Business Plan II

On January 3rd (2008) I identified the two basic reasons for a business plan; create a map of your business, and preparing for a loan. In that post I briefly discussed the steps to create a business plan ending with keep it simple and well edited. Then I ended with the link to Microsoft’s business start-up kit. Today I’m going to return to return to the business success diagram from January 2nd, and continue the business plan discussion. In this post I’m going to identify and briefly discuss the remaining six reasons to create and follow a business plan.

Analysis – By analyzing the previous year’s plan, a contractor can easily and quickly see if he’s making headway, losing headway, and merely mired somewhere in the middle. Analysis of the previous year’s financial projections against the actual end-of-year results says it all.

Setting Goals – Setting business (and personal) goals is the contractor’s New Year’s Resolution. Goals should realistic and attainable, they should be specific and performance, not outcome related. Guidelines for setting goals:

  • Express as a positive statement
  • Measurable (include dates)
  • Prioritized by importance
  • Written (hold your own feet to the fire!)
  • Immediate, small and achievable

Prioritize Opportunities and Acknowledge Threats – Perform a SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis and develop a separate strategy to deal with each.

Review and Set Budgets – Setting budgets for an upcoming year involves an in-depth review of your last year’s financial successes and failures. Ask your CPA to sit with you and point out the incidentals you may miss in your own analysis . . . you pay him/her for their financial expertise, not just for your taxes at the end of the year.

Reorganize Responsibly – Based on your financial and SWOT analysis identify and reorganize your responsibilities to your clients, employees, trade partners, and yourself.

Establish an “Action Plan” – Do you need more and better marketing? Is it time for an influx in capital for growth? Is your mark-up adequate to maintain profit margins? Are your trade partners and vendors contributing to your success? With these and other conclusions create a plan to make all the elements of your business click.

What’s Subprime mean to me?

Plainly said, it should mean nothing, but that’s simply not the case is it? This should be the best of times for remodelers and builders. The cost of money is still at an all time low, material is readily available, there’s an available workforce, and you’re a better than average contractor . . . just ask anybody. Trouble is Mr and Mrs. Anybody doesn’t live here anymore . . .

We, contractors, are taking a pretty hefty hit over events which we had nothing, absolutely nothing to do with. For the most part we don’t sell real estate nor generate loans for home buyers. It’s clearly not our fault that unsophisticated mortgage seekers smitten with ill-place ego buy more than they can afford, but we are paying the price just as if we were, somehow, at fault. If we have a fault, it’s not educating clients better, through better marketing, but that for another time.

Contractors with a head for business and the ability to continue to market will survive. Those lacking one or both will probably not, but there may still be a light at the end of the tunnel. By that I mean we are seeing more and more contractors, especially remodeling contractors, scaling back their operations, cutting their overhead by getting rid of in-house cabinet shops, and though it’s hard to do, lying off employees, choosing to be paper generals.

Most of these contractors are maintaining decent margins, working fewer hours, and just as importantly, satisfying their clients. Instead of fielding a plethora of employees in expensive vehicles, they are hiring one or two smart, talented, dedicated project managers who know how to get the job done with fewer hiccups, and keeping sophisticated clients, those with 7, 15, and 30 year conventional mortgages, happy.

So who’s doing the actual hammer swinging? Yes, that would be the contractors of yesterday who didn’t have the back log of clients in-waiting are now today’s subs, or they’re doing installs for big orange and big blue getting the mouse’s share of the pie.

But I digress . . . there have been tough times in the past, there will be tough times in the future. Some will survive by adapting to the times, rearranging their business model, and doing what’s smart, not expedient. As my son is fond of saying, “Sleep, food, water . . . they’re only a crutch.”

Business Plan I

This discussion will focus on creating a quick and simple business plan. But first, we’ll take a look at why a business plan is important and the benefits gained from having one. As time goes on, there will be many more posts about this critical business tool.

Why are business plans important?

There are two basic reasons for a business plan.

  • It is a map of how your business will begin and grow.
  • It’s the single document bankers and lenders use to make the decision whether you get a check or not.

Creating a Simple Business Plan

So . . . you’re going to the bank for a loan. Your loan will depend on your business plan.

The average business plan of a few years ago was much longer and more complex than what we see today. That’s because business plans have become more common among bankers and investors who read them.

The trend today is to focus on the fundamentals with good projections and solid analysis. An easy to read format is more important than ever. If you want people to read the business plan you develop, keep it simple. Keep all the plan elements straightforward and short. Not to be confused with simple thinking. It just gets your point across quickly and easily. To quickly get the reader on your side, write it so it’s easy and fast to read.

Consider these specifics for a business plan to present to a lender or investor.

It’s not a novel. Effective business writing is easy to read. People will skim your plan—then they’ll focus on the numbers.

  • Short sentences are easier to read.
  • Buzzwords, jargon and acronyms make it harder to read.
  • Use bullet points for lists,

Brevity is king. You can probably cover everything you need to convey in 20 to 30 pages of text plus another few pages of appendices for projections, resumes and supporting data. There are exceptions. A plan for a remodeler or a builder should contain photos of recent projects, testimonial letters from past satisfied customers, and appendices containing research that add weight to your assumptions.

Charts and graphs. Make your important numbers easy to find and easier still to comprehend. Summary tables and simple charts highlight important numbers. The related details belong in the appendices.

  • Use two-dimensional bar charts to show, at a minimum, sales, gross margin, net profits, cash flow and net worth by year.
  • For market share and market segments, use pie charts.
  • Gantt chart tasks and milestones show the major tasks and milestones effectively.
  • If a chart is used reference it in the text.

Look and feel is queen. Aside from the wording, make the look of your text simple and inviting.

  • Use only two fonts, not three, not four, and a single font is even better for the text.
  • Use 11 or 12 point size. This document is Calibri 11-pt. Avoid small fonts.
  • Use abundant white space. Use 1-1/2 line spacing and generous margins.
  • Use the spell-checker. Use the spell-checker. Use the spell-checker.
  • Have someone else proofread and edit carefully!
  • Double check that the numbers in your text and tables match.

Remember: Keep it smart. Keep it simple. Keep it brief and make sure it is well edited.

More: For more help visit Microsoft’s Business Start-up Center at