Start Planning for Success
The mystery of why so many new businesses fail
has been solved in â€œThe Case of the Missing Business Planâ€
by Dr. Ric Black
Most business owners today can learn a valuable lesson during this 51st anniversary of the motion picture, The Wizard of Oz. If Dorothy had had a map, a plan, some kind of strategy of how she intended to get to her goal, The Emerald City, her trip down the yellow brick road would have been considerably less hazardous.
Financial experts today agree that a solid, well-thought out strategy is vital before setting out on a business venture.
Generally referred to as a business plan, the strategy of how you intend to get your business from where it is now – point A – to where you want it to go – point S (for Success), may be the most important action you can take toward insuring stability and growth.
A business plan is essential to running a successful martial arts school. Why? Because government statistics show that 80 percent of all start-up businesses fail within five years; 50 percent within the first 24 months. Guess what the number one reason is for those failures? Exactly. No business plan.
Would you pack up your family, board up the pets, get into the car and say, â€œOkay, where would you like to spend our two-week vacation this year?â€ Maybe the Griswalds would do that, but not you and your family; starting off on even a two-week venture is too goofy to consider. But according to the statis- tics above, thatâ€™s exactly how goofy 80 percent of business entrepreneurs acted when they started off on their business ventures.
Failing because of a lack of planning doesnâ€™t have to happen to you, even if you are just starting a business or you are already established.
First, why should I have a business plan?
Writing a plan for your business forces you to think through all areas of your business and decide exactly where you are heading. This is the fun part; youâ€™re heading for success, of course. But to get to that general goal, you must consider some specific targets along the way. What exactly are your goals and purposes? When exactly do you want to accomplish these goals and purposes? How exactly do you intend to accomplish them? How much exactly will it cost you to accomplish them? And how long exactly will it take you to get to them?
The answer to these questions makes up the greatest part of the business plan.
Besides giving you peace of mind about your projected future, the business plan also gives banks, relatives, venture capitalists – any potential source of investment – peace of mind, too.
Your business plan is actually a report to those who will invest in your businessâ€™ future. If you want to convince potential lenders that you are putting together a first-class business operation, then you must first put together a first-class business report.
Then, how do I write a business plan?
A business plan can vary from elaborate to simple, in both graphics and information. The aesthetics of your presentation, while important, is secondary to the quality of your information. While graphics quality can depend on budget and access to a production artist, the quality of your information depends soley on the amount of work you put into the project…and you canâ€™t put to much work into preparing your business plan.
Even if you decide to do a simple business plan – by choice or necessity – it must contain all of the following divisions:
* The Executive Summary – This division is always presented first. It provides a synopsis of the entire report that follows; an overview of your proposed business venture.
Â Just like a good magazine article or newspaper story, you must grab your readerâ€™s attention with a sharp, clear lead. This lead should tell the reader why your business is unique, or if it isnâ€™t unique, why it will succeed like others who are succeeding, and competing.
After you have told the reader what youâ€™re about, you need to follow-up with what it will cost to fund your venture. Tell it succinctly; donâ€™t dance around. You need what you need.
According to venture capitalists and lenders who receive hundreds of business plans, they donâ€™t have time to read each one completely. But what they always read is the Executive Summary. Only then, if they like what theyâ€™ve read, do they read the rest of the business plan.
(Please note here, that although Iâ€™ve written about the Executive Summary first in my article, and it is the lead in your business plan, it should be the last section of your business plan that you write. You must do the other divisions first so you have a comprehensive overview and thorough understanding of your business venture. Only then should you attempt your Executive Summary.)
* Description of You and Your Business – This division describes your background, tells why you are qualified to run a martial arts school, what the corporate structure of your school will be – sole proprietorship, partnership, or corporatiion), a history of the business (if youâ€™re applying for growth or improvement capital), how you will operate your school on a day-by-day basis, and your goals and purposes for your school.
