Effective Business Planning
- Clearly define your business idea and be able to succinctly articulate it. Know your mission.
- Examine your motives. Make sure that you have a passion for owning a business and for this particular business.
- Be willing to commit to the hours, discipline, continuous learning and the frustrations of owning your own business.
- Conduct a competitive analysis in your market, including products, prices, promotions, advertising, distribution, quality, service, and be aware of the outside influences that affect your business.
- Seek help from other small businesses, vendors, professionals, government agencies, employees, trade associations and trade shows. Be alert, ask questions, and visit your local SCORE office.
Making the Most of Your Business Plan
- Take the long view and do long-term planning. Map out where you want to be five years from now and how you plan to get there.
- Write the plan yourself. You will learn more about your business by doing so.
- Think of your plan as a living document. Review it regularly to make sure you are on track or to adjust it to market changes.
- Share the plan with others who can help you get where you want to go-such as lenders, key employees and advisors.
- Understand that you might pay a price in the short run to obtain long-term business growth and health.
- Think of a budget as a useful tool-a written financial plan that helps you set goals and measure progress.
- Start by coming up with a sales revenue target. Make it your best estimate.
- Based on past experience, estimate your cost of goods sold (e.g., 70 percent of sales) and subtract it from the sales revenue to come up with your estimated gross margin.
- Forecast variable expenses (items such as travel and commissions that vary according to the level of sales) and fixed expenses (items like taxes and rent that stay the same, regardless of sales). Subtract these expenses from your gross margin to arrive at your estimated net income (before federal taxes).
- Break your annual budget into quarters and monitor your progress every three months to detect problems and make corrections.
Developing Policies for Your Business
- Think ahead. Establish policies before you need them. Doing so helps avert crises and awkward situations, and helps solve problems before they arise.
- Determine what policies you need. Some you'll want early in your business include a mission statement, as well as compensation, performance evaluation and employee policies.
- Get input from key employees, as well as from members of your advisory board, your board of directors, and/or your professional advisors and consultants.
- Communicate policies to everyone in your business.
- Review policies on a regular basis-once a year, for example-and revise them as necessary.