Keys to a Successful Business Plan

In Kentuckiana, there are about 30,000 small businesses, and all but about 500 are classified as small businesses. Studies have shown that only about 18% of small business owners have a written business plan, but for those entrepreneurs who have invested the time to write a business plan, virtually all consider that a key to their success.

Going through the process of developing a business plan will result in the following: help you uncover many options and opportunities that you might never have otherwise considered; be used as a measuring tool for your goals and tactics; be used to better run your operations; be used to develop the skill sets of your team and yourself; be used to adjust your plans if your business activities are not going as you want; and to enhance your chances for success. With a business plan, you will shift your thought process from a reactive basis to a proactive one, and you can use your business plan for so much more than just presenting to your banker along with an application for a business loan.

So why do so few entrepreneurs write a business plan? The one-word answer: T-I-M-E. The always-positive entrepreneur feels that his or her new business is a “can’t miss, sure-fire success”. That person does not want to take the time to think about the target market, research the business environment and understand the competitors’ strengths and vulnerabilities, assess his or her company’s strengths and vulnerabilities, market opportunities, management and leadership gaps, product/service offerings, pricing strategies, cash needs, marketing strategy, legal entity, regulatory issues, and much more.

Does all of this sound overwhelming? Yes, it does, and it can be very overwhelming if you do not have a business plan template to follow. There are thousands of articles and hundreds of books and websites available on how to write a business plan and what to include in the plan. Most include the following:

• Executive Summary.
• Summary of Business: this section includes your mission statement, business description and background, legal entity and strategic alliances.
• Marketing Plan: includes the industry trends, target market, competitive analysis, product/service and pricing strategy and promotional and advertising plan.
• Management Plan: covers the overview of key management team and its experience, personnel needs, board of directors, advisors and/or key advisors/mentors.
• Financial Plan: Accesses comprehensive information on the historical financials (past 3 years), sources and uses statement (if you plan to borrow money or seek investors), income statement, cash flow and balance sheet (3-year projections), break-even analysis and key financial ratios.
• Supporting Documents: Includes pertinent research and important information in this section.

If you break this monumental task into small steps, you can not only develop a business plan, but have a very good plan that will greatly enhance your business value. As you begin this process, take the following actions:

1. As I mentioned in my article Steps to Start a Business in Kentuckiana, the first action an entrepreneur should do is to schedule a meeting with a small business consultant. The Small Business Development Center (SBDC) and SCORE provide free services and can help you develop a start-up business plan, and their services are free. They will have several versions of a business plan template, but more importantly, they can help guide you through the multiple drafts of a plan.

Here is the contact information:

Louisville area SBDC (502) 625-0123 Southeastern Indiana SBDC (812) 265-3127

Louisville area SCORE (502) 582-5976 South Central Indiana SCORE (812) 944-9178

1. The next step is to define your core business and use that to develop your mission statement. While this sounds very simple, it is an important and challenging task, as you must spend a tremendous amount of T-I-M-E (there’s that word again) considering the core competencies of your business as well as those of your competition, your target market, and what strengths you can offer your customers. Developing a solid mission statement will keep you laser-focused on your core competencies.
2. Go to the library. Yes, I know that sounds very quaint and old-fashioned, as there is so much information available through the internet. And that is precisely why you do need to go to the library. Experts on business research can show you how to access information that you would never uncover on your own.
3. Be prepared to expend a great deal of T-I-M-E studying the market and marketing opportunities. You must not just offer a product or service, but offer something of enhanced value to your target market.
4. Write multiple drafts of your business plan. Treat this process like that of a term paper that you did in school. Continually refine the plan as you uncover more information. Seek advice from experts who can critique the business plan and offer insight on how to improve the plan.
5. Understand the components of the financial statements. Do the numbers scare you? Recruit someone to your team that can explain those statements, what they mean, and how you can use the information to develop a better business strategy, focus on profitable opportunities, benchmark your business and develop a budget to keep your business profitable.
6. Seek business advisors, such as marketing experts, IT professionals, HR consultants, in addition to your attorney, accountant, insurance broker, banker, etc. as part of your advisory team or board of directors.
7. Be patient with yourself and others on your team in developing the business plan; be persistent in refining the document as you gather more information; be accountable to yourself and your employees to complete the business plan; and be focused on the reasons why you are developing your plan.
8. Finally….be prepared to USE your plan. Do not store it in a file cabinet or on a shelf in the back of the closet.