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You've decided to write a business plan, and you're ready to get started. Congratulations. You've just greatly increased the chances that your business venture will succeed. But before you start drafting your plan, you need to--you guessed it--plan your draft.
One of the most important reasons to plan your plan is that you may be held accountable for the projections and proposals it contains. That's especially true if you use your plan to raise money to finance your company. Let's say you forecast opening four new locations in the second year of your retail operation. An investor may have a beef if, due to circumstances you could have foreseen, you only open two. A business plan can take on a life of its own, so thinking a little about what you want to include in your plan is no more than common prudence.
Second, as you'll soon learn if you haven't already, business plans can be complicated documents. As you draft your plan, you'll be making lots of decisions on serious matters, such as what strategy you'll pursue, as well as less important ones, like what color paper to print it on. Thinking about these decisions in advance is an important way to minimize the time you spend planning your business and maximize the time you spend generating income.
To sum up, planning your plan will help control your degree of accountability and reduce time-wasting indecision. To plan your plan, you'll first need to decide what your goals and objectives in business are. As part of that, you'll assess the business you've chosen to start, or are already running, to see what the chances are that it will actually achieve those ends.
Close your eyes. Imagine that the date is five years from now. Where do you want to be? Will you be running a business that hasn't increased significantly in size? Will you command a rapidly growing empire? Will you have already cashed out and be relaxing on a beach somewhere, enjoying your hard-won gains?
Answering these questions is an important part of building a successful business plan. In fact, without knowing where you're going, it's not really possible to plan at all.
Now is a good time to free-associate a little bit--to let your mind roam, exploring every avenue that you'd like your business to go down. Try writing a personal essay on your business goals. It could take the form of a letter to yourself, written from five years in the future, describing all you have accomplished and how it came about.
As you read such a document, you may make a surprising discovery, such as that you don't really want to own a large, fast-growing enterprise but would be content with a stable small business. Even if you don't learn anything new, though, getting a firm handle on your goals and objectives is a big help in deciding how you'll plan your business.
If you're having trouble deciding what your goals and objectives are, here are some questions to ask yourself:
It doesn't necessarily take a lot of money to make a lot of money, but it does take some. That's especially true if, as part of examining your goals and objectives, you envision very rapid growth.
Energetic, optimistic entrepreneurs often tend to believe that sales growth will take care of everything, that they'll be able to fund their own growth by generating profits. However, this is rarely the case, for one simple reason: You usually have to pay your own suppliers before your customers pay you. This cash flow conundrum is the reason so many fast-growing companies have to seek bank financing or equity sales to finance their growth. They are literally growing faster than they can afford.
Start by asking yourself what kinds of financing you're likely to need--and what you'd be willing to accept. It's easy when you're short of cash, or expect to be short of cash, to take the attitude that almost any source of funding is just fine. But each kind of financing has different characteristics that you should take into consideration when planning your plan. These characteristics take three primary forms:
Almost any source of funds, from a bank to a factor, has some guidelines about the size of financing it prefers. Anticipating the size of your needs now will guide you in preparing your plan.
Believe it or not, part of planning your plan is planning what you'll do with it. No, we haven't gone crazy--at least not yet. A business plan can be used for several things, from monitoring your company's progress toward goals to enticing key employees to join your firm. Deciding how you intend to use yours is an important part of preparing to write it.
When you select clothing for an important occasion, odds are you try to pick items that will play up your best features. Think about your plan the same way. You want to reveal any positives that your business may have and make sure they receive due consideration.
For most of us, unfortunately, our desires about where we would like to go aren't as important as our businesses' ability to take us there. Put another way, if you choose the wrong business, you're going nowhere.
Luckily, one of the most valuable uses of a business plan is to help you decide whether the venture you have your heart set on is really likely to fulfill your dreams. Many, many business ideas never make it past the planning stage because their would-be founders, as part of a logical and coherent planning process, test their assumptions and find them wanting.
Test your idea against at least two variables. First, financial, to make sure this business makes economic sense. Second, lifestyle, because who wants a successful business that they hate?
Answer the following questions to help you outline your company's potential. There are no wrong answers. The objective is simply to help you decide how well your proposed venture is likely to match up with your goals and objectives.
John Jantsch is a veteran marketing coach, award winning blogger and author of Duct Tape Marketing: The World's Most Practical Small Business Marketing Guide published by Thomas Nelson - due out in the fall of 2006.
He is the creator of the Duct Tape Marketing small business marketing system. You can find more information by visiting http://www.ducttapemarketing.com.