Can You Become A Part-Time Franchisee?
Is it possible to find a legitimate franchise opportunity that only requires a few hours a week to run? And, if you do find a part-time franchise, can you make enough money for it to be worth your up-front investment, and of course, your time? Let’s find out.
First off, it’s important for you to be able to distinguish a true franchise-type of business, from a non-franchise business.
In most cases, franchise ownership offers:
· A proven business system that’s easy to replicate
· A formal training program
· Proprietary software and technology
· Marketing and advertising tools and systems
· A support team
· Formal and lengthy contracts
· Protected territories
Business Opportunities, or Biz Opps, as they’re sometimes called, aren’t very structured when compared to a franchise business. You won’t usually find territory restrictions with a business opportunity, and there are no royalties.*
In addition, the total investment amount is usually less than a franchise business.
While there may be training, and even some marketing tools, the support structure isn’t as tight as it is with a franchise business system.
(It's not because purveyors of Business opportunities are mean-spirited people that they don't supply a tight support structure. It has to do with the business model; in a Business Opportunity, the investment amount is collected up-front. There’s no royalty-stream coming in that could support a lot of well…support, in this type of business set-up.)
There’s another type of non-franchise business that’s worth mentioning here; Network Marketing businesses. Also known as MLM’s (Multi-Level Marketing) these businesses are almost always marketed as “Part-Time Opportunities.”
There isn’t enough space here for me to go over all the pros and cons of a Network Marketing business. Suffice to say, there’s a plethora of information available, including an article I found over at FTC.Gov that defines Network Marketing businesses in easy to understand terms.
Part-Time Franchise Opportunities
While the thought of owning a franchise that doesn’t require a full-time commitment may be appealing to you, the reality is that there are very few franchise concepts around that fall into that category. Most franchises are designed to be owner-operated, with the owner on the premises.
But, if you do have your heart set on investing in a franchise that can allow you the flexibility to not be there all the time, know this; you’ll probably need deep pockets. That’s because most of the franchises that tout things like “flexibility” in their marketing methods are multi-unit ownership opportunities.
In addition to the promise of flexibility that several franchisors offer their franchisees, there’s another option offered in the franchise marketplace that may also have a nice ring to it for you. Ready?
How would you like to keep the job you have while you start a franchise business?
Right off the bat, it’s very appealing, cash-flow wise. That’s because if you can keep your day job while launching a new franchise business,* you’ll have cash coming in-via your paycheck, and that can really give you some breathing room.
To summarize, if you have a pretty sizeable net worth, want a lot of flexibility, and like the idea of maybe being able to keep your current job while your new business launches, there are opportunities available in the franchise marketplace.
*Non US-Government links
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Small Businesses Receive More than $90 Billion in Federal Contracts in FY11
Small business procurement is one of the largest and most important programs for small businesses across the federal government. In FY2011 the federal government awarded more than $91.5 billion in federal contracts to small businesses, which represented 21.65 percent of small business eligible federal contract dollars. During the first three years of the Obama Administration, the federal government awarded $286.3 billion or 22.07 percent in federal contracting dollars to small businesses. This is a $32 billion increase over the three preceding years even as contracting spending overall has declined across the federal government.
Federal contracting with small businesses is a win-win. Small businesses get the revenue they need to grow their revenues and create jobs. Meanwhile, the federal government gets the chance to work with some of the most responsive, innovative and nimble companies in the U.S. —often with a direct line to their CEO.
SBA is required to report to the President and Congress on achievements by federal agencies and departments against their annual procurement goals to ensure greater accountability. The Small Business Procurement Scorecard provides an assessment of federal achievement in prime contracting and subcontracting to small businesses by the 24 Chief Financial Officers Act agencies. It also measures progress that departments are making to ensure small business opportunities remain an integral part of their acquisition of goods and services to meet mission objectives. The FY2011 Small Business Procurement Scorecard is now available on sba.gov.
The FY2011 Small Business Procurement Scorecard reflects the need for improvement in small business procurement across the federal government. Over the last year, SBA has increased its efforts and collaboration with our federal agency partners to provide more opportunities for small business to compete for and win federal contracts, but we know more must be done to ensure that more contracts get into the hands of small businesses. The SBA is focused on a number of initiatives to help the government meet the 23 percent goal, ensure the accuracy of data, and prevent fraud, waste and abuse, including:
- Implementing the 19 contracting provisions related to increasing opportunities for small business contracting and minimizing fraud, waste and abuse in the programs in the Small Business Jobs Act of 2010;
- Significantly improving the quality of small business procurement data;
- Collaborating with White House and Administration Senior Officials to help ensure top-level leadership commitment from across the federal government to utilize small businesses;
- Training prospective and existing small businesses to acquire the confidence and skills needed to successfully compete for and win federal contracts through GC Classroom;
- Conducting outreach and matchmaking events across the country to ensure that small businesses everywhere have direct access to federal buyers; and
- Promoting Small Business Partnerships, such as with the IBM Foundation's Supplier Connection to help make it easier for small businesses to gain access to more than $300 billion in combined supply chain spending by a consortium of 17 of America's largest corporations.
Small businesses are an integral part of our economic recovery. SBA and the Obama Administration will continue to provide small business owners the necessary tools to ensure they have the wind at their back, enabling them to grow and create jobs.
For more information about the Small Business Procurement Scorecard, visit sba.gov.
About the Author:
John Shoraka is the Associate Administrator for Government Contracting and Business Development at the U.S. Small Business Administration.
Importing Goods into the U.S. – An Introductory Guide for Small Business Owners
Whether you’re looking to diversify your product line or leverage cheaper-made merchandise, selling imported goods in the U.S. can be an important ingredient in small business success.
Interestingly enough, importing doesn’t always necessarily cannibalize the economy here at home. Research from the Federal Reserve Bank of San Francisco (cited in this USA Today article) suggