Up and Running:

Browsing and searching last night, I discovered “Why You Need a Business Plan” by Colleen Debaise on the Wall Street Journal’s website. This is a good, strong post and a good reminder. Her five reasons:

1. Identify your company’s strengths and weaknesses.
2. Figure out how much money you’ll need.
3. Get clear direction, which can help eliminate stress.
4. Summarize for lenders, investors or partners.
5. Evaluate the market for your product or service and size up the competition.

My personal favorite is No. 3, particularly the phrase “help eliminate stress.” It’s not as if the business plan eliminates uncertainty, but business planning does manage and reduce uncertainty by laying things out where you can see them more easily (like cash flow, for example). The interrelationships between the different parts of the business are not all intuitive.

Point No. 4–summarize for lenders, etc.–bothers me. Too many people miss the benefits of business planning because they don’t need to show anything to anybody else. If that’s your case, look at points 1, 2, 3 and 5.

That link is “Why You Need a Business Plan”–WSJ.com

This is a lively and easy-to-listen-to audio piece that covers business planning very well. It’s a discussion between Jim Blasingame, Small Business Advocate, and Kelle Olwyler, author of Paradoxical Thinking. Both of them are right on target about business planning in the real world, for real small businesses.

This is not about the academic formal business plan, but business planning to run businesses.  And, yes, I may very well be influenced by the fact that they’re agreeing with things I’ve written here and elsewhere. And Kelle’s list of myths sounds a lot like one I would have written (obviously because she and Jim are both smart and know what they’re talking about).

Olwyler’s business planning myths:

1. No time to plan:

Jim calls this a prescription to fail. Having no time to plan means failing to run your business well. Planning saves time.

2. Once you have a plan it doesn’t change.

Of course a plan changes, because assumptions change, and reality changes. A plan should be flexible and expect change.

3. The fact that things will change makes planning a waste of time.

This one is very closely related to the first two, of course, but it’s worth setting apart because you hear it voiced in these terms often. “Why bother to plan, since things change?” That of course misunderstands the relationship of planning to change: planning helps manage change. As the pace of change increases, planning becomes more, not less, important.

4. Plans are too big to implement all at once.

Very nicely put, and I have to admit, this is one that I’ve never heard before, and never written about; although it seems obvious as soon as you think of it. Olwyler points out that business plans aren’t implemented as the whole thing all at once; you implement a plan one piece at a time.

I posted here last Friday about the new business planning tutorials posted on the (relatively) new business.gov information site for small business and entrepreneurs. I’d like to point out a special section of that focusing directly on the problem of forecasting sales for a new business.

I get that question a lot: “How do I forecast sales for a new company?” Or a new product, or new service, of course. A lot of people make the implicit assumption there that if you don’t have data on past sales, then you can’t forecast. In the illustration here below, you see part of the video where we look at how you would forecast a new restaurant–just one example–using the specifics of the chairs and tables available during prime meal serving time.

The three videos covering sales forecasts take a combination of only about 20 minutes to watch. They cover the standard structure, a simple example, and a lot of tips on how to develop a sales forecast for a new business.

The way that site works, you can select from 11 different portions of the business plan tutorials. If you’re interested in the sales forecast portion, browse down the page and find the ones shown here.

I’m pleased to say that the business.gov site is hosting my  Business Planning Tutorials, a collection of 13 videos I did for the site about business planning–soup to nuts, top to bottom. For the benefit of entrepreneurs and business, these are presented free.

Although I do cover the classic formal business plan, I’m happy to say that my emphasis in this series is on the business planning process, a tool for all the rest of us who don’t have a business plan event (like getting financed) to use to run our businesses better.

I also like the way that business.gov presented the series as 13 separate links on the same page, so you can look at the topics and see what interests you. You don’t have to take it one by one, or in any preset order.

If you’re at all interested in business planning, whether or not you need a business plan document to show to outsiders, I hope you’ll drop by the tutorials page at business.gov/start/business-plan-tutorials.html. It was a lot of work, for me and the team at business.gov that put it together, and I’d like to think it’s very useful. You don’t have to go start to finish in order, either. If you have just four minutes to spend, click on the “Form Follows Function” link and try that one. It’s my personal favorite.

I liked Why You Need a Business Plan, a nice piece by Colleen DeBaise in yesterday’s Wall Street Journal. She has a lot more detail than I’m showing here for each item, based on a very useful five-point list:

1. It forces you to identify your (and your company’s) strengths and weaknesses.
2. It helps you figure out how much money you’ll need.
3. It gives you clear direction, which can help eliminate stress.
4. It will serve as a resume when you seek lenders, investors or partners.
5. It makes you evaluate the market for your product or service and size up the competition.

