Power in the Results of Your Plan!
Published August 31, 2009 | 
I need to make one statement right away and get it out in the open, and that is the fact that no business or strategic plan is ever 100% dead on accurate, but of course having no plan is absolutely never the right thing to do either, so let’s look at the actual results of the business compared to those projected in the business plan.
Another seemingly contradictory statement is that most plans are wrong and yet extremely vital, it’s an unexpected and surprising thing to hear from someone who forecasts and prepares business and strategic plans for a living, especially for those that have never developed and put a plan together, so after making a statement like that where else do we have to go, except to the very core of what business and strategic planning is.
Let me start out by saying that those who are deeply involved in plans prepare projections that many times are incorrect, and of everyone I know, only a few even came close in predicting the steep plunge in the global economy last year in the summer and fall of 2008, 
so it goes without saying that those who are deeply involved in business planning processes around the world have been going through a lot of changes, adjustments and corrections, and multiple reviews and revisions, a classic true learning experience for everyone.
So you see why my opening statements about needless ineffective business and strategic plans, and yet their importance should start to make sense, and as we look ahead to the rest of the 2009 and further ahead to 2010, many upbeat forecasts that are being questioned, are in the review and revision process and starting to reflect the realities of the global economic situation, which always brings up the question why do business and strategic planning in the first place, is everyone just wasting their time developing plans and forecasts?
The answer should quickly become obvious that although the results are inaccurate at times, how we can determine where we are, if a map hasn’t been produced to show us how we got there in the first place and of course, where we are going.
If and when you look at your plan prepared last year, and of course the results should be greatly different from what actually took place, you would compare the two in detail and look not only where the differences are, but where the greatest differences exist, for example, where expenses were tied 
to sales, where sales performed as expected, and look for how all the numbers were supposed to tie together, not just why they didn’t, and many times contributing factors that exacerbated the economic impacts can be identified, and those factors can be planned for and possibly eliminated as adjustments are made for the future.
And If you are like the many thousands of global entrepreneurs and organizational leaders that did not have a business or strategic plan, then this might be a really good time to get the process started in order for you to develop and have a much clearer view of your future business, and you can start by making some simple projections for sales and revenues, costs and expenses, and at this time don’t worry about whether they’re wrong or not, just try and make sure that you check each month to determine where and how, and in which direction the numbers were incorrect so that you can make necessary adjustments as a result of the information, and this whole process should bring you much closer to the action of what is taking place in the local, national, and global markets, and increase your awareness of the actions you need to take to increase your success.
By implementing the review process on a monthly basis, if you are wrong you are only wrong one month at a time, and as you use the plan’s comparison to actual results and associated analysis to see more closely what is happening exactly, your adjustments will improve, become more accurate, and the future results will be much more in tune with market activity, and you should begin to see monthly improvements.
These planning and analysis steps will increase your analysis skills, and put you in a better position to forecast more accurately when the markets should finally start to improve, and they will at some point, and you will be able to use what you learned in the process to see the signs, anticipate what will take place, and plan your actions accordingly.
So although the results of planning may be wrong and inaccurate, it is still a critical key component to an Entrepreneur’s or organizational Leader’s strategies for success, and an essential tool for successful global Entrepreneurs, as they learn in addition to preparing an initial business or strategic plan, an important part of the process is making necessary changes and adjustments, ultimately determining how to recover in the most effective and efficient manner, and how would you know how to recover if you didn’t prepare the business and strategic plan in the first place.
How to Structure the Business Plan Financial Projections
Published August 28, 2009 | 
Creating financial projections for your business is both an art and a science, and although investors prefer to see cold, hard numbers, it is difficult to predict with great accuracy what you expect your financial performance to be three years down the road, especially if you are still raising capital, but regardless, a short- and medium-term financial projection is a critical part of your business plan if you want the serious investors’ attention, and even if your business plan will only serve as a blueprint for managing and monitoring your business, it is imperative that you make financial projections, since the financial projections can be an effective guide to future business decisions.
