Planning Needed for Small Business Success
Great industries and businesses often have had humble beginnings. The Wright brothers designed the first airplane in their bicycle shop. The early days of Apple computer date to the garage of Steve Jobs and Steve Wozniak. Google was started as a research project by a couple of Stanford students, Larry Page and Sergey Brin. The way to job in today’s economy for many will be starting a new business.
Small Business Failure Due to Lack of Planning
Most new businesses fail within the first few years. While the reasons vary with each individual business the principal reason is the lack of planning. A great idea may fill an important need, but unless the idea is managed properly it will not survive in the market place. It is critical for all businesses to have a business plan. Many small businesses fail because of fundamental shortcomings in their business planning. The owners have not taken the time to draft and follow a blueprint for success.
A Different Business Plan for a Different Audience
Every business needs a plan. One mistake many entrepreneurs make is to outline a single plan. While there needs to be an overall plan to direct the activities of the people involved in the business plans with varying emphasis need be drafted depending upon the intended audience. These variations are designed to achieve different goals. Some plan drafts will have a purpose of informing and other variations will be to persuade.
The potential audiences for business plans and goals for each include:
- Management: To drive the decision making process
- Investors: To create interest and commitment leading to investment
- Suppliers: To build relationships involving the extension of credit
- Banks and Lenders: To provide financing for start up and ongoing operations
- Potential Employees: To attract qualified job applicants
- Customers: To sell the idea to customers that it is worth parting with their money
These plans are built around a central idea, but the details of each differ because each audience has need for different knowledge to make their own decisions regarding relationships with the business.
Elements of a Business Plan
Every successful business plan should include something about each of the following areas, since these are what make up the essentials of a good business plan:
- Executive Summary: Overview of the business, vision, goals, and keys to success
- Market Analysis: Description of the need for the proposed product or service, sales potential, competition in the market place
- Company Description: Proposed legal structure whether it is a corporate form, a limited partnership, a limited liability company, general partnership, sole proprietorship
- Organization & Management: Description of key jobs and personnel to fill those jobs, reporting structure and resumes of key personnel
- Work force needs: Description of the skills and experience needed by potential employees including potential salaries and job descriptions, team building plans
- Potential problems and solutions: No business is without problems to be solved, recognizing problems that may arise will make solving them more straightforward
- Marketing & Sales Management: Anticipated methods of gaining sales and market share including advertising, networking and web presence
- Service or Product Line: Detailed description of the intended goods or services to be offered
- Funding Needs: Anticipated needs including capital investment and supply list, bank credit, supplier credit and reinvestment from cash flow
- Financials: Pro forma financial statements including balance sheet which describes assets and liabilities and income statement showing sales and expenses, and cash flow analysis
- Appendix: Providing credibility by giving sources for research done to make the assumptions necessary to define the market, the competition, sales projections, expense projections and other information included in the development of the plan