Â If you will have a large management team or you intend to incorporate, you may want to create a separate sub-division called â€œManagement Planâ€, wherein you describe the members of the Board of Directors, the officers and their backgrounds, and an explanation of the officersâ€™ responsibilities. Include a description of your management team, complete with a resume and background information on each member.
* A Marketing Plan – This division may require the most research. You will need to answer questions like: Who are your potential customers? Who are your competitors? How and why will your school be able to successfully compete with other martial arts schools in your area? How much will students be willing to pay? How are you going to â€œsellâ€ your school – direct mail, newspaper adver- tising – sales representatives, telemarketing? Show your potential investor that you have carefully thought-through these issues and that even if you donâ€™t have all the answers specifically, you do have a solid foundation with which to get the answers at a later date.
* Day-to-Day Operations – This division lets the investor know how youâ€™ll be operating your school one day to the next. Here you give class hours, frequency of classes, who your teaching staff is and what are their qualifica- tions, contingency plans for sickness or injury to key personnel – the informa- tion that will assure the reader that you have your business under control. If you plan to sell martial arts equipment – as you will – project the amount of inventory youâ€™ll carry, list the vendors, even the procedure by which youâ€™ll order. Under this division comes the areas that for most instructors turned entrepreneurs are the least confrontable – record keeping, bookeeping and accounting plans. It may not be a fun area, but donâ€™t neglect it, itâ€™s crucial.
* Financial Information – If your business plan could be called a â€œbodyâ€ of information, this division is its â€œheartâ€. Unless you are truly an expert, hire a financial professional to help you create the financial documents that must be included here: income statement, cash-flow analysis, break-even analysis, and balance sheet. If youâ€™ve been in business for a while, provide a financial history of at least two years, in addition to your projections. Be sure to include a breakdown of how much money youâ€™ll need to start and stay in business for a given period of time, and an estimate of what kind of return on investment the investor might expect to receive.
* Crossing the â€œtâ€™sâ€ and dotting the â€œiâ€™sâ€.
When you have gathered all the information required of a thoughtful business plan, assemble it in a logical manner, then, write it down in a rough form. Go over it several times; have a knowledgable business friend go over it several times, make changes that seem real to you, then work on a smooth, final draft. Use concise, clear sentences. When you have what you think is a final, presentable draft, have your business plan professionally edited and proofread.
At this point your are ready to physically prepare the final work. Word process and print it out on a letter-quality printer, or typewrite it with a clear, black ribbon. It must be double spaced.
Most business plans are usually 40-to-60 pages long, but the length of yours should be determined only by the amount of information you need to present. For the convenience of your readers create a â€œTable of Contentsâ€ list- ing at least the major divisions with corresponding page numbers.
Bind your business plan with an attractive, durable cover. Your cover design doesnâ€™t have to be fancy, but make sure that it includes your businessâ€™ name, address, telephone number as well as your name, title and the date of the plan. It is customary to include a title page with the same information repeated. First impressions do count, and your report will probably circulate through several pairs of hands at the lending institution. Your report, within tasteful standards, should â€œstand outâ€, separating it from those hundreds of others business plans we mentioned earlier.
When preparing your business plan, remember that it must be a combi- nation of strategy and selling – so approach its construction with the appro- priate balance of creativity and realism. If you are too optomistic about your prospects for success, too creative with your figures, potential lenders will reject your presentation. They can separate fact from fantasy. It is their business. This doesnâ€™t preclude a case of healthy optomism! In fact, if you arenâ€™t enthusiastic about the possibility of success, neither will your lenders be enthusiastic.
And once you have gotten your investment secured, donâ€™t abandon your business plan, thinking it has served its purpose; use your business plan daily to manage your operations. Donâ€™t work over it slavishly. The economy changes and so must you. One of the key ingredients of a business plan is its ability to be altered to reflect changing financial conditions.
If you consider your business plan as a road map to success, then remember the rules of the road: proceed toward your destination enthusiastically but safely, donâ€™t speed, watch for sharp curves, and remember – getting there is half the fun…if you have a business plan!