Financial projections can be intimidating, but however, they are less a matter of mathematical aptitude and more a matter of your knowledge of your business, the industry, and the market, and financial projections are most often viewed as the most 
critical part of the business plan by investors, lenders, shareholders and other stakeholders with a financial interest in the potential future of the business and its projected growth and return on investment (ROI).
The financial projections section of the business plan should be thought of as simply quantifying the effects of what was presented in the plan narrative, although the projections are concerned with the future don’t think of the projections as merely a prediction, instead of the projection should be thought of as goal-setting with respect to revenues and expenses, and it always must be remembered that we cannot predict the future and yet this is precisely why planning is necessary, because we can make plans, that set expectations and goals.
Projections should at least include a list of required funds and their uses, a sales forecast of at least monthly for the first year, and quarterly for additional years, a variable cost of sales analysis, a fixed-expense operating budget, a projected profit and loss statement, and possibly a projected cash flow statement, balance sheet, and breakeven analysis.
You should list out exactly how much money you need to make your plan a reality, and your listing should break these costs down into Fixed Assets and Working Capital. Fixed Assets are property that usually has some sort of long-term value, and Working Capital is money that will be used to finance the short-term operations of the business.
For your sales forecast don’t let the fear of prediction stop you from arriving at projected revenue figures, as every business sells units of something, whether it be hours, projects, products, services, etc. Simply set goals for the numbers of units you believe you can sell taking into account any seasonality factors, and finally, multiply these 
units by your average established a prices and the result is your sales forecast in dollars. Each fundamental assumption that you make needs to be documented in this section since the assumptions themselves can be more important than the final numbers.
Variable costs are those cost incurred every time a sale is made and they of course vary with sales, while they are the direct cost associated with the producing or selling your products and services, which include the cost of goods themselves, any direct labor associated with creating the product, or any materials that go into the product itself.
Fixed expenses do not vary with sales and are usually tied to some contractual arrangement or indirect cost of doing business such as rent, salaries, loan obligations, insurance, and advertising, and you should develop a monthly fixed expense budget for the year detailing these amounts and when they occur.
A profit and loss statement commonly called the “P&L” combine’s the revenue, variable cost, and fixed cost amounts in order to see if the business is operating at a profit or at a loss, and this statement tries to line up all revenues and expenses to determine the profit potential of the business.
Finally, as mentioned before, financial forecasting is as much art as it is science: You’ll have to assume certain things, such as your revenue growth, how your raw material and administrative costs will grow, and how effective you’ll be at collecting on accounts receivable, and it’s always best to be realistic in your projections as you try to recruit investors for equity-based capital, and any uncertainty in the future industry trends should be reflected in the information and associated assumptions from revenue, to costs, to payroll, to operating expense, and to the bottom line/profit, and remember to always maintain a conservative approach to the projections and you will eliminate most surprises that might occur once actual operations commence.
How to Structure a Business Plan and Narrative
Published August 27, 2009 | The first thing I need to point out and emphasize, is that there are no required formats for a business plan and with good reason, but there is however, a fairly common structure that most business plans use as a skeletal framework. 
In order to provide a context and to the scope of your business plan, you should identify the time period for which the plan will focus, be it a one year, two years, three or more, this time constraint is necessary in order to provide a window of context for your thinking and decision-making.
First of all, think of a business plan as a story, a story that explains how a business works, and when a business plan doesn’t work, it’s typically because it fails either the narrative test or the numbers test, two questions which simply ask “Does the story makes sense?”, and “Does the story add up?” A business plan is therefore usually broken down into these two test sections, first, a written section typically called the plan narrative, and second, the numbers section, typically referred to as the financial projections or feasibility, and even though separate, 
the two sections must be completely entwined, which is where the business plan problems surface by the two sections failing to relate and tie information together.
The narrative of a business plan is usually broken down into three major sections including first the business description section, second the market strategy section, and third the management and operations section. The business description section simply describes attributes about the business itself and should include company mission/the purpose, company vision/dream with the deadline, and the section should also include current business status and description of future plans. Along with the business description, information about the industry should be included indicating the chief characteristics and trends, and finally the product and service description section along with proprietary features and future development plans.
