Gathering Information For Your Business Plan

A common problem people encounter when writing their business plan is finding information about their business industry and competitive companies. Fortunately, in recent years the Internet has made information gathering simple and easy, but sometimes the best information is found much closer to home, with real people, in real time.

Gathering Information For Your Business Plan

A common problem people encounter when writing their business plan is finding information about their business industry and competitive companies. Fortunately, in recent years the Internet has made information gathering simple and easy, but sometimes the best information is found much closer to home, with real people, in real time.



Always take a look at other businesses similar to your own, as a very good first step. If you're looking at starting a new business, you may well be starting one similar to one you already know. If you're doing a plan for an existing business, you are even more likely to know the business well. Even so, you can still learn a lot by looking at other similar businesses.


Look at existing, similar businesses.
If you are planning a retail shoe store, for example, spend some time looking at existing retail shoe store businesses. Park across the street and count the customers that go into the store. Note how long they stay inside, and how many come out with boxes that look like purchased shoes. You can probably even count how many pairs of shoes each customer buys. Browse the store and look at prices. Look at several stores, including the discount shoe stores and department store shoe departments.

Find a similar business in another place.
Find a similar business far enough away that you won't compete. For the shoe store example, you would identify shoe stores in similar towns in other states. Call the owner, explain your purpose truthfully, and ask about the business.

Scan local newspapers for people selling a similar business.
Contact the broker and ask for as much information as possible. If you are thinking of creating a shoe store and you find one for sale, you should consider yourself a prospective buyer. Maybe buying the existing store is the best thing. Even if you don't buy, the information you gain will be very valuable. Why is the owner selling? Is there something wrong with the business? You can probably get detailed financial information.

Always shop the competition.
If you're in the restaurant business, patronize your competition once a month, rotating through different restaurants. If you own a shoe store, shop your competition once a month, and visit different stores.
It takes a little hard work but by using the Internet and doing some research at local businesses, you should be able to gather all the information necessary for your business plan.

Business Plan Mistakes

Often you may hear about what a business plan consists of. While including the necessary items is very important, you also want to make sure you don't commit any of the following common business plan mistakes:

1. Putting it off.
Don't wait to write a plan until you absolutely have to. Too many businesses make business plans only when they have no choice in the matter. Unless the bank or the investors want a plan, there is no plan.

Don't wait to write your plan until you think you'll have enough time. "There's not enough time for a plan," business people say. "I can't plan. I'm too busy getting things done." The busier you are, the more you need to plan. If you are always putting out fires, you should build firebreaks or a sprinkler system. You can lose the whole forest for paying too much attention to the individual burning trees.

2. Cash flow casualness.
Cash flow is more important than sales, profits, or anything else in the business plan, but most people think in terms of profits instead of cash. When you and your friends imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be. We are trained to think of business as sales minus costs and expenses, which equal profits. Unfortunately, we don't spend the profits in a business. We spend cash. So understanding cash flow is critical. If you have only one table in your business plan, make it the cash flow table.

3. Idea inflation.
Plans don't sell new business ideas to investors. People do. The plan, though necessary, is only a way to present information. Investors invest in people, not ideas.

Don't overestimate the importance of the idea, particularly the importance of the uniqueness of the idea. You don't need a great idea to start a business; you need time, money, perseverance, common sense, and so forth. Very few successful businesses are based entirely on new ideas. A new idea is much harder to sell than an existing one, because people don't understand a new idea and they are often unsure if it will work.

4. Fear and dread.
Doing a business plan isn't as hard as you think. You don't have to write a doctoral thesis or a novel. There are good books to help, many advisors among the Small Business Development Centers (SBDCs), business schools, and there is software available to help you (such as Business Plan Pro, and others).

5. Spongy, vague goals.
Leave out the vague and the meaningless babble of business phrases (such as "being the best") because they are simply hype. Remember that the objective of a plan is its results, and for results, you need tracking and follow up. You need specific dates, management responsibilities, budgets, and milestones. Then you can follow up. No matter how well thought out or brilliantly presented, it means nothing unless it produces results.

6. One size fits all.
Tailor your business plan to its real business purpose. Business plans can be different things: they are often just sales documents to sell an idea for a new business. They can be detailed action plans, financial plans, marketing plans, and even personnel plans. They can be used to start a business, or just run a business better.

7. Diluted priorities.
Remember, strategy is focus. A priority list with 3-4 items is focus. A priority list with 20 items is something else, certainly not strategic, and rarely if ever effective. The more items on the list, the less the importance of each.

8. Hockey-stick shaped growth projections.
Have projections that are conservative so you can defend them. When in doubt, be less optimistic.

Sources of Financing

Because businesses have different needs than consumers, there is a much wider range of financing options available for business owners. The type of funding appropriate for your business and the availability of it depends on a number of factors, including the amount needed, the intended use of the money, the length of time you need the money for, the financial standing and credit history of the business, and often your personal credit score.

Perhaps the most important thing to know about business financing is that you need to plan for it in advance. If you wait until you've nearly run out of cash to try to get a loan, you may not be successful

Here is a summary of the major types of financing and what each type is typically used for.

Business Owner's Personal Savings
Most business owners launch their businesses using their own money. But startup time isn't the only time business owners dip into their own money to finance their businesses. Many business owners use their own savings or equity in their homes to help their businesses get through slow times or to provide some or all of the money for expansion and growth.

