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The Business Plan – From the SBA Training Network

March 29, 2009

The following is a transcript from the U.S. SBA’s Small Business Training Network:

  

Announcer:  You are listening to the SBA Small Business Training Network, your small business resource.  I’m Ron Johnson.  If you are thinking about starting or expanding a small business, having a good business plan may be the difference between success or failure. 

 

So what is a business plan?  Well, today we will be discussing developing a business plan, but just as a builder will not begin construction without a blueprint, eager business owners should not rush into new ventures without a business plan. 

 

Don Martin, a Business Counselor and Trainer from the Pennsylvania Small Business Development Center at Kutztown University, is here to explain why it is important to have a business plan and how to go about creating one.  But remember, you do not have to do it alone.  Across the country you will find SBA offices and its resource partners, small business development centers, SCORE – Service Corps of Retired Executives – and women’s business centers to help you compete in the marketplace. 

 

And when it comes to developing business plans, SBA’s Small Business Training Network offers free courses on this topic and more than 40 other free courses targeted to improving small businesses through its virtual campus.  You can check out the campus at www.sba.gov/training.  So today, let’s get started.  I would like to welcome Don to the program.  How are you, Don?

 

            Don Martin:  Yes.  Thank you, Ron, for having me today on behalf of the Kutztown Small Business Development Center.

 

            Ron Johnson:  So Don, the first question our listeners would like some insight, why is business planning so important to prospective or existing small business owners?

 

            Don Martin:  I think to the small business owner, business planning is the process itself is one of the keys that will ultimately determine their success or their failure.  We have done recently some research that demonstrates that just by going through the process, the business owners themselves begin to really understand the whole idea of working on a business, not just in a business. 

 

It is the best tool you have to help you get investors.  It is required if you are going to the bank.  I always utilize the business plan with my employees, so I have kept them informed about our vision, our mission.  Today, Ron, more than ever, a business plan is a vital tool to making a business run successfully.

 

            Ron Johnson:  What is a business plan?

 

            Don Martin:  A business plan is a written document that communicates to your banker, to your investors, to your employees.  It clearly outlines your vision, your goals for your small business and simply put, it tells your story.  We emphasize in business planning today that it is critical that the reader understands the passion you have for your business and more than ever, perception is reality.  A well-crafted business plan creates the perception that we have got a successful business in the making.  So the business plan is, today, more than ever, vital to you being in business and staying in business.

 

            Ron Johnson:  Does the plan have to be long or professionally drafted?

 

            Don Martin:  The answer to that is no.  What we have learned is at Kutztown SBDC, we put on a four-part business planning program.  We blend that with online learning, and what we tell the business owners is you must write the plan.  We can help because the process of them struggling through and building the business plan, the more they do that, the more successful they will be. 

Today, with help from the small business development centers from the SCORE chapters, from the women centers, there are many organizations out there poised to help the entrepreneur to get that plan written.  So again, we do not need to… years ago you used to spend money $5,000, $10,000, $15,000 to get somebody to write a plan for you.  The problem was it became their plan, not yours.

 

            Ron Johnson:  Which businesses should prepare a business plan?

 

            Don Martin:  A short answer to that is everyone needs to prepare a plan.  We have many clients.  A third of the clients that come to Kutztown SBDC in our website are already in business but because their business is changing because of trends – cost of energy is one example, the global market – suddenly they need to sit down and again re-plan.  “What is our product?  What is our service?  How are we going to market it?  Are the numbers working?”  So more than ever, existing businesses and start-ups are all in the process of writing the plan.

 

            Ron Johnson:  Don, what do you need to consider before you begin writing a business plan?

 

            Don Martin:  I think the key things that we work with our clients on before they sit down to write that plan, I always ask a really critical question, “What is it that makes your small business unique, the product or service you are going to offer?  How are you going to differentiate yourself in the marketplace?”  We want them to think about that.  We talk to them about the target market.  Who are you going to be able to sell your product and service?  What are the demographics?  What are the psychographics of that? 

 

We walk them through exercises to help them so they begin to understand that, again, unless we understand our target market, we will not have a successful plan.  And of course the key to marketing is always how am I going to be able to reach my target market?  Am I going to use ads?  Am I going to use the yellow pages?  Is it the newspaper?  What about a website?  How do I make that website?  So that is the marketing question. 

 

And finally, integrated into marketing, there is always a very simple one:  If I have this product, what price can I sell it at so at the end of the day, there is a profit left for the business owner, and we call that the financial component of a business plan.

 

            Ron Johnson:  Also Don, what are the components of a business plan?

 

            Don Martin:  Generally today, the overview would be… a critical one is always the executive summary.  We have to crisply, concisely show the passion, show the uniqueness of the product, show that there is a target market, show there is a financial, and so an executive summary is key.  And then generally we get in to the business description itself, again that listing of products and services.  Then what you want to do is show that we have market analysis that shows us that this product or service has a target market at the price we want to charge. 

 

We pool all of that together and what we have created then is the narrative of the business plan.  What we tell our clients as kind of a rule of thumb, half of a business plan is really a marketing plan.  Again, that narrative for us, we figured out it runs about six pages and sometimes that can run 12 pages in length.

 

            Ron Johnson:  So the first part of the plan gives the background of your business.  What comes next?

 

            Don Martin:  Next, to no surprise, are the areas that really ultimately lead to the critical success and the making and breaking of the business.  First is how am I going to operate this business?  The operation and the execution of a business plan is what make you successful.  Investors and others need to know what is the management profile, what are the skills that the management team brings to the table, and how is that related directly to the business you are going into. 

 

And the final part of a business plan is the financial part of the business plan where we really outlined and developed the cash flow, income statements, pro formas that really communicate to a banker and investors over these next three years.  This is where this business is going to go from a financial perspective.  Wrap it all together and you have what today would be a business plan that could be used for the banker, for the investors, or for the employees.

 

            Ron Johnson:  Don, you have given our listeners a lot to think about.  Clearly, developing a business plan is your road map to success in the business world.  For more information on writing a business plan or to locate a local SCORE Chapter, Small Business Development Center, or Women’s Business Center, go to www.sba.gov. 

 

I would like to thank our guest, Don Martin, a Business Counselor and Trainer from the Pennsylvania Small Business Development Center at Kutztown University, for helping us understand the basics of developing a business plan. That is it for this program. 

You have been listening to the Small Business Training Network.  I’m Ron Johnson.  [End of transcript] 

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One Comment leave one →
  1. Bridgette Mongeon permalink
    March 30, 2009 1:14 am

    Great article. I am looking forward to doing an interview with SCORE in the future. every business should know about SCORE and the SBA. I wanted to share these new videos that I am putting together for those interested in going into business. Simple step-by step videos on thinking and planning and doing. The first video titled The Art of Business and The Business of Art- Video #1 The Beginning can be found here http://www.youtube.com/watch?v=EwrTaMCAdJo The next one is Planning for Your Pony, and I think you get the idea. By the time everyone watches video number 4 they will have all of the research for their business plan. Of course I have already planned a video titled SCORE a mentor. Can’t wait to start on it. Here is a link to video #1

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