a business, whether or not the business needs new loans or new investments. Businesses need plans to optimize growth and development according to priorities.
What's a Start-up Plan?
A very simple start-up plan includes a summary, mission statement, keys to success, market analysis, and break-even analysis. This kind of plan is good for deciding whether or not to proceed with a plan, to tell if there is a business worth pursuing, but it is not enough to run a business with.
Is There a Standard Business Plan?
A normal business plan, one that follows the advice of business experts, includes a standard set of elements. Plan formats and outlines vary, of course, but generally, a plan will include standard components such as descriptions of the company, product or service, market, forecasts, management team, and financial analysis.
Your plan depends on your specific situation. For example, if you're developing a plan for internal use only (not for sending out to banks or investors), you may not need to include all the background details that you already know. Description of the management team is very important for investors, while financial history is most important for banks. Make your plan match its purpose.
What's Most Important in a Plan?
It depends on the case, but usually it's the cash flow analysis and specific implementation details.
- Cash flow is both vital to a company and hard to follow. Cash is usually misunderstood as profits, and they are different. Profits don't guarantee cash in the bank. Lots of profitable companies go under because of cash flow problems. It just isn't intuitive.
- Implementation details are what make things happen. Your brilliant strategies and beautifully formatted planning documents are just theory unless you assign responsibilities, with dates and budgets, follow up with those responsible, and track results. Business plans are really about getting results and improving your company.
Can you Suggest a Standard Outline?
If you have the main components, the order doesn't matter that much, but here's the outline order we suggest in Business Plan Pro software:
- Executive Summary: Write this last. It's just a page or two of highlights.
- Company Description: Legal establishment, history, start-up plans, etc.
- Product or Service: Describe what you're selling. Focus on customer benefits.
- Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc.
- Strategy and Implementation: Be specific. Include management responsibilities with dates and budget.
- Management Team: Include backgrounds of key members of the team, personnel strategy, and details.
- Financial Plan: Include profit and loss, cash flow, balance sheet, break-even analysis, assumptions, business ratios, etc.
We don't recommend developing the plan in the same order you present it as a finished document. For example, although the Executive Summary comes as the first section of a business plan, we recommend writing it after everything else is done. It will appear first, but you write it last.
Business Plan Mistakes
By Palo Alto Software, Inc.
Often you may hear about what a business plan consists of. While including the necessary items is very important, you also want to make sure you don't commit any of the following common business plan mistakes:
1. Putting it off.
Don't wait to write a plan until you absolutely have to. Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan.
Don't wait to write your plan until you think you'll have enough time. "There's not enough time for a plan," business people say. "I can't plan. I'm too busy getting things done." The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees.
2. Cash flow casualness.
Cash flow is more important than sales, profits, or anything else in the business plan, but most people think in terms of profits instead of cash. When you and your friends imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don't spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table.
3. Idea inflation.
Plans don't sell new business ideas to investors. People do. The plan, though necessary, is only a way to present information. Investors invest in people, not ideas.
Don't overestimate the importance of the idea, particularly the importance of the uniqueness of the idea. You don't need a great idea to start a business; you need time, money, perseverance, common sense, and so forth. Very few successful businesses are based entirely on new ideas. A new idea is much harder to sell than an existing one, because people don't understand a new idea and they are often unsure if it will work.
4. Fear and dread.
Doing a business plan isn't as hard as you think. You don't have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as Business Plan Pro, and others).
5. Spongy, vague goals.
Leave out the vague and the meaningless babble of business phrases (such as "being the best") because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.
6. One size fits all
Tailor your business plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better.
7. Diluted priorities.
Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is something else, certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.
8. Hockey-stick shaped growth projections.
Have projections that are conservative so you can defend them. When in doubt, be less optimistic.
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