Why Do I Have to Write a Business Plan?

I’m the “social work” type that believes in living in the here and now.  So when told I needed to formulate a complete business plan I balked like a stubborn mule.  After all I had managed several similar agencies and I was extremely good at problem solving issues on the fly.  I had a picture in my head of exactly how things were going to go and I didn’t need to put it down on paper. That was for sissies and bean counters.  I had always been a success and I knew I could make this a go just by strength of will.  Boy was I in for a rude awakening!

The community development grant loan I was applying for required a comprehensive business plan.  Their requirements included three years of projected financials, growth expectations, market analysis, and models of operation.  I learned more in completing that business plan than in any general business course I had taken throughout my college career.  It was hard, it was time consuming and it was worth every second I spent on it.  The most important thing I learned was how much I didn’t know. 

I started the process by searching the internet for “business plan template”.  For those of you looking at starting up a business please know this: Google is your new best friend.  I located several free templates and web sites that offered everything from one page simplistic templates to sophisticated, interactive help.  You must spend time exploring your options.  Do not choose the quickest, shortest, easiest route unless you are very experienced and have a startup or two under your belt.  You will be doing yourself a disservice and risking failure.  Do not choose the most extensive, comprehensive, technical site either because you will overwhelm yourself and either get bogged down and take far too long to complete your plan or you will simply give up on your dream.  Be like Goldilocks and pick the one that is “just right” for you and your new business.

Once you have picked the right tool it’s time to get to the real work of planning your business.  You must spend time doing the required research.  You need to define your target markets in a realistic way.  You need to figure out who your competition is.  You need to be honest about your strengths and weaknesses. You need to develop a vision that will make you stand out.  You need to realistically determine if there is a market share that will support your vision.  You need to get real and bring your dream down to solid bedrock or your dream will turn into a nightmare. 

Then it’s time for the financials. If you are math challenged find a friend who can help you.  I strongly recommend putting together Excel spreadsheets for your financials.  Learn Excel!  It will fast replace Google as your new best friend throughout the life of your business.  Having a basic spreadsheet will allow you to copy and paste and play with numbers until you come up with realistic expectations.  I ended up with three or four different formations.  Then I took the “worst case scenario” spreadsheet and halved the income and doubled the expenses.  This was the one I included in the business plan and the one the bank wanted to see.  They don’t care about pipe dreams.  They care about the absolute worst case scenarios. Be real, be conservative, and be pessimistic in your financial projections.  If you show the people with the cash that even in those worst case scenario situations you can make a go of it they will be more willing to trust you with an investment.  But if you go in with rainbows and unicorns in your financials they will simply show you the door.

It took time, it took humility, and it took taking a hard look at reality to put together a solid business plan.  But by the end of the process I had a very real picture of my dream and a much improved knowledge base to make it happen.  And that is the power of a good business plan.  Don’t avoid it.  Put the mule ears aside and embrace the process.  It will serve you well. 

 

Tami Jones is the President and CEO of Idaho Behavioral Health, Inc. in Boise, Idaho.  In addition to being a successful business owner she is a licensed clinical social worker with 20 years of experience in the mental health field as a direct provider and administrator.