I particularly noticed point three there, in the middle of the list, with its note about clear direction and helping to eliminate stress. Colleen explains:

As a business owner, you often have to juggle multiple roles–everything from bookkeeper to CEO–and that can leave you feeling distracted, disorganized and overwhelmed. A document that outlines your mission and plans for the future can prevent overload, help you set realistic goals, keep you on track and boost your productivity.

I’d also add a sense of the step-by-step process, breaking things down into more manageable pieces. And having numbers to use in tracking progress.

I noticed that four of those points (No. 4 excepted) apply equally to new businesses and existing businesses, and whether or not you’re looking for business loans or investment.

And also that only point No. 4 requires a fully formed, edited and polished business plan printed out and made available to outsiders. For the rest of those benefits, you can work with a plan-as-you-go business plan that lives on the computer.

And in all cases, the benefit comes from living with the plan, keeping it up to date, revising as actualities and assumptions change, and using it to manage your company.

(Photo credit: Gabi Moisa/Shutterstock)

I have to admit bias squared with this post, because I like Ramon Ray, the author, and he’s congratulating Business Plan Pro, which is my work, on its 15th anniversary. Still, Ramon makes this point very well:

We all know that when applying for a loan and seeking venture capital funds you simply have to have some sort of business plan. But we often forget about one important audience, ourselves. A business plan is not only needed for third parties involved with providing funding to us in one shape or another, a business plan is an important, strategic document to help guide our growth. Like a good road map on a trip, it helps us know where we have been, where we are and where we are going.

That’s from Business Plans Are Not Just for Startups on Ramon’s excellent blog Smallbiztechnology.com. If you don’t follow Ramon there and as ramonray on Twitter, well, you ought to. He’s a true expert in the subject.

(Photo credit: I captured that picture from Ramon’s Twitter profile)

You don’t have to do a formal business plan to get the benefit of business planning. Why not start the planning process today; or, if you’ve done a plan in the past, reinvigorate the planning process. Real planning is modular, and iterative, not step by step. Here are some things you could do today.

• Set a review schedule now. When are you going to double back and look at results? Put a date on it.
• Develop assumptions. List them. 
• Review or develop your strategy, the heart of any plan. How are you different, what are you better at? Who are you selling to, and who isn’t your market? What are you not doing, and why is that important?
• Review or develop milestones: dates, deadlines, activities, budgets, and who’s responsible.
• Develop your basic numbers, and write them down: sales forecast, expense budgets.

And don’t feel compelled to do all of these today if you can’t. Do just one. Pick a card. Start anywhere, and get going. One step at a time; and you choose which step.

So, I do follow my own advice. Yesterday I posted here about how putting video on your site is relatively easy. So today I’m posting this video here. I did it last weekend. I confess; I was motivated in part by wanting to do something with my new FlipHD video camera.

The river seems to drown more people in the slow deep inviting part than in the crashing and splashing white water part. Similarly, unexpected Cash flow problems are more likely to catch the growing company that’s enjoying sudden growth than the declining company that knows it’s in trouble.

Here’s my video explanation of that, as posted on YouTube on Sunday. By the way, you can click here to go to the YouTube original, which includes an HD option.

Here’s a case for discussion. You be the judge.

Mary comes up with a great idea for an iPhone application. She works on it for three months in her spare time. She develops sketches and designs, trying to figure out how it would work. She looks at other iPhone applications doing related things.

About three months into it, her enthusiasm has waned a bit, but she’s still thinking about it. She’s spent maybe 10 to 20 hours on it so far. Her best friend suggests she talk to Ralph about it. She doesn’t know Ralph, but her friend does. They meet for coffee. Ralph is a programmer. He works for a company in town doing web programming. He’s also an enthusiastic iPhone user and has been thinking about taking an online course on programming the iPhone. Ralph is excited, and his excitement rekindles Mary’s excitement. They agree to be partners in a new business based on this initial iPhone application.

Four months go by. Ralph takes Mary’s initial idea and starts developing. It turns out, as he gets into the code, that what Mary imagined isn’t quite possible on an iPhone. Ralph revises the idea radically, makes it practical and develops a prototype. Mary meets with him three times, they talk, she accepts his changes begrudgingly. At this point Mary’s total hours have gone to 15 to 25, but Ralph has worked a lot, probably 120 hours, on the programming.

