By Carlos Mejia Castillo
Perhaps now, more than ever before, the importance of Planning in Small Business is at the forefront of sustainability factors. Today’s successful entrepreneurs have done yesterday’s hard work: setting goals, designing action plans to reach them, and building plans for growth based on measurable metrics. Every business owner has different goals and priorities that drive the purpose of their business plan. Let’s dive into a few of the most common requests for planning that I receive from my clients at the Nevada SBDC, and some important factors to consider.
#1: An entrepreneur with a money-making idea, but not sure where to start
In this scenario, the business plan is essentially a roadmap that specifies the processes necessary to establish your business – defining the actions, tasks, and steps that can be measured to assess progress and success. I call this type of business plan the “Blueprint”. By definition, a blueprint is a drawing up of a plan or model. The blueprint perspective allows you to see all the pieces needed to assemble your business before you begin. One of the most challenging parts of being an entrepreneur is feeling confident in making choices about strategy and direction. Separating emotion from business sensibility in the form of measurable plans helps many new entrepreneurs fight their anxieties and stay focused on their goals. The Blueprint provides realistic expectations for a new business owner in the practical form: Startup expenses, licenses and permits required, time management, and profitability all measure against the expectation of sales and success.
#2: An established business or a seasoned plan that is ready for launch
In this case, the focus is less on the feasibility of the business concept and more on the steps to take and metrics to measure that ensures the business meets pre-established projections and goals. I call this type of business plan the “Action Plan”. By definition, an action plan is a proposed strategy or steps toward an outcome. Action Plans can focus on any goals important to the business. These commonly center around increasing sales, entering new markets or identifying acquisition targets, reducing the cost of goods sold, improving production processes, and employee performance improvement, among other considerations. Goals are broken down into portions to be achieved over specified periods, to allow for accountability and to verify that the plan is working. Evolving Action Plans allow changes based on outcomes measured at benchmark periods; if the expected outcomes for an action do not result, the owner might consider adjusting the plan. A system of accountability connects outcomes to daily actions, making it easier for an owner to make smart, nimble decisions about what’s best for business. Use the “Action Plan” to outline your goals and metrics, define specific daily/weekly actions and how they are expected to meet the goals and metrics, and ultimately compare the goals to actual performance.
#3: A business that is seeking capital (money) to either launch or to grow
As you might have guessed, I call this the “Capital Plan”. This is really a combination of the “Blueprint” and “Action” plans. Think of it simply as this: If your neighbor asked to borrow $200 to buy a lawnmower to help him start his neighborhood landscaping business, you’ll want to know when he’ll pay you back and whether his business will make him enough money to pay you back in the promised time. For such a straightforward business, the math is pretty simple; at $10 per yard, he has to mow twenty yards to make back the money he’d owe you. The action plan is nearly as simple; assign a timeline to the goal of repayment, determine how many yards per week must be mowed, and precisely how the business will market to and sign up the required number of customers to meet the business goal. Performance projections are important no matter what kind of business you are planning for; from lawn mowing services to ice cream shops, businesses need goals and plans to meet them if they wish to be successful. Perhaps the most tedious section, the financial projections of a business plan, showcase the expected revenue and performance based on the Action Plan. The fundamental financial documents for an existing business are the Profit and Loss Statement (Income Statement), Balance Sheet, and Statement of Cash Flows. Lenders and Investors to your business will expect these financials to accompany any funding requests. In the case of a startup or pre-revenue venture, past financial performance will not apply but your projections should follow the same standardized financial statement format. Make sure to keep projected numbers based on the actions described in your business plan to make it easily understandable for any reader. Also, be sure to include any market data you use in your assumptions.
Ultimately, most successful businesses will create, carry out, and modify multiple versions of each of these business plans as their businesses grow and evolve. This past year, many successful business owners who have been following the same plan for years have had to suddenly adjust; “pivot” is the phrase of the moment. Whether I am working with a new entrepreneur or an established local icon adjusting to the shock of COVID-19, I always emphasize the importance of planning for success. I’d like to invite local business owners to reach out to our team at the Nevada SBDC for guidance and advice on how to plan for growth and other goals. Our services are no-cost and confidential and available to businesses across Nevada.