Basic Thing To be Successful in Business is A Plan
Most of the small business owners I deal with really know their craft. They know what materials to use, which vendors offer the best terms, which customer is most likely to complain, and so on. They're also pretty good business people. They understand controlling expenses, tracking labor and material, and pricing their product to make a profit. They work hard and are justifiably proud of the results.
Their business plans, though, all too often sound like "If I build it, they will come." That may work in the movies, but it stands as much chance for success as a plan to install a tonneau cover that doesn't include the model number of the truck.
A business plan isn't really about what kind of work you're going to do or how much shop space you need. Those are elements of it, but they are so minor that they're almost footnotes. There are five basic components:
1. Business Description - A short statement about why the business exists and what it hopes to accomplish. Generally, the more specific-and shorter-the better.
2. Marketing Plan - Answers the questions about how the business will be successful. Who is going to buy the product or service? Why? What need does it satisfy? How many potential customers for it are there? How often will they buy? What are their competitive alternatives? What price will they pay? How will they know about it? How will you get it to them?
3. Financial Plan - Shows the expected financial results of the marketing plan. How much income will be produced? What net worth will be generated? Who will receive that income (you or the bank)?
4. Cash Flow Plan - The step-by-step instructions for generating cash and keeping it. How will the working assets be acquired? When will operating cash be needed? How soon will profits appear? What happens until then?
5. Management Plan - Describes the shop owner or manager's role in the business. Who will do what? What are their qualifications? How much training expense and time is required? How much time will be devoted to production, marketing, and administration? It also includes contingency plans for events like natural disasters, up- and downturns in the economy, and competitive changes.
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