Managers often react to the mention of business plans the same way they react to mention of tax returns: a headache. The headache comes for two reasons.
First, in order to have a good business plan the manager must do a great deal of detailed research and number-crunching. This is necessary in order to determine what it will cost to make the product or provide the service. What will it cost to ship in any needed components and to ship or deliver the finished product? What difference will it make whether the orders and sales are single item or volume?
Factors in considering overhead include such things as the amount and cost of advertising, marketing, materials, labor, interest, insurance, breakage, storage, taxes, warranty and packaging.
Second, each funding source has its own business plan format. No matter how a given business finalizes the business plan it will not likely be right for the bank or investor considering a loan, credit line or investment in the business. That means the business plan will need to be tweaked with applications to each funding source. Tweaking takes time and, once again, attention to many little details. In other words, there is no perfect business plan format universally accepted.
It would be a mistake to consider the development and updating of business plans as wasted time. A good business plan is far more useful to you in the management of your business than it is for the bank. The assumption is that each business has carefully considered the best course of action at the present time and for the future. A business plan is the writing down of this plan in terms of numbers, activities, cost and market considerations. The plan gives the business a well-thought-out and carefully recorded guide by which to conduct and evaluate its activities and to measure its progress. In theory the financing source is simply asking for a copy.
The business plan is your guide every day as you manage the operation. It is the most important document for your Board because the Board makes policy and gives advice based on the plan.
How to Avoid the Headache?
Beauty is in the eye of the beholder. In developing a business plan recognize that it grows out of strategy. It translates the business strategy into quantified and thus measurable actions and numbers. If the strategy is to make flower pots and sell them to flower shops within driving distance, the business plan details how many flower pots get made each day. It tells what materials will be used to make them, how much it will cost to make them, what size the pots will be, how many will be sold and what the profit or loss will need to be by certain points in time. This data in turn provides the basis to predict how much cash will be needed to run the operation and what cash flow will be required to pay the bills. Any person who has ever laid out a vegetable garden is already familiar with basic business strategy and business planning. It will cost so much to purchase plants, seed, fertilizers and garden tools. The plants will need to produce so much in order for the garden to break even. Compared to the cost of purchasing vegetables, the garden will be cheaper or more expensive than simply purchasing vegetables. Gardens intended to yield food for sale need to produce so much food sold at such and such a price to break even or yield a profit. The concept is simple but the devil is in the details.
The headache is avoided by recognizing that a basic plan based on a strategy is a big help, not a burden. Coaches recognize that a good game plan is a big help. They base the game plan on the abilities of the team players and the strengths and weaknesses of the opposing team. Making the plan involves detailed work but it is not a headache and it certainly is not a waste of time. Gardeners know this too. When you make a business plan in order to run the business well you are simply doing what coaches and gardeners do all the time! Strategy and planning are productive and rewarding. The headache only comes into play if you do not build in the time and effort required.
Entertainers and performers know only too well that practice is the secret of good performance. It takes planning about what to practice, when to practice, and how to recognize the needed results. Without a sound plan the practicing is hit and miss and the performance will not turn out well. Eddy Cantor is sometimes quoted as saying that it takes twenty years to make an overnight success. It does not necessarily take twenty years to make a business successful but to be sure, behind every successful business is a good business plan!
The best Christmas present any manager could give employees and all others who depend on the business for their livelihood is a sound business plan that is working well. And what about yourself as the business manager? What is your present? Less stress! As the commercial says, less stress is the gift that money cannot buy, it is the result of a good business plan.
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