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Do I Really Need a Business Plan?

Writing a business plan not only helps you to establish whether your idea is a viable one but it also helps you to lay out a direction for the future of your company. Without it, your business could simply meander along with no real direction and with no means of measuring its success.

It may not be an easy process but going through with writing a plan could force you to think carefully about your business overall and whether the model will work. Once complete, you’ll have a much better idea of whether you can make your venture work and whether you still really want to go ahead with it. Before you invest your own time and money into any idea, wouldn’t you rather have done a plan first to make sure that you know it can work?

There is now software available which can help you with writing a plan so it does not need to be such a mind-boggling task. There are online sites and a whole host of self-help resources out there which will help you to draw up a plan and carry out an analysis of your proposed ideas.

To carry out just a quick assessment or executive summary of a business idea will only give you a very brief overview and will not go into enough depth about whether the business could be viable should any extenuating factors get in the way – and let’s face it, there will be many!

In your business plan, you can expand it to include critical factors such as contingencies should you need them. You can work other factors into it that needn’t be too complicated but will give you a good idea of where you might be in, say, five years’ time. It will help to focus your mind on your goal and show others how you plan to keep yourself afloat.

And once you have your plan, it is never lost. All good projects or ideas start out with a plan. The plan then changes as it goes along if need be and you can keep reverting back to the original plan to track and measure your successes or failures.

Of course, having a plan does not ensure success and some would argue that a full business plan for a small venture is not necessary; that your time would be better spent on getting your business up and running rather than worrying yourself with laborious documents. However, you can make your plan as minimal or as in depth as it needs to be, according to the size of your proposed venture.

But bear in mind that, as with any plan, it could be seen as a restrictor and actually remove the entrepreneurial spirit in which the business idea was first created. You should always remember than any plan can be broken, changed or amended at any time and that it’s important for small business owners not to lose the importance of free will.

So, ‘to plan or not to plan?’ – that is the question.

Business Planning and Business Plans – What’s the Big Deal?

Whether you are a veteran business owner, have recently begun your own venture, or are still in the dreaming stages, you have invariably spent many hours thinking about and envisioning your organization. While it is always exciting to try to realize your dream in your mind and to project that image into your future, the realization that barriers, stumbling blocks, and necessary “to-do’s” exist. These subjects range from broad to very specific, and can include questions such as:

  • Who is my ideal client?
  • What would be a good name for my organization?
  • What is my unique selling proposition (USP)?
  • How will I balance my work life with my personal life?
  • How big do I want this business to be?
  • Do I have the necessary resources? If not, where can I get them? If so, how do I most effectively utilize them?

The list goes on for pages and pages; indeed, there are numerous resources that outline these very details, and putting some time into exploring these ideas is always a smart move. For some specific ideas, check out some of the free articles on offer by MEG Enterprises.

The reasoning behind developing a business plan for businesses of all sizes can vary, but business plans are most often created for two primary reasons: as a management & planning tool, and to acquire funding for operational business needs.

Management & Planning Tool

If you are like many other small business owners, you are not only the owner of the company, you are likely also actively involved in the day-to-day operations as the President/CEO, the marketing department, the IT department, the HR department…the list goes on and on! One of the most important things to remember in trying to bring all of this together into a cohesive and efficient package is that planning is vital!

Many small businesses take a “fly by the seat of your pants” approach to operating their businesses. For example, let’s say that an excellent business opportunity arose for you, an opportunity that would net your business $5,000 over the next 3 months. However, in order to take advantage of this opportunity, you need an initial cash outlay of $1,000. Do you have the resources necessary to take advantage of this opportunity? If your answer is no, you may have been able to easily accomplish this goal by planning for such expenses in advance through a business plan. Even if having cash at the ready is not a viable alternative for you, you may have planned to have a line of credit available for such opportunities, knowing that in your field these opportunities do arise from time to time.

In a more broad sense, business planning helps businesses of all sizes to deal with the day-to-day needs of the organization by forcing the owner to weed through the operations of a typical work day. Business planning will assist you in understanding how to effectively market your business, how to understand and plan for financial stability both now and in the future, how to carry out your daily operations with a necessary level of routine, and so forth. Moreover, while unpredictable issues will certainly always arise, effective business planning will not only help you to navigate the predictable operations, but will also take these unpredictable situations into account. This will help you to deal with these issues with a level of comfort and ease, knowing that you have thought through and planned for such events.

In essence, here is a great way to think of superior business planning. Imagine you are taking a road trip from California to New York. No planning (“flying by the seat of your pants”) would involve you getting in the car and driving “East” on every freeway you come across. Adequate planning would involve mapping out your course, planning where to stay overnight, where to eat, sights to see, and so forth. This is a much better plan indeed. However, a superior plan would take all of these ideas to the next level by planning for “what if”: what will I do if I get a flat tire, if I run out of gas, if someone gets sick, or if I lose my wallet? You can see how the superior plan is clearly the best in most situations in that it allows for flexibility, plans for the expected and the unexpected, and allows you to spend more time enjoying the trip, knowing that you have all of your bases covered.

HELP…I Need Cash! (AKA Creating a Business Plan to Acquire Funding)

Another reason to create a business plan is to acquire funding. In today’s struggling economy, having access to cash as a small business is vital. In developing plans for this reason, a much more specific approach is taken. Here, the plan is created with a specific reader in mind: the lender. Whether seeking funds from a bank, an angel investor, or so forth, knowing your audience is vital.

