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Guest Column

Business plan as crucial as all else in ownership

By KENNETH PARROTT
Published July 24, 2006

Everyone who has ever thought about starting a business or who has started a business probably at one time or another has heard, "You need a business plan." But once the budding entrepreneurs are charged up on their idea and ready to hit the ground running, writing a business plan seems like slowing down the process instead of moving it forward.

To many, the process is intimidating. There is the task of analyzing, compiling financial data and goal setting, not to mention the actual writing. Many talk it over but never actually write a plan.

But going through the process of committing a plan to paper might just be the difference between success and failure. So let's start at the beginning: Why do you need one, and what exactly is the business plan?

If you were building a house, you would want a blueprint before starting. You could build one without a blueprint, but it probably would end up not being what you envisioned. Even if it somehow turned out like you expected, it probably would not be accomplished cost efficiently and would include a tremendous amount of trial and error. Just like the blueprint for your house, the business plan is the blueprint for your business.

A primary reason to write a business plan is to secure financing. Startup businesses need cash. Any potential lender is going to want to know what your business is, why you need a loan, how much and how you going to pay it back. The more in-depth your business plan is, the more the lender's questions will be answered and the better your chances of getting a loan. But even if you do not have a need for financing, you still have need for a plan.

Developing the business plan forces you, the owner, to focus on your strategic objectives. Define yourself, your core business and why you are going to be successful. Focus on your target markets. Who are your customers, and what is the best way to reach them? Look at your competitors. Who is the competition, and what are their strengths and weaknesses? What are your strengths and weaknesses? Why would customers buy from you rather than your competitor? Think where you might have a competitive advantage over your competitors.

Then there is the important financial section of the part of the plan. Lenders are quite interested in this, and you should be, too. Here, your plan transforms into numbers. Growth projections become an integral part. Income and expense projections should be honest and include best-case and worst-case scenarios. Forecasts should start in the short term and continue out several years. A break-even analysis will determine the volume of sales you need to cover the basic expenses.

Once you have a plan, it should be reviewed periodically. You may find that market conditions have changed, requiring you to redefine your objectives. Or maybe you find that the plan was sound but that you drifted away from it.

The point is that successful companies do not happen by accident. They plan for their success on an ongoing basis.

While the task of writing your business plan seems tedious and time consuming, it soon becomes invigorating to the budding entrepreneur. During the writing process, many issues and questions you may not have thought of previously suddenly come in focus. You are forced to think through various business aspects and come out of the process better for it. Either you come through it charged up and ready for the challenge, or find the better course of action is to stay out of the business. But either way, you are better off for the effort.

Yes, the business plan is for investors. But it is also an invaluable tool for you. Your well-defined goals and objectives set to paper provide the blueprint to follow in building your business. Write it, review it periodically and change it as necessary. Remember, it is a tool. Keep it out and in use.

If you need help with your business plan, call SCORE at 621-0775. The knowledgeable counselors are available to offer free advice. They will help you through the process and make sure you write a plan that is meaningful and helpful to your business objectives.

SCORE is a nonprofit volunteer organization and is always looking for qualified members. I invite those interested to call and attend one of our meetings. And I'm Kenneth Parrott, wishing you a great month in business.

Editor's note: This column is one of a series of monthly columns by Kenneth Parrott that provide information supplied by Citrus County SCORE Chapter 646. SCORE, Counselors to America's Small Business, offers free, confidential counseling services to new and existing businesses in the county. For assistance or workshop information, call 621-0775 or visit its Web site, www.scorecitrus.org.

[Last modified July 24, 2006, 07:04:03]