While the news is often full of articles detailing the problems faced by small businesses, it's not usually filled with an equal number of articles outlining solutions to those problems. While we can't promise to solve all of the world's ills, this new series of columns will look at common and not-so-common issues that small businesses and entrepreneurs encounter on a regular basis, and we'll examine some common sense solutions. Today's topic: The Business Plan.
Walk into any small business lending or counseling institution to discuss your business and the first sentence you're going to hear is, "Where's your business plan?"
There's often confusion about why a business plan is necessary, what it's used for, and how it should be assembled. To put it in perspective, you wouldn't build a new house without a blueprint, and you shouldn't try to start or run a business without a business plan.
Books and software programs are widely available to help you create your business plan, as are a number of free or low-cost services and programs offered by local non-profit organizations. Regardless of how you decide to tackle your business plan creation, however, the bottom line is that your business plan is about your business. It must be concise, accurate and honest; and most important of all, you should consider the plan a living, breathing evolving piece of your business. Don't expect to write the plan and then file it away. Instead, you should plan on consulting and updating it regularly.
Let's start with some common mistakes many business people make when it comes to business plan creation:
Not having a business plan at all: If you're planning to apply for any sort of traditional funding, you will absolutely be required to have a written business plan. There's no way around it. Even if you aren't looking for funding, the process of creating a business plan forces you to consider crucial pieces of information you may never have thought of before information that could greatly impact the way your business runs.
Developing a business plan involves not only in-depth market and competitive research, but also a good deal of introspection and soul searching all very worthwhile investments to make before launching your business.
Missing or inconsistent information: Two common mistakes are leaving out entire sections of the business plan, and having inconsistencies between sections. Double-check your plan to make sure that each section is complete and accurate, and that your narrative matches your financial projections. Ask a friend or associate to read the entire plan to give you objective feedback on the plan.
"Fudging" the plan: If you embellish, withhold information, omit details or otherwise provide less than 100 percent accurate information in your business plan, I can make you two guarantees: One, you will get caught by the lender or investor. Two, you will succeed in cheating only yourself.
In today's economic climate, every lender and investor is going to go over your plan with a fine-tooth comb and verify everything down to your middle initial and eye color. They're not taking any chances. Bottom line about fudging the numbers: Don't do it. It won't work and your reputation will be ruined.
Equally important, ask yourself why you're falsifying information in the first place. Is it because your business model simply won't work without falsifying data? If that's the case, the business is probably doomed to begin with. If you're fudging simply because you don't know the answer, or you don't know where to go for information, that's a different story. As northern Nevadans, we're lucky to have access to numerous organizations that will help you get the answers you need, usually for free. (See below).
Not knowing your plan inside and out: Your business plan will have many elements to it, from detailed financial projections to competitive market analysis. Even if you're employing an outside source to help you put your plan together, don't take a passive role in its creation. You should be able to answer questions and provide back-up data on any aspect of the plan without hesitation.
Consider your business plan an evolving document that you will use to help you navigate your business through various scenarios. Your understanding of your business model and the way it works is a vital element not only to successfully pitching your company to a lender or investor, but in helping you run your business as well.
If you need help assembling your business plan, there are plenty of places to go for free assistance:
* Nevada Microenterprise Initiative (www.4microbiz.org).
* Nevada Small Business Development Center (www.nsbdc.org).
* SCORE (www.score.org).
In future columns, I'll look at other common challenges faced by small businesses and entrepreneurs, and some interesting solutions.
Dave Archer is chief executive officer of Nevada's Center for Entrepreneurship and Technology. Contact him through www.NCET.org. The information presented in this article is for informational purposes only and should not take the place of professional financial consultation.