Everyone loves a road trip. Imagine throwing your family in the car for some summer fun with nothing but your luggage, snacks, and a reliable GPS. You may have an idea of where you eventually want to end up, but for the time being, you simply enjoy the journey and input your first destination. Like a road trip, your business needs the right tools to get where you want to go even if you don’t necessarily know your end destination yet. This week, we talk about building your business plan. Think of this plan as your road trip map or a building blueprint. Especially with the finances of your business, it’s important to have enough metaphorical gas in your car to get you as far as you need to go as you journey into the sunset.
The Purpose of Your Plan
Imagine a person who loves making cupcakes. Let’s call her Jane. Jane loves making cupcakes, and after selling them among friends at her kids’ basketball games and cheer camp, Jane decides to open a business. She takes a loan from the bank, rents a space in the mall, and starts making cupcakes by the dozens. Fast forward five years later. Jane is still working at her cupcake shop, but she’s finding her profit margin continuously decline as costs begin adding up mysteriously. Jane wants to grow her business, but she isn’t sure of her next steps. She calls Adam Kae and sets up an appointment. We walk her through her finances and help her develop a plan of next steps Jane can take to help her business thrive toward greater success. We work with her to build a sustainable plan for her business, and we help her build a projection plan toward growth.
Your business plan gives you a common goal to continuously work toward while you run your business. This doesn’t mean we encourage you to open ten cupcake shops at once, but rather consider what type of scale you might need if you wanted to open ten cupcake shops in the future. Putting forth these ideas and procedures now will help your business smoothly grow toward your goals. This also depends on your industry and the surrounding environment, too. Especially when the time comes for business growth, it’s important to consult outside resources to help you develop the best plan for success.
Building Your Plan
In the Arizona Capitol Times, Coddington (2006) introduces 4 questions to ask yourself before building your business plan:
1. What offering do you provide, and what need does it fill?
When we say “offering,” we’re referring to both products and services. These are the offerings you provide to your customers. Every offering you create should fulfill your customer’s needs in one or many ways.
2. Who will buy your offering?
Once you understand the need your offering fulfills, consider whose needs it fulfills. Think about different segments of markets you could serve and how your offering serves them best. Are there changes you can consider making to better fulfill their needs?
3. How will you reach your potential market?
Now that you know what you’re selling and who you’re selling it to, how will you tell them you exist? There are many different ways to market your product, and Adam Kae & Associates has resources that can help you discover the best initiatives for marketing your offering.
4. What financial resources do you have to start your business?
Lastly, it’s important to understand what types of resources you can use to cover startup costs until you begin making a profit. Are you taking out loans? Are you working with investors? Whatever methods of raising capital you choose, Adam Kae & Associates can help you manage your resources. If you’re a nonprofit organization, we can help you establish procedures for handling donations and allocating funds. Stauss also had a few suggestions for your credit card, such as timing your usage accordingly to offset interest costs. This can add up over time and save you hundreds!
Formatting Your Business Plan
After figuring out the basics of your business plan, next is learning how to format your plan accordingly. Rathod and Mohamedbhai wrote How to Format Your Business Plan, and we felt it was a great guide for any business or nonprofit organization.
Projections
We’ll first start out by figuring out where X marks the spot. Every business owner has different visions of what success looks like, and your projections are a mathematical way to really bring those visions to life. Start by projecting the first 1-3 years; your first focus will likely be moving toward break-even to start profiting from operations. Next, you’ll list your current customers (particularly if you have fewer large clients rather than many small ones) and your current assets. Next, we approach costs. List your fixed costs and variable costs. Remember that these can change over time, and think about ways you can mitigate costs. AdamKae & Associates can help, too!
Profit Margin
Decide on your profit margin. This depends on a myriad of factors including whether you sell goods or services, the cost to produce your offering, employee costs, current/long-term assets, current/long-term liabilities, and more! Not sure where to start? Adam Kae & Associates can help you find the right profit margin to meet your long-term goals.
Current Standing
Next, we’ll look at where you currently stand. What types of assets do you have? What types of liabilities do you owe? Once again, thousands of factors can be noteworthy. Adam Kae & Associates can help you search across your industry to find the right KPIs (key performance indicators) to use when talking about your business.
Risks
All of our clients at Adam Kae & Associates receive a SWOT analysis to help establish their standing in the big world of business. We also do an environmental analysis to discover what types of outside factors might affect your business. It doesn’t stop there, either! We’ll keep you updated on any changes that may create risks in the future and help you plan ahead.
Stay Dedicated to Your Plan
So far, we’ve worked hard together to create a business plan to set you up for success. You can’t run a marathon if you don’t train, now we talk about how to stick to your plan! You don’t have to be a finance pro, but there are smaller goals you can set for yourself. Fullen suggests a few goals including understanding where you:
Break-even
Make profit
Use profits toward new expenditures
Grow your business
To stay dedicated to your plan, keep track of all of your finances. Yes, all of them, including every business receipt and mile you drive! These can add up over time and help you create the most accurate profile of your business. Also, good tracking makes it easier for you to cut costs and invest in revenue-generating initiatives. Not sure where to start? Adam Kae & Associates can provide guidance on how to analyze your finances and use that information toward positive growth.
Conclusion
Just like spring cleaning, it’s important to start with small goals and celebrate your successes! Your business won’t grow overnight, but having a set plan will help you stay on track as your business thrives. Adam Kae & Associates can help you each step of the way by creating the best financial strategies to meet your goals according to your vision for your company. Contact us today for a free consultation!
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Resources
References
Rathod, S., & Mohamedbhai, Q. (2016). A Checklist for Writing Your Business Plan. Family Advocate, 38(3), 16-17.
Coddington, J. (2006). Writing a business plan. Arizona Capitol Times, p. 1.
Fullen, S. (2005). How to Write a Great Business Plan for Your Small Business in 60 Minutes or Less. Ocala: Atlantic Publishing Group.
Strauss, S. (2008). The small business bible : Everything you need to know to succeed in your small business.