Friends and Family
Business owners have traditionally turned to friends and family when they need more money than they can provide or raise on their own resources. Friends and family financing may be structured as either as a loan, or as an investment, depending on the needs of the parties involved

Credit Cards
Businesses typically use credit card for startup needs, day-to-day office supplies, small equipment purchases, online purchases, and online advertising.

Bank Loans and Lines of Credit
Banks are the go-to source for many business finance needs. Although specific types of financing options may vary from bank to bank, a large commercial bank is likely to offer business lines of credit, term loans, SBA loans, commercial real estate loans, and other specialized services.

Trade Credit
Trade credit is short-term credit that is provided to you by companies from whom your business buys things such as inventory, raw materials, and supplies.

Equipment Leasing
If your business needs equipment, leasing is worth looking into. Open-ended leases let you buy the item at the end of the lease term for an additional payment; closed leases are like renting – you use the equipment for the term of the lease then give it back or get a new lease on newer equipment.

Receivables Financing
Receivables financing is borrowing against your company's receivables. The company pledges the receivables as collateral for a short-term loan. This provides cash to operate with until you get paid from your customers.

Factoring
In factoring, a third party (called a factor) buys the receivables from you at a discount and collects their money from the customer.

Angel Capital and Venture Capital Investors
These are outside investors who provide money to start or grow a business in return for partial ownership of the business. They usually plan on make money on their investment when the business is sold or goes public.

10 Tips for Successful Business Networking

Effective business networking is the linking together of individuals who, through trust and relationship building, become walking, talking advertisements for one another.

Keep in mind that networking is about being genuine and authentic, building trust and relationships, and seeing how you can help others.

Ask yourself what your goals are in participating in networking meetings so that you will pick groups that will help you get what you are looking for. Some meetings are based more on learning, making contacts, and/or volunteering rather than on strictly making business connections.

Visit as many groups as possible that spark your interest. Notice the tone and attitude of the group. Do the people sound supportive of one another? Does the leadership appear competent? Many groups will allow you to visit two times before joining.

Hold volunteer positions in organizations. This is a great way to stay visible and give back to groups that have helped you.
Ask open-ended questions in networking conversations. This means questions that ask who, what, where, when, and how as opposed to those that can be answered with a simple yes or no. This form of questioning opens up the discussion and shows listeners that you are interested in them.

Become known as a powerful resource for others. When you are known as a strong resource, people remember to turn to you for suggestions, ideas, names of other people, etc. This keeps you visible to them.

Have a clear understanding of what you do and why, for whom, and what makes your doing it special or different from others doing the same thing. In order to get referrals, you must first have a clear understanding of what you do that you can easily articulate to others.

Be able to articulate what you are looking for and how others may help you. Too often people in conversations ask, "How may I help you?" and no immediate answer comes to mind.

Follow through quickly and efficiently on referrals you are given. When people give you referrals, your actions are a reflection on them. Respect and honor that and your referrals will grow.

Call those you meet who may benefit from what you do and vice versa. Express that you enjoyed meeting them, and ask if you could get together and share ideas.

Tips for selling your business

Selling your business is usually a one-off event. Here are a few tips on making sure you get it right.


Prepare yourself and your business: Make sure your house is in order before you even start. Any prospective purchaser will want to see accurate financial and other management information as part of the process, so make sure things are ready, well-presented and bang up-to-date. This will give would-be purchasers confidence that you’re in control of your business and run a tight ship. If you need help to sort things, get it – you only get one shot at convincing a potential purchaser. And prepare yourself too; you’re going to have to share information, justify things on which you wouldn’t normally be challenged, and take negative comments in your stride. You may even have to stick around to ease the transition – few business owners are able to walk away as soon as the ink is dry. The better prepared you are, the less stressful the experience will be. Many members of The Alternative Board (TAB) join several years before they intend to sell, specifically to learn from fellow board members who’ve already been through the sale process.

Have a realistic value in mind and know your walk-out position: There are lots of formulas for valuing a business. But, no matter how many numbers are cranked into various equations, price usually depends on profitability. So think about your numbers. Many small businesses show little profit. That's good for tax purposes, but bad for determining the value of what you've built. You want to show the business in the most positive light, so it can be well worth restating your financial results to reflect what you, the owner, take out in terms of salary and benefits. This can be especially useful when dealing with a buyer who would operate the business himself. The actual multiple used varies from industry to industry and business to business and, generally, the more strategic the purchase, the greater the multiple. So, do your homework, know the market and be realistic (or you’ll probably be very disappointed).

Don't count on a cash sale: More than half of all small-business owners finance the sale of their businesses through deferred payments and earn-outs. You could find yourself effectively lending as much as 70 per cent of the purchase price to the new owner, so minimise the risk by checking them out thoroughly and agreeing what information you will receive to monitor your position going forward.

Keep it quiet: Employees can become nervous and start to look around – and good, experienced employees are part of the assets that are transferred in a business. You need to ensure that business continues as usual.
Find a good adviser to act for you, who understands your business and your objectives. Seek recommendations from other business owners who’ve sold their businesses successfully – they’ll be only too pleased to share their experiences. At TAB, we find it’s the one topic that every business owner is interested in. And, no matter how many times they’ve been through it, there’s always more to learn.