Business Planning

By Sandy Buxton, Extension Educator, Comell Cooperative Extension - Washington County

Take Stock of your Resources

• What are the personal skills of you and your family?
• What are the personal interests of you and your family?
• Physical resources of property - what is it suited for?
• What financial resources are available to you? Commercial sources? Family opportunities?

There are many issues that need to be considered when looking at getting into a business. A person's skills and interests must tie into the different resources that are available to help gear up for success.

Look at and develop your options and ideas

• If you like working with people, what are the businesses that tie-in?
• Brainstorm up possibilities

Now that you have some thoughts and information about what you might be interested in, move to the next phase. Make sure that you brainstorm and recruit ideas from many sources. You might not be able to see a possibility that could lead somewhere because you have pre-conceived opinions.

Basic equipment required

• Plan and research what might be needed
• Cost information

Take this list and look at several of the possibilities in more depth. But make sure that you include a reasonable concept of the many requirements. Use information from business associations to help with this phase.

Licensing, taxes and legal terrain

• Do you know what the legal issues are around your business idea? What licenses are required?
• What are the liability and insurance needs?
• What type of paperwork and financial records will need to be kept?
• Prepare to keep financial and business records to assist in analysis and
  long term planning.

Many entrepreneurs don't feel that this a is an area that needs much work or worry if they are just starting out small and part-time. However, everything can be fraught with disaster. Picking a name for your business and registering it can be a problem in itself if you pick a name that uses something that is already taken.

Understanding some of the key issues surrounding work place contracts, harassment and other employment issues are items that also frequently need to be dealt with in a business. A small business may not be large enough to be targeted for enforcement, but should be aware of the issues.

Manage from the ground up.

• Understand all aspects of the business
• Be involved in every area
• Cross train everyone at least some

Remember that most people get into a business because they enjoy doing something - growing flowers or vegetables, painting houses, or being around animals. But making the transition into a successful business means moving into a completely different area. Now there are other worries - paperwork, paying the bills, being paid by the customers, and managing people if you expand. All are important functions and necessary to the success of the business, but not what you really enjoyed doing in the beginning.

Plant it, grow it, market it!

• How are you going to market?
• Who is your target audience?
• Develop good production techniques.

No matter what business you get into, it will only be successful if you can convince someone else to buy your product. Dairy fanners only have to convince one customer, their milk handler, to buy their product. Retailers have to convince hundreds of customers every day to try and buy their product. You always need to be looking for new customers to replace ones that you lose, and more must be added if you want to increase your sales and profit.

Understanding how products and services should be priced is a weakness for some people. They undervalue their own time and expertise. Pay attention to pricing and understand its affect on your business.

Reap the benefits - Marketing Strategies

• Do a market survey.
• Look at your competitors.
• Find the unfilled niche!

Marketing is one of the most difficult tasks that a business owner must deal with and only a few enjoy the challenge it presents. Leam all that you can and make yourself a necessity.

Get budgets in line.

• Be conservative.
• Plan out 12-36 months in a monthly budget.
• Produce a 5 year annual budget.

I know that most people are thinking of part time businesses that are only going to support income levels, but even so you should plan ahead. Know what is going on and what to expect. You may run the numbers and find out that you are losing money and would be more successful spending the day at the beach!

If you are looking for income to actively support family living then it is important to plan out what is happening and what can be expected from the business. Calculate what you must make and look at whether or not that is possible.

Analyze cash flow and financial statements.

• Leam what these terms are and what it means.
• How can you better use them?
• Track them and pay attention.

According to William Bygrave (1997), it is important to think of cash flow as the life- blood of the business. The business is a person, and cash is the nutrient that runs through its veins and arteries. If cash flow is interrupted for any length of time it can kill the business.

One of the most key concepts to understand is that cash flow levels have very little to do with whether or not the business is successful. A business can have cash available but be very unprofitable. And an expanding business can have almost no cash flow but be very profitable. Where and how the money is tied up or moving has more impact.

Cultivate money resources.

• Understand what the bank wants to know.
• Learn who are the available resources.
• Be creative when looking.

Develop a business plan to help give credibility to yourself with the industry. It will also assist you in making sure this is not a mistake to act. If traditional financing is out, can you leverage something else or utilize family?

Harvest your future. Planning ahead will foster success!!

Business Plan Design
The business plan should contain some form of these parts.

• Cover letter - for the bank or a third party
• Cover page - list the business name, address, contact person, phone number, logo or photo
  Also may include a disclaimer about private information that shouldn t be copied or transmitted.
• Contents page - detailed list of where everything is
• Executive Summary- the single most important section, this heart of the plan provides a general overview.
• The business - discuss the businesses strategy, management team and experiences
• The market - answer the questions: Who are the potential buyers? How do you know that they are out there? Who are your competitors? How and why are they not serving these customers?
• The product/service - describe what you are going to do, how you are going to do it, and why people are going to pay for it.
• Sales and promotion (marketing) - How will sales actually take place? What methods will be used for promotion? How will these strategies evolve over time? How will you keep old customers? How will you reach new customers?
• Finances - include all financial information - real and projections along with explanations and disscussion about them. Plan must have monthly (annual) and 5 year: cash flow, income and loss, balance sheet.
• Appendix - include items that strengthen you plan but have not been addressed
  • Letter of intent for sales or lease
  • Letter of support from purchaser
  • Acceptance letter into farmers' market
  • Endorsements from customers
  • Resume
  • Promotional literature for the business

   

  Source: Bygrave, William, The Portable MBA in Entrepreneurship, New York, 1997