Building on last month’s discussion of business plans, we now focus on an understanding of the key elements and the process. The business plan process involves capturing “every” aspect of business operations and the financial implications. If you are new to business and planning processes (and especially if you work with experienced business experts on your business plan), you will gain an understanding of the impact of assumptions, decisions, and the interconnectivity of the “how, what, when, where, and how much” that were discussed in previous articles – while still in the conceptual stage. Think of the business plan and its financial projections, as your opportunity to “virtually” open your doors, before you commit to physical space, payroll, and other expenditures. Your assumptions and projections won’t capture everything and they won’t be 100% accurate, but they will enable you to make reasoned decisions and have a plan for when things change or miss targets.

The task of documenting assumptions; identifying relevant and critical demographic information; and estimating the expenditures, on-going expenses, and revenues/sales is often a daunting task. Some of the most practical ways of obtaining “numbers” are to get quotes on equipment, talk to leasing agents – for rent, utilities, etc., contact service providers (accountants, attorneys, etc.) to get rates, and “shop” your competition for pricing of products and services.

Beyond these more straightforward numeric questions, there are some less easily obtained numbers that are important to the business plan – sales volumes, costs to produce and deliver, employee expense, taxes, and so on. Many of these numbers are derived from assumptions, market demographics (information about the composition of your target customers) and the planned structure of your organization.

Customer demographics and size of your target market(s) can frequently be obtained through internet searches, area Chambers of Commerce, County and State economic development offices, and even the US Census Bureau and other government agencies. Additionally, many market research firms have pre-existing research that can be purchased at a range of prices and level of detail. (Caution: When purchasing “canned” market research, take the time to validate that the report will contain data for a recent timeframe and that it is relevant to the industry, market, niche, or customer demographics. If you can’t see a sample of the report data, then ask if they will provide you information on key dimensions and how the data is grouped.)

Again, this part of the business plan process can be extremely intimidating. The degree of detail you want to examine and include depends upon WHO will be using your business plan and the purpose of the plan. If you are seeking investors, then the level of detail and analysis of operating and financial assumptions and projections will be significantly higher in quantity and quality than a plan being used to “simply” facilitate your own decision-making and planning processes.

Lenders, accredited investors, angels, institutional and venture capital groups have higher expectations of process, content, and clarity in all aspects of the plan (especially the financial numbers), than friends, family, and others. [Caution: When accepting funding – loans or investors from friends, family, and others — it is important to convey to them and for you to understand that the ability to pull money back out of the company in the early stages is difficult. If there is a “life event” or “emergency” or your investor gets nervous and/or impatient, and investor suddenly comes back asking for the return of the investment, etc., your business and relationship can be put under significant “strain.” Be cautious in accepting “loans” and “investors” if they aren’t prepared to wait for the business to have cash and make a profit.]

A “basic” plan may be all you desire or need. If your dream business isn’t something you can fund yourself or launch in phases, then a more comprehensive and professionally prepared plan may be the route you need to take. There are, of course, businesses launched with no plan and there are infinite points between no plan and a comprehensive, professional plan. You may decide to get assistance on different plan components – marketing, sales, staffing, or the financials. Whatever you decide, know that it takes time, attention, information, and resolve to develop a robust business plan. It is an investment of time and money in the future success of your business.

Copyright © 2004 Lea A. Strickland, F.O.C.U.S. Resource, Inc.

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