Q: Why is the process of developing a business plan as valuable as the plan itself?
People tend to gravitate to the areas of running a business that they like, and give less attention to more difficult or less enjoyable aspects. Unless you have the discipline to fully research and prepare a business plan, you tend not to deal with the details necessary to meet goals, or measure your progress toward meeting them.
Q: What are the risks of attempting to build a small business without a business plan?
I call them the “overs”—being overconfident about your prospects and overlooking the details. You also need to consider different scenarios and build that flexibility into your plan. Otherwise, you’re flying by the seat of your pants, and making decisions day-to-day, rather than working toward specific goals.
Q: Making accurate sales and revenue forecasts can be difficult in an uncertain economy. What’s the key to making projections with a higher level of confidence?
Forecasting is difficult, even for large organizations with huge resources. For small businesses, it’s a matter of combining quantitative data—historical information about your industry and market— with qualitative data—an understanding of what is driving the trends and how they influence them. It’s easy to forecast 2-3 years out, but looking any further into the future can be difficult— there are too many variables.
Q: With so many “do-it-yourself” software programs for preparing business plans today, does an aspiring entrepreneur still need the assistance of a skilled small business mentor?
Most of these products are worthwhile because they provide some structure to prepare your plan. But you still need a reality check—an unbiased, fresh set of eyes. We tend to tell ourselves what we want to hear. So you need to work with someone who will challenge your assumptions and make sure you think things out fully.
Q: How often should the business plan be reviewed/updated, and what sections should undergo the most scrutiny?
Generally, once a year. But for a new business, you might want to do a review as early as three months in. If you’re still feeling your way through, you want to see if you’re on the right track, and how well things are working. And if there’s trouble, you want to jump on it as soon as possible.
Q: Can a well-established small business benefit from taking a fresh, thorough look at its business plan?
Yes, it’s easy to get complacent if things are going well. We don’t ask for help because we don’t feel it’s needed. Every business should be in constant improvement mode, so it makes sense to get a check up and see if there are things that need to be addressed or improved upon.
Q: There’s nothing like first impressions, particularly if the business plan is intended to help secure financing. Having reviewed so many of them as a SCORE mentor, what characteristics best indicate the plan’s potential for success?
- Is it well researched? You usually can spot that pretty quickly. If I ask questions that a person can’t answer, it is not a good sign.
- Is it realistic? Getting a business going tends to take longer and cost more than one may think.
- What are the assumptions? These are the foundation for your expectations, and lead to other parts of the business plan. Unforeseen things will always happen, so I like to see that the plan has a margin for error.
Q: Similarly, are there important elements or details of a business plan that many people tend to overlook?
Financials are overlooked because they’re more difficult to do. But many people also don’t spend enough time on defining their potential customers. You may have identified a general customer base, but there may be many subsets that will affect how you organize your business, set price points, advertise, and so forth. You always need to look deeper.
Q: In addition to knowledge and experience, what are some of the most valuable things SCORE small business mentors offer aspiring entrepreneurs?
You get good, unbiased advice for free. SCORE mentors may also have connections with banks and other resources. An introduction can make a big difference.
Q: Did you ever consult with SCORE during your career in business? And if not, are there times when you wish you had?
No, but looking back, there are a few times when I wish I had. When you try something that doesn’t work out, you wonder if maybe some good advice beforehand might’ve changed the outcome, or enabled you to make an adjustment before it was too late.
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