There’s a mystique to the term business plan that makes it sound like you couldn’t possibly do one without an MBA or two, but much of what makes up a bona-fide blueprint is probably already in your head. A business plan is a part-words and part-numbers profile of where you are, where you want to go, and how you plan to get there.
The words describe your company, its products and services, competitors, customers, management, operations, marketing and sales plans, industrial outlook, and long-term goals. The numbers estimate your cash flow, income and expenses, balance sheet (what you have and what you owe), and a break-even analysis. There aren’t too many people not intimidated by both numbers and words, but once you break the plan down to these essential components, you’ll find you an do most of it.
12 Steps to Success
Here, in the spirit of helping business plan phobics, are the best ways to trick yourself into writing a plan–the 12-step program, if you will, for people who truly, madly, and deeply hate reports.
1. Even if you do only parts of a formal business plan, you’ll be ahead of the game. The more you learn about business plans, the more you’ll realize how useful they are, even for people who don’t need to borrow money or capitalize inventories. A solid business plan is a blueprint that can help you manage your workdays. Some of your tougher should-I-take-this-assignment-or-concentrate-on-that-client choices will be made easier with a plan. When you turn to your financials, you’ll no longer worry about how to make your next insurance payment–you’ll see where the money is coming from.
And you need not even write a whole plan to make one your best business tool. The other little secret is this: If you are writing for yourself, you can pick and choose the parts of a formal business plan that mean the most to you and ignore the others.
2. Work with software, a good book, or a $125-an-hour business consultant who will hold your hand. When business plan expert Rhonda M. Abrams, a San Francisco business consultant and author of The Successful Business Plan: Secrets Strategies (The Oasis Press), decided it was time to reshape her company, she didn’t write her own plan; she hired a strategic consultant to help her. Sometimes you need objectivity, and sometimes you just need prodding.
The new generation of business planning software is full of prompts that can get you going when you aren’t sure what to put in your plan. Business Plan Pro (Palo Alto Software) puts a section-by-section outline in your word processor, along with questions like: “Why do people buy your product instead of others? Do you have better features, a better price, better quality, better service, or some other factor?”
PlanMaker (PowerSolutions for Business) has a manual you could use as a guide even if you never load the software. Each section comes with its own questionnaire that can similarly push you through the plan-writing process. “Do you know of any trade publications that have cited the growth potential of your industry, product, or service?” it asks, for example. And when it comes to crunching numbers, programs such as BizPlanBuilder (Jian Tools for Sales) offer spreadsheet templates for such financial forecasting as a break-even analysis.
Furthermore, the business section of every bookstore and library is replete with how-to-write-a-business-plan volumes.
3. Just put something on paper or screen. This is the old writer’s trick of doing anything to appease that damn blinking cursor. “Get over the idea that the first draft has to be perfect,” says Tim Berry, who wrote Business Plan Pro. “Type your first sentence, and understand you will change it and change it.” You can do the same with the financial section. Some people are afraid of writing business plans because they secretly fear their dreams will vanish upon close inspection, says Abrams, but this is usually not true. “Fantasy” businesses become more real and more exciting as we delve into the details.
4. Tackle the fun part first. You can’t write a business plan until you know where you want to go, so the mission statement should be your first building block. Your mission can be high-minded and mercenary: “To make a lot of money while providing superior marketing help to promising start-up companies,” for example. It sounds vague, but it isn’t. A mission statement like this helps you weed out schlock projects or low-paying clients. And on bad days, you can refer to it to keep your eyes on the prize.
5. Use plain English. If you are uncomfortable with the jargon of the business world, don’t use it. You can always go back later, before you deliver the plan, to insert capital assets” and “accounts receivable” at the appropriate points, where you thought computer and fax machine” and “what everybody owes me” were good enough.
6. Ask yourself questions. Abrams suggests that a meaningful business plan first answers your own questions. What do you need to know to make this business work? Ask yourself if it’s realistic to expect that you will do everything the company needs. Your business plan may point out areas–marketing or accounting, for example–where you’ll want to hire help.
7. At least do a marketing plan. Figure out, as realistically as possible, who your customers are going to be and how you are going to reach them. Calculate the costs of reaching them, through direct mail, advertising, commissioned sales people, and other methods. When you write your plan, outline it as specifically as possible.
8. Predict cash flow, even if you ignore other numbers. A short-term way to predict cash flow is to lay out the next six months on a spreadsheet. How much is coming in and how much do you know you’ll have to spend? Cash flow planning would have saved a friend of Berry’s from the embarrassment of driving to the bank in a Mercedes to get a home-equity loan to pay his business bills. “When he landed a $300,000 a month contract, he ran out and bought the car,” notes Berry. “A little cash flow planning would have told him he wouldn’t have the money to meet his bills for months.”
9. Learn to do a break-even analysis. How many widgets, cups of coffee, or hours of layout work do you have to sell before you can take any real cash out of your business? Business plan software crunches this calculation for breakfast, but you can also build it into a spreadsheet like this: Figure out your gross profit margin and express it as a decimal (average percentage of gross income realized after you subtract the cost of goods–so if your cost of goods is 25 percent, your gross profit margin is 0.75). Divide your fixed expenses–rent, computer costs, overhead–by your gross profit margin to get the total amount of sales you need to reach the break-even point. Divide that figure by the price of the unit you sell to figure out how many of them you need to unload.
This can put an unrealistic idea in perspective, prompt you to raise prices, or expand or contract your line of products.
10. Cut to the chase. The hardest part of the entire business planning process is coming up with a five-year projection for sales, expenses, and profits when it’s all new to you–the projecting as well as the business. But cheer up! Nobody does this perfectly. Notes Thomas Carroll, the multiple-company entrepreneur who wrote PlanMaker software, “If people had an infallible way of doing that, there would be no business failures.” Make informed estimates based on the specifics you’ve laid out elsewhere in your plan, and be conservative. It is better to overshoot projections than to fail to meet them.
11. Implement it. When in doubt, go back to the plan. Follow your marketing plan until you see a reason to change it. Keep your expenses in line with what you projected to spend, and focus your business energies where your plan told you to.
12. Do it over. The beauty of computing, of course, is that you can print out a shiny, new plan every day. Probably overkill–Abrams says she has some clients who are so obsessed with creating the perfect plan that they never actually start their businesses. Keep your plan in a loose-leaf notebook and go back to it quarterly to make sure it’s still realistic and you are on track. As you gain more experience, you’ll make your plan more professional and specific, and you’ll probably have some new ideas that will change your blueprint a bit.
Finally, once you’ve gone this far, consider yourself well into recovery. Feel free to proselytize to all those colleagues out there who are still in denial and don’t think they need business plans of their own.