The Business Journal, April 14, 1997
Clear road map puts a business on right path; business plans identify objectives. (Strategies) I. Satya Sreenivas.
Whether it's a mom-and-pop store on the corner or a tech startup in a garage, a business plan has been a common prerequisite for anyone wanting to establish their own business.
Ê The plan works as a strategic tool that helps crystallize a nebulous vision and acts as a road map, identifying necessary steps that help a small-business owner along the way to success.
In today's complex and competitive world, a business plan is more than a projection of the positives of the proposed business. Professional investors view such rosy scenarios with skepticism.
Even if you are investing your own money or have friends or relatives with deep pockets who may not demand a business plan, experts suggest you piece one together.
"A common misconception is that a business plan is solely a document to attract investors. There is nothing farther from truth," said Mike Hildreth, a partner in the Palo Alto offices of accounting firm Ernst and Young in charge of entrepreneurial services.
"The important thing is that a business plan helps an entrepreneur deal with issues that are critical to success. It brings out the strengths and weaknesses, helps [identify] the competitive scenario and evaluate opportunities and threats."
A complete business plan can bring out perspectives that until then were not obvious; identify weaknesses and potential threats; and act as a speed breaker of sorts in decelerating your ideas that are zooming at the speed of light in your mind.
"A business plan is a road map to success. It documents details such as where you are, where you want to be, how you want to get there [and] what must be done to get there," said Elza Minor, director of the Silicon Valley Small Business Development Center in San Jose.
Funded by grants from the Small Business Administration, Mr. Minor's center offers consulting services in several areas, including help in preparing business plans for prospective entrepreneurs.
The first step in the long haul of starting and succeeding in a venture is preparing a business plan. It is not a task that should be delegated to an assistant or a friend unless they are also stakeholders in the business.
Seeking professional help may be a good idea if you are entering a highly competitive business segment or pioneering a new activity, according to experts.
"Professional help may cost you anywhere from $3,000 and upwards. Also, there are several community and government funded, not-for-profit organizations, such as ours, that help entrepreneurs in preparing a business plan free of charge," said Mr. Minor.
Whether you do it yourself or enlist professional help, researching and compiling information is an important prerequisite for a good plan. Much of the information needed is available from public sources, including local libraries, chambers of commerce, industry associations and the Internet.
While researching and compiling information is important, the critical factor is interpreting and analyzing that information to your specific needs.
Also for entrepreneurs, who are accustomed to "menu driven" software packages, there is help available for preparing a business plan. Most of these software packages are available from several retail stores for less than $100.
For actual preparation, Mr. Hildreth of Ernst and Young, suggests a six step process to develop an effective business plan.
* Identify your objectives and evaluate your product or service, as well as the competition.
* Find a balance between what you know, what you want people to know and what people need to know from a business plan.
* Prepare and review an outline that addresses critical areas.
* Write the plan with essential financial information.
* Prepare an executive summary.
* Update your plan as factors change.
The importance accorded to a business plan varies according to the target audience it is intended for and their objectives and evaluation criteria. A community lending organization may not be as stringent as a venture capital firm. Banks, experts said, fall somewhere in between.
"Venture capitalists are inundated with stacks of business plans. The executive summary is perhaps the most critical part of a business plan aimed at venture capitalists," said Mr. Hildreth. "It is essential for the executive summary section to stand out and make a compelling impression."
Some organizations demand a business plan depending on the kind of venture that is being pitched.
"For existing businesses we do not necessarily require a business plan. But for start-ups we need a business plan," said Eric Weaver, executive director of Lenders for Community Development.
The San Jose-based community lending organization is funded by 20 community banks that targets minority- and women-owned businesses.
As the business environment is dynamic, it is paramount to have built in flexibility in the business plan.
Starting from macroeconomic factors such as rising interest rates to changing demographics of your neighborhood, any and every event has the potential to impact your business.
As things change you need to change your tactical game plan while the vision and the strategy remain more or less the same, experts said.
The following are a few software packages that help entrepreneurs prepare a business plan:
Satya Sreenivas is a freelance writer based in Union City.
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