How do you create an effective business plan in this situation? Well, simply stated, place yourself in the shoes of the person lending the money. What would you as the lender want to read in a plan? First and foremost, these individuals want to see that you have demonstrated the ability to repay the loan with the required level of return on investment (ROI) and within the required time frame.

These areas require that you present a strong case for your proposed financial expectations, grounded firmly in the supporting information of your plan, including marketing, market analysis, business operations, and so forth. Having confidence in your business and in yourself will assist you in demonstrating the potential for your company and in being able to deliver what your investor is looking for. Doing your due diligence and knowing the facts surrounding your business and your market will prove to be of great benefit when selling your business case, both in writing and verbally, to the lender you are seeking funding from.

So, How Do I Create A Business Plan? What Does It All Come Down To?

Although the term “business plan” conjures many negative images in the eyes of some business owners, taking a step-by-step approach will prove that creating a business plan is much less daunting than one might imagine. Although no two plans are exactly the same (the necessary details of the plan can vary between companies), the contents of a typical business plan include the following topics:

  • Executive Summary – Sell your business to your reader!
  • Business Overview – Giving a general summary of the business.
  • Market & Competitive Analysis – What environment are you competing in?
  • Marketing & Sales Strategy – How will you “win” in your market?
  • Organization Plan – How is your organization structured?
  • Financial Projections – Current status and future outlook.
  • Funding Sought (if required)
  • Key Milestones – What are your specific & achievable goals?
  • Critical Risks – What keeps you awake at night?
  • Appendix/Attachments

Does this look like a lot to you? Well, believe me, as you truly delve into the details of the plan and your business, you will be wondering why there isn’t more room for details!

The most important aspect of business planning (the “What does it all come down to?” part), however, is spending the time to do your research (“due diligence”) and critically thinking about these various aspects of your business. Of course, it is impossible to anticipate every detail simply by spending time thinking and writing; it is for this reason that plans are referred to and viewed as “dynamic”. However, the more issues and scenarios you are able to come up with ahead of time, the more prepared you will be to handle these as they arise.

So, in the end, I encourage you to realign whatever preconceived notions you may have of the business planning process and view it not as a daunting task or a necessary evil of running a successful business. Instead, view it as yet another opportunity, the chance to help make your dreams into a reality by mapping out the needs of your business, your customers, your employees, your suppliers, your community…and yourself!

An Engineering Business Plan is More Important in a Recession

Is your engineering firm meeting its goals in this recession? Do you have more business or less? When do you expect the economy to recover? If your company is like many other engineering companies, you were caught off guard at the beginning of the recession. Are you sure that the current and expected market changes are reflected in your business plan? These are all questions that need to be answered in your business plan; your company’s business road map.

Without a doubt most business owners know that they need to have an up-to-date business plan. All that is required of any business owner to keep the plan current is the time to review, analyze, and update the plan, which can be difficult. So if you have not already, now is the time to review your plan and periodically make modifications.

In a prolong recession a proficiently ran business is more important than ever. Professional engineers are extremely knowledgeable about their career, but are rarely the experts in operating their company’s. An engineer will have spent 8 to 10 years in college and post graduate training before being licensed as a Professional Engineer without ever taken one class in business.

When the projection of incoming revenues slow or stop coming in the door your first reaction is to find more clients from the same source and second to cut costs by downsizing. This may not be the right business steps to take. Usually the better action is to re-examine each of your markets and clients in those markets, and to determine if those markets change in direction is temporary or long term, and then to careful review your company’s services and products. Operating any business should be a constant review of the process of that business, and whether it is operating at its best. Mistakes in the operation of the business during the good times are easy to compensate, but during the not so good times the same mistakes can close the business. A careful review may also show that your company is relying on one market to heavily and may need to diversify into other markets.

The kitchen table sketch may have been the beginnings of an engineering business plan, but as the company continues to operate and grow, the business plan needs to be formalized and updated periodically. The engineering business plan is nothing more than an outline, summarizing how the company will operate to be a successful business. Within the plan there are estimates based on industry research and personal experience which determines how much the company can expect to profit. This is established by quantifying the amount of services and products to be sold minus the expenses. It is one of the business owner’s primary responsibilities to work on the business through the process of reviewing and updating the business plan.

A detailed description of the engineering firm’s direction and purpose is found in the business plan. Without a plan the company can and often will wonder aimlessly, and may eventually fail. A slowing economy can be very damaging to poorly structured companies whether they are large or small. These companies are usually not in a position to handle the changing market conditions, and end up closing their doors. The stronger companies are usually better managed with an operations plan in place to handle the ups and downs of the economy or the changing target market conditions. Companies following good business plans whether small or large tend to survive a recession, and are set to expand during the economy’s recovery period.

There are many resources on the subject of writing a business plan, including websites, computer software and books. Unfortunately most of these sources address the generic business such as retail or service businesses. Engineering is unlike any other professional service business or any type of business.

A very good resource is the United States Small Business Administration website http://www.sba.gov. According to the website, the minimal requirements for a business plan are as follows:

  1. Description of the business: What is the structure of the business, and what are the services and products it provides?
  2. Marketing: What are the potential clients and how will the business communicate with them?
  3. Finances: What are the expected revenues sources and what are the expenses? Also what are the potential profits and losses?
  4. Management: Who are the key personnel and who is responsible for the various functions of the company?

The best way to get through the recession is to have a plan. Now is the time to review your business plan, and, if necessary, revise some or all of the sections. Write out the strategies that will improve all four areas of your business. Next implement those strategies, and monitor their daily, weekly, monthly, and quarterly results. If the results are not meeting your standards, then make adjustments.