Have you prepared a business plan for 2014? If you haven’t, you’re not alone. I know of no research revealing the number of business owners who create business plans. Personal experience and conversations with peers indicate the percentage is in the low, single digits.
However, considerable research supports the value of such plans. Scott Shane, professor of entrepreneurial studies at Case Western, writes in a www.NYTimes.com blog that writing a business plan helps in a number of ways. Rather than enumerating, I will sum them up by saying they improve the odds of business success. Regardless of what performance measure the researchers look at, writing a business plan has a positive impact on the likelihood of success.
So why don’t entrepreneurs write plans? Some think it is ignorance, particularly those new to business. I personally doubt that explanation because so many programs and other resources devoted to helping business owners succeed almost universally encourage planning.
Perhaps a more likely theory is related to the Nike motto of “Just Do It.” Writing a plan doesn’t feel like an action step to those entrepreneurs. They want to get the doors open and start serving customers.
I’ve seen many entrepreneurs suffering from denial. They don’t want to know or face the facts a business plan may reveal. The plan may even show a business should not be started or a business now operating is doomed. Late last year I, worked with a client to accept the fact his business plan showed the market was too small for success. Although he did not like the news, he was grateful to learn before he invested – and lost – his capital.
Can an operating business get past the business plan block? Perhaps. Think about writing a “business growth” plan. A growth plan is similar to a business plan. However, it focuses on expansion and making it happen. It feels a little more action-oriented. It also has the advantage of addressing a key concern of most business owners.
A growth plan describes expansion opportunities and states specific financial goals broken into appropriate time units, such as weekly, monthly, quarterly, etc. It includes a marketing plan detailing capital, staffing, equipment, inventory and other needs to implement the plan. The last component is a cash-flow plan showing when cash must be expended and when income is expected to come in. The cash-flow plan is the test of whether the plan realistically can be expected to succeed. If cash flow is not acceptable, the plan must be modified or scrapped.
No one has a crystal ball, and no one can control the future. Therefore, plan to review and revise your growth plan on a regular basis. Use your growth plan to guide and direct your staff. Involve your employees in developing your plan to obtain their commitment to it.
One advantage of limiting your planning to growth is it is less formal and thus less intimidating than the typical business plan. It is bare bones, containing what is needed to plan for growth and no more.
Bowser@BusinessValueInsights.com. Dan Bowser is president of Value Insights Inc. of Durango, Chandler, Ariz., and Summerville, Pa.
