If you’re a new or long-time business owner, you’ve heard these words… “Do you have a business plan?”
It is one of the first questions a business coach will ask a new business owner client. And, it is one of the most awkward questions to answer. Today’s blog post will focus on a single Bible verse…
Proverbs 21:5 The plans of the diligent lead to profit as surely as haste leads to poverty.
If you follow this verse, there are two traits that you may want to model: 1) plans; and 2) diligence. Let’s take these two words and dig in.
I’m a business coach… and I do ask the question, “Do you have a business plan?” Why? A plan shows how much my business owner client understands about their industry. It tells me if they’ve tried to create path to succeed in their business. I look for five basic elements to a business plan: 1) Executive Summary; 2) Marketing; 3) Sales; 4) Finance; 5) Staffing; and 6) Execution.
The executive summary briefly introduces your company and what it does. This summary should be no longer than ½ page and it must detail your vision for your company. Include whatever details you require to solidify this vision in your mind and create a reasonable amount of motivation to investors or future stake holders to join in making your vision a reality. You can include details about: Annual Revenue; Profitability; Personal Situation; Number of Employees; Your role in your business; Customers you will be serving; How you will be making the world a better place; Or whatever is meaningful to you and your staff. Be concise and clear in this section. If you’re giving this plan to others, this may be the only section they read before deciding to read on. So, make it captivating and convincing.
The marketing plan will describe how you will attract customers to your product or service. This plan must include: 1) Market Segmentation; 2) Messaging; and 3) Marketing Tactics. Marketing segmentation describes the specific people in as much detail as you can muster. Market segments can include industry type, gender, ethnicity, geography, age, etc. Messaging is a brief tagline that describes the problem/solution combination that your company will provide your market niche. The final section is a list of three tactics that you feel will work best to attract your market segment with specific tactics.
The sales plan is best described as a sales process. And, your sales process must accommodate your prospective buyer’s buying process. Most buyers will not buy a product or service without thinking about their purchase. The larger the sale, the more education a buyer will need to make a buying decision. Once you’ve considered the objections a typical buyer has and what education they need to make the right buying decision, you will map out a step-by-step process that takes your buyer from interested prospect to either paying customer, or disqualified prospect.
The number one reason that small business startups fail is that they provide a product or service that no one needs. The number two reason that small businesses fail is that they run out of cash. A financial forecast is necessary to help you understand where the money will come from to fund your business. There are three basic financing options: 1) Your savings; 2) Debt; or 3) Investors. Regardless of which source you need, you must be able to describe in as much detail as practical how your business will generate wealth for you. This means that you will need to describe your prices, the quantity of sales, the gross margin, the direct cost, marketing & sales costs, expenses, and your net profit. If these words are foreign to you, take a business course at a local Business Development Center or use the tons of online training programs that are out there.
If you want a job instead of a business, you can skip this part. To grow a business, you cannot do all the work. If you’re boot-strapping your business, it is common for you to be the bookkeeper, the receptionist, the worker, and whatever else you need. As you grow, you will need to hire additional staff to complete each role. Your pricing structure must allow sufficient margin for you to hire and pay these folks a good wage or salary. Therefore, the staffing and financial plan must be linked. If they are, you’ll know who to hire and when to hire them based on the level of revenue you achieve. If you fail to do this, you will be in a position where you will not have enough money to hire the people you need; and you must increase prices when you do hire staff. You will avoid this trap by planning.
The execution plan is almost not a plan. It is a list of immediate tasks you must take to move your plan into action. This is the one section of your business plan that will never be complete. The idea of an execution plan is to get you to move from planning and into action. These tasks can be as simple as applying for a trademark or legally forming your company. They could be as big as leasing office space. In any case, this list must be immediately achievable and help you launch your new business.
The other word in this Bible verse is just as important as “planning”. Here’s the definition:
Diligent: having or showing care and conscientiousness in one's work or duties.
When a business coach asks a new business owner if they have a business plan, they are not only referring to a written plan. In fact, the written plan is the least of their concern. Diligence means that you have thought about your plan. You have acted out each step that you described in your plan. You did the math in your pricing and have a sense of what discounts you can give and how much your competition is charging for a similar product and service.
Diligence implies that you have thought about your plan enough that you will be able to put your plan into practice.
Haste Leads to Poverty
Proverbs 21:5 is not only speaking about planning, but also about the opposite of planning… which is “haste”. Planning is not easy. You must push your mind through uncomfortable areas of thought that are unfamiliar. You may not feel fully educated in each area. Frankly, you may not understand the relevance of each of the planning sections I just described.
The sad statistic is that 80% of new small business owners don’t plan. The other sad statistic is that 90% of small business startups fail to make it 5-years. I’m sure there are a few planners that fail; and a few non-planners who succeed. However, many of the small business failures are due to poor planning.
I hope you learned the basics of how to create a business plan. There are many resources out there that can help you create a strong business plan for your business. Whether you’ve been in business for ten years; or are just starting out; please make a business plan and update it at least annually for your business. If you need affordable business planning training, I offer Starting Your Business from Scratch for business owners who want to start their business the right way.
About me. I have been actively engaged in the energy efficiency, renewable energy, and energy conservation industry all my professional career from 1987 until now. I was a licensed Professional Engineering in six states and a Certified Energy Manager (CEM). I worked as a sales executive, energy engineer, sales manager, and entrepreneur. I started, grew, and sold my own Energy Service Company (ESCo) called Ennovate Corporation (1997 to 2013). I now coach business owners, engineers, and business development executives in the energy efficiency industry.