THE BUSINESS EDITION WHY WRITE A BUSINESS PLAN?

Why do I need to write a business plan for my small business? This is undoubtedly the most

frequently asked question by small business entrepreneurs when applying for funds to either

open or to expand their small business. The answer to their question is two fold. The first

reason all business owners’ need a business plan is to quantify, with measurable goals and with

a timeline for achieving these goals, how they will measure the success of the business. The

second reason is to communicate the strategies and tactics the owner intends to use to

accomplish these goals and objectives to others inside and outside the business. Successful

individuals and successful corporations are achievers and achievers are constantly setting and

revising goals by which they can measure their success. A business plan is a tool that

entrepreneurs use to measure their own success as well as, an instrument by which others

especially lenders and stockholders may use to determine whether or not a business is meeting

and / or exceeding expectations. A business plan is a working three to five year instrument that

is constantly in revision and so long as the business is in existence will never be completed. In a

study by the American Institute, it was proven that a business plan increases the likelihood of a

business’ success in a start-up or expansion by more than fifty percent.

When clients apply for financial assistance from lenders, they are typically advised to write a

business plan. In the plan they are asked to examine what “Critical Issues” are most important

for them to achieve in the first year for their business to be successful. For example, one such

critical issue may be to find and to retain talented employees in the business. To accomplish this

critical issue the entrepreneur must first turn it into a “Measurable Objective” answering the

questions, “How Many?” and “By When?” How many employees do I need initially when I

open my business and how many employees will I need three to six months down the road when

my customer base is expanding and business begins to become steady? This is why both

questions are equally important and therefore may result in different “Measurable Objectives”.

A small business for example, may need only one employee when the business initially opens

where additional employees may be needed as the business grows three to six months down the

road.

THE BUSINESS EDITION WHY WRITE A BUSINESS PLAN?

Every measurable objective has a “Cost/Benefit” to the business and these must be examined

as well. There will be hiring; training; and salary costs for each employee and the decision to

bring employees on board must be weighed against the perceived benefit their hiring will bring

to the business i.e., their contribution to the bottom line and the responsibilities they will fulfill

in the business. Finally, with each enumerated “Critical Issue” that is transformed into a

“Measurable Objective” the entrepreneur must identify, in his/her business plan, Strategies

(plans for achieving the objective) and Tactics (actions/steps taken to accomplish the plan) for

achieving each. For example, in the case mentioned above a Strategy for finding and retaining

talented employees may be to run an advertisement in a trade publication offering a base salary

plus commission for a position that is typically known, in the industry, only to be compensated

by commissions. The Tactics used would be to specifically identify the trade publication where

the advertisement is to be run, as well as, the run dates, size, cost, and copy of the employment

classified advertisement. Strategies and Tactics offer the detail that an investor is looking for

when reviewing the merits of a business plan. An entrepreneur must remember when writing

his/her plan that it is not only important to set measurable goals in the plan but also to

communicate, to those inside and outside the business, what those goals are and what the plan is

for achieving them.