Business Plan or Big Pain?

During the course of this last year seeing clients at the UNI SBDC, a few things have stuck out- most notably the fact that many existing business owners did not create a business plan before starting their business. This is not an earth shattering finding by any stretch of the imagination. It actually makes very good sense- in my experience entrepreneurs are not the sit-down-and-plan-it-out types.

The response that I usually get when I suggest to those entrepreneurs that they should draft one is nearly as universal- *sigh*. I want to spend some time with this blog and explain why having a business plan is worth all of the time and energy that it takes to pull one together. Trust me on this- I know about the sacrifice it takes to do it well, having written my first one when I was 12 and completing two others since (thanks Mom).

First and most importantly, who the heck is going to take on the risk of giving or lending you money if they don’t feel like you have thought through your business idea and can demonstrate that you have done your due diligence? A well-crafted business plan should not only should demonstrate your knowledge about your industry, show your passion for your concept, and set clear goals and expectations; but it can also ensure your financial security! Bottom line- a good business plan can be traded for start-up or expansion money, plain and simple. There isn’t any program in Iowa that will give you financial assistance without a business plan. In fact, many financial assistance programs structure their applications in ways that mirror a business plan- who are your competitors, what product/service will you offer, who will be in charge, what licenses/permits will you need, where will your money go, etc. If you already have a business plan created, well thought out and reviewed, these questions are simply a matter of copying and pasting from your business plan into the application. Have your attention?

Writing a business plan is hard, but the rewards are great. This is because the process of writing your business plan will make you a better business person and strategic thinker. Sound cliché? It’s not. Inevitably the business owners who I see who have already began pulling together their business plan are more knowledgeable about what they want to do and get out of their business than the ones who come in cold-turkey with just a great idea. If you have already spent the time writing out what you want to do with your business, inevitably you will be better posed to answer questions like: Where do you see your business in five years or what is unique about your product/service that will make you successful? Ask any FastTrac graduate what I mean and you’ll get a great response (by the way, I know there are a number of you who are on MyEntre.Net and I hope that you contribute to this discussion with your comments and perspective- even if you disagree). This is because in the FastTrac course, participants are forced to spend three hours a week doing nothing but working on their business plan. As is often said- they work on their business instead of in it. The process of drafting, editing, and finalizing your plan will cause you to take a hard look at what you want to do and give you a new appreciation of whether it’s worth doing or not. By deconstructing your business into its most critical parts, you are given an opportunity to figure out things like:

• Have I got a shot at success?
• Are others doing what I am doing and are they doing it better?
  

These types of questions are especially salient to those existing business owners, and you know who you are, who believe that things have worked out pretty well thus far without a business plan- why start one now? I understand maintaining the status quo, but if you really want to build your business, you’ll start first with working on the competition section of your business plan. Who are your top five competitors? How is their service? What is their store atmosphere like? What technologies are they utilizing to increase efficiency and their profit margin? Even more basic, do you know how much money your competitors are making and did you know you can get this information for free via our Iowa Business Concierge service?—Shameless plug I know… 🙂

A business plan is an organic document. Your business plan will grow with your business. As you hit hard times you can pull it out and it can provide you with ideas for improvement or even expansion. Perfect example, I had a client that totally forgot about an entire avenue for advertising that she had originally wrote down in her business plan back before she started. Just by dusting off the business plan and reviewing it, she was able to recall ideas for marketing her business that she didn’t have time to implement once she was up and running in the thick of her day-to-day management of the business. This is especially important for tough economic times like these when you may have a lot of downtime to create or edit your business plan to reflect the growth of your business.

Finally, any good business plan has a complete and comprehensive set of financial documents affixed to it. Wondering what your business will look like in November when it’s July? A great advantage to having a business plan is that you should be able to look into your industry trends section and pair it to your financials to figure out where your cash position should be for virtually any point in time.  Your local Iowa Small Business Development Center consultant can even help you create and edit your financial documents for free!

You should have at least one other person review any plan you draft to ensure that there is clear vision, goals, and expectations from which to start or expand your venture.

Find some free business plan templates to get you started here!

Rob Williams is a Business Analyst for the University of Northern Iowa