At Ralph’s suggestion, he and Mary take the prototype to Terry. Both of them know Terry, but neither knows him well. Terry has been through a failed startup, has a business education and is looking for a startup to do again, this time the way it should be done. Terry’s skill is mostly marketing, but he knows how to develop a plan and seek investment. Terry does a business plan and networks with local business development groups to find angel investors. They win an opportunity to present to an angel investment group.

Another three months have gone by. Mary has now put in more like 40 hours, Ralph 250 hours, and Terry 120 hours.

The three of them meet to plan their approach with angel investors. Ralph wants to quit his job and work full-time on the new thing but needs to get paid. Mary doesn’t want to quit her job but wants to stay involved; she’s not quite sure how. Terry wants to lead the new company as soon as he can get financing.

The business plan indicates it’s going to take $250,000 to develop the business for the first year, after which it will probably need another $750,000 to become cash-flow self-sufficient.

During this meeting, Mary and Ralph and Terry come to an extremely awkward realization: They’ve never really talked about who should own how much of this company, much less how much they are willing to offer to investors in exchange for $250,000.

So what do you think? This is a typical case.

1. How would you suggest that Mary, Ralph and Terry divide up the 100 percent ownership of the company now, before they go to the angel investors. Who owns how much?
2. What do you think of the management team here? Ralph and Terry both want to work full-time on the business when there’s money to pay them. What titles should they take? How much salary?
3. How much of the company should these three offer to the seed investor for $250,000?

I like this piece called “Entrepreneur Chic” at Latina, written by Kenrya Rankin Naasel. She has a nice breakdown of the startup process into eight steps. I particularly liked the first and second steps. Here’s her list:

1. Pick an Expertise. I like this a lot. After deciding what you like, she says:
   

   Next comes your single most important decision: making sure that there is actually a market for the thing you love to do. That’s exactly what Gladys Benitez-Reilly did when she started Viva Spanish! Language Programs, a company that teaches Spanish in schools and organizations in Cleveland. “It won’t feel like work if you’re passionate,” she says. “I took a look at my skill set and figured out what service I could provide that could be profitable and fill a need.”

2. Write a Business Plan. She adds:
   

   The biggest mistake [Marcia] Pledger sees people make with their business plan is not writing one at all! “We operated with no real plan for years,” Benitez-Reilly admits. “If we’d gone through the process, we might have defined our own direction, rather than relying on luck.” And don’t just stuff it in a drawer when it’s done. “Things don’t generally go as planned,” Pledger says, “so it’s critical to update it as things change.”

3. Make It Official. That’s the name, the registration and so forth. Another quote:
   

   Take care when picking a name. “This is crucial, as it’s the face of your business,” says Liliam M. Lopez, president and CEO of the United States Hispanic Women’s Chamber of Commerce. Ask yourself three questions: Is it easy to remember? Does it give an idea of what you do? Is it already being used? You can figure out the first two with the help of friends; for the third, do a trademark search on United States Patent and Trademark Office’s site (uspto.gov).

4. Get Your Financing Straight
5. Be Sure to Insure
6. Spread the Word
7. Know the Customer
8. Learn How to Adjust

There are, of course, a lot of other lists around and other step-by-step guides; but this is another useful one. Particularly starting by choosing an expertise, and with planning.

We’re sort of back to normal at Palo Alto Software now, after the big push to create our own sort of stimulus package for our state last week.

I posted about this here last week. The idea was that we decided to do something to help our state with its unemployment problem–in Oregon we have the second highest unemployment rate in the country–so for one day we gave away our premier Business Plan Pro software to anybody in Oregon who wanted it enough to go to one of 84 locations and pick up a download card.

The Eugene, Ore., Register Guard, the daily newspaper in our town, has the story.

I hope it doesn’t seem like total self promotion–I’ve tried to avoid that as much as possible on this blog–but hey, tomorrow Palo Alto Software is going to give away thousands of copies of Business Plan Pro (and not a light version, the upscale, premier version) for free to Oregonians who want it. I would like to think that’s newsworthy, even if it’s my company.

The video here is my talking for slightly less than three minutes, my summary of what happens tomorrow. If you can’t see it for any reason, please click here to go to the Youtube source.

And for more information, here’s the link to the page at Palo Alto Software that explains what we’re doing and provides a map of the 85 locations (mostly town halls and chambers of commerce, no commercial locations–it really is a free giveaway) where people can go tomorrow to get the software.

It’s just for the one day, tomorrow, July 1. For any Oregonian 18 years or older who goes to one of those locations to collect a download card.