Why You Need a Business Plan
Have you ever forgotten something important? I forget things all the time, like my toothbrush when traveling or what my wife wanted me to pick up at the store. It’s human nature to forget things, especially in today’s fast-paced world. So, I write down what I think I could forget and that reminds me about it.
What about money? Can a list help us find more money in the business? Yes it can. Write down where the money is and think about ways to make more of it. For contractors, this is called a business plan, and without a business plan, owners and managers forget what they need to remember to grow their businesses and earn more money.
You’ll never hear an owner say: “I’m planning to fail this year,” or “I have a good plan to lose money.” Many business owners don’t have a plan at all. They’re going through the motions of operating the business, reacting to issues and things that inevitably come up and affect the business and its profitability.
“I think that a business plan is important for a business and business owners,” says Mark Borst, president of Borst Landscape & Design, Allendale, N.J. “It makes the owner think about where the company was, where it presently is, where it is going and how they are going to get there. I view it as an annual checkup to take the pulse of the company.”
Have you ever stopped to consider how much money your business is worth?
It’s important to track the value of your business and know what it’s worth. A good business plan is helpful in keeping you informed of this very important metric.
If you have partners or want to bring in a partner, they’ll want to know your plan.
Your banker needs to know your plan, so when you want operating or expansion funds, they understand your business and why it makes sense to provide the funds. Employees, in particular your managers, need to know how you plan to grow the business and their roles it in. If and when you decide to sell the business, potential buyers will want to see your business plan.
Your plan should be a key element in your professional life, and the road map to your business operation. Successful owners always have a plan, and they regularly review and revise it as conditions change.
“For the business owner or senior managers I believe the real value for a company is derived from the process of developing the business plan, of obtaining input from managers or committees challenged with improving specific processes or goals and working together as a team to finalize the plan,” says Joe Janssen, vice president of business development, Servello & Son, Inc., DeBary, Fla. “A successful business plan is always a work in progress.”
Composing a business plan scares the heck out of most owners. Writer’s block happens the minute you begin, and before long the business plan idea is tabled and it’s back to working in the business.
Let’s review the segments of a plan and see how easy it is to fill in the blanks once a template is established. Here are the seven key elements of a business plan.
1. Executive Summary: Gives a quick read of the plan and the business’s general intention.
2. Industry Overview: Describes the green industry and what service providers do, growth expectations and trade group information.
3. Company Strategy: Identifies your operating strategy and how you’re planning to grow.
4. Management Structure & Bios: Identifies the management’s organizational chart and principal’s background
5. Competition: Tells how competitors effect the operation and what you’re doing to address competition and mentions national companies in your market so unfamiliar readers understand large companies operate in the area. This shows bankers and other interested parties that the industry is sustainable.
6. Risk Factors: Describes the risks the business faces, like weather, loss of key managers and other potential risks, followed by what you’re doing to address them.
7. Financial Information: Shows your past year’s financial statements and projections of the next three to five years.
I’ve started, bought and sold a number of businesses, and in every case a business plan started the process, aided in negotiations and led to a successful conclusion. If you’re operating without a plan, commit to completing your plan by the end of the year. It could become the most important and profitable action you’ll take this year. If you’re skeptical about the need for a plan, just ask your banker, accountant or financial advisor. The positive results that developing a plan will bring to the business are so strong and advantageous that they can’t be ignored.
Rick Cuddihe is president of Lafayette Consulting Co., a PLANET Trailblazer, and he works with landscape contractors to improve their businesses. Contact him at [email protected].