The market strategy section documents all of the activities surrounding the most important function of your business, the marketing, which addresses the questions of what you sell and how you sell it, and should include a market analysis with target market and market trends along with the growth potential, competitive analysis with competitor profiles, market niche and market share, and a comparison of strengths and weaknesses. Market strategy also includes cost, differentiation, focus, pricing strategy, distribution strategy, service and warranty policies, and promotional strategies including social media strategy, advertising, public relations, personal selling, and sales promotions.
The management and operations section of your plan is critical, and many times closely focused upon by potential investors and lenders, because it describes who will manage the business and how they will do so, including the description of how you produce the products you sell, or the services that you deliver, and of cour
se, basic details of how the day-to-day operations of the business are conducted. The management and operations section of your plan should also include the management team listing including education, background and responsibilities, and the ownership structure of the business, whether sole proprietor, partnership, S corporation, LLC, etc., and a strategic partner and supplier discussion along with human capital and personnel needs discussion, and finally insurance and risk management discussion and facilities overview.
Questions a Business Plan Must Answer
Published August 26, 2009 | 
Many Entrepreneurs and businesses have already been able to develop and implement clear, concise business strategies critical to successful, efficient and more profitable operations, but other businesses and Entrepreneurs that have either ignored or refused to consider developing a business plan for many different reasons, far outnumber them.
The Entrepreneurs and businesses that fail to plan (plan to fail) have also failed to consider that developing a business strategy doesn’t have to be restrictive (a common fear), and can be really as flexible and simple as they prefer, especially when first starting the planning process.
Following are questions and issues that need to be addressed as part of a well thought-out, clear and concise business plan, and of course other issues specific to the individual business project will also need to be addressed as they are identified.
What does the business stand for now and what will it be in the future?
- This question addresses the questions of mission and vision for the business.
- It should not only address what the business is but also what the business is not.
What does success look like?
- This is about goal setting, and if you don’t know what success looks like then you might never find it.
- Goals should always be set for specific time frames.
- Ask yourself: What do I have to accomplish by the end of this year to achieve my definition of success?
What do you make?
- Every business must create “value” and ultimately make something.
- This is about the basic “value proposition” of the business.
How do you make it?
- This question is about your craft, systems, and your way of doing business.
- It addresses your inputs, processes, and outputs of the business.
How do you sell it?
- While making something is about the creation of value this question is about marketing or capturing value.
- Many entrepreneurs are great at creating value but many failed to capture it by dropping the ball when it comes to marketing execution.
- As management author Peter Drucker wrote, “There are only two functions of business: Innovation and Marketing.”
Who are the customers?
- This question addresses the people that the business services.
- Most successful Entrepreneurs and small businesses operate in turbulent and uncertain markets catering to small niches of customers that a big business does not want to serve.
- By doing this they are able to stay off the competitive radar screen of the big companies that can’t afford to take huge gambles on such uncertain market segments.
What can you or business contributed to the world that no one else can?
- This is about the understanding of what your “one big idea” is.
- It involves a deep passion, understanding of what you can be the best in the world at, and a sufficient economic engine to drive it.
Who will manage the business and how?
- Who are the people who will operate and grow the business and how will they be organized? This speaks to the organizational structure of the business, as well as, the legal structuring.
- Having a great idea is never enough. Greater ideas are common, but the people who can successfully implement are rare.
How are profits generated and where do they come from?
- At the end of the day, the business must be profitable or it is not a business.
- You should be well versed in the revenue and cost drivers that make business profitable.
- Without profits the company cannot grow and will never be anything more than just a lifestyle business.
What stands in the way of success and how will you overcome it?
- This is about your future story, the enemy and how you overcome it and ultimately win.
- Up until now, you have been addressing questions that concern your business model which is essentially your business in the vacuum.
- But sooner or later, your business will confront internal forces or external competitors that will potentially keep you from achieving your goals.
- Dealing with this reality is, in essence, your strategy.