by Jack Warkenthien
Starting or managing a small business is hard work. It takes time and a lot of personal commitment. It also takes a great deal of planning to overcome the odds that are heavily stacked against success. Over 80% of small firms fail within the first five years.
What is it that makes a small business succeed or fail? There is no easy answer or guaranteed formula. However, most experts point to three major keys to creating a profitable, sustainable enterprise:
- Effective leadership skills
Access to cash for survival and expansion
A well-thought-out business plan
A good business plan is a dynamic document that captures vital information regarding your business – where it is now, where you envision taking it in the future and the activities you propose to get there. An effective plan does the following:
- Establishes long term objectives and strategies
- Nudges you away from the tactical day-to-day challenges in order to concentrate on the big picture.
Encourages you to set specific and challenging objectives and determine creative ways to achieve them.
- Provides an important management tool
- Like a road map, a plan charts a route to your final destination and allows you to measure progress toward it.
- Helps attract key employees
- Prospective employees will be more likely to accept your offer if they understand and support your company goals.
- Provides a pathway to obtain financing
- A comprehensive plan is essential if outside funding sources are needed.
It provides potential investors or creditors with the background information and financial projections they need in order to make a sound business decision.
- Helps obtain customers and strategic alliances
- A solid plan will reassure potential customers and partners that you have the capability to deliver on what you promise.
If you already have a business plan, continue to refine it. If you don’t, plan to create one – this month!
Now, it’s crunch time! You have 20 minutes to persuade a stranger to lend you money or invest in your business. It’s now or never; and your company’s future rides on the outcome. Is your business plan up to this kind of challenge? While business plans vary greatly in length and scope, winning plans share several ingredients. Here are eight characteristics of successful business plans:
- Clear, Realistic Financial Projections – Bank loan officers and investors often start and end their review of your plan, here.
Detailed Market Research – Demonstrate that you know your customers and the problems you are solving for them. Know the size of your market and the trends.
Detailed Competitor Research – Everyone has competitors, and you have to know them and respect them in order to run a company effectively. Get their pricing and promotional materials, know how big and successful they are, and learn everything about their product or service.
Leadership, Leadership, Leadership – You lead people and manage things. If you have holes in your leadership team, start lining up people to come on board and include mention of them in your plan.
A Killer Summary – A great summary starts with a statement of what the company is seeking and continues with a clear description of the market, the company’s leadership, and proposed solutions. Keep it short — two to three pages at most.
Good Formatting And Clear Writing – The first requisite of a successful plan is that it be interesting to read, well written, and smooth-flowing. Write short paragraphs, and use bullet points whenever applicable.
Keep The Plan Short – Fewer than 40 pages is a good goal. Long business plans are a turnoff. If it’s too long to look inviting for you to read, why would anyone else be interested?
Design For The Bottom Line – If you are seeking investors, don’t just talk about the present– project where the business is going. It’s also important to show that you have invested in the company. Don’t ask someone else for money if you haven’t put your own in first.
Well, is your banker pulling out the checkbook? Back to the drawing board!
Jack Warkenthien, CEO, NextStep Solutions. Email him at [email protected] or call him at 832-344-6998