Gordon Smith, Business Specialist of the Small Business Development Center at Clovis Community College has a knack for educating others on the importance of having a business plan; which can be a predictor of business success or failure. Read on as he expounds on the process of planning for a business:
Happy New Year.
2011 is right around the corner and it means another fresh start. Possibly it’s time to start a new business based on a great idea. A good place to begin is to write a detailed description of what the business will be.
Compile financial projections for at least three years, followed by supporting documentation. This business plan will serve as a tool to keep the business owner on track and answer any questions lenders or investors may have.
Part of the planning process should include not making the common missteps new businesses make. These include a lack of experience in a given field, lack of operating capital, lack of accounting knowledge, and a lack of good credit – just to name a few.
Any entrepreneur can profit from someone else’s mistakes if they are aware of the many negatives that cause a business to fail. If a business were to ignore its competitors, overstock its inventory in relation to its volume of sales, grow too fast, or choose a poor location, it may fail. Other examples include businesses that provide poor customer service, treat their employees badly, and are slow in paying their suppliers.
All businesses, new or existing, should have a strategy mapped to ensure ongoing success. The owner should maintain constant vigilance for new competitors in the marketplace, potential increases in expenses, and the need to upgrade fixed assets.
A good financial strategy is to frequently monitor financial statements, maintain a manageable inventory and keep cash in reserve in case of a shortfall. While it may not be as obvious as poor customer service, the business that did not have this strategy will have something that is obvious: a sign that reads “Out of Business.”
A great man once told a hostile crowd, “Let’s don’t think of all the reasons we can’t, let’s think of all the reasons we can.”
That was the beginning of great turnaround for his community. This concept holds true for small businesses.
The entrepreneur’s great idea should be followed by a comprehensive business plan. The entrepreneur will next arm themselves with knowledge and experience, become an expert in accounting or hire someone who is, and adhere to sound business principles.
Sandra Taylor-Sawyer is director of the Small Business Development Center at Clovis Community College. Call the center at 769-4136 or visit www.nmsbdc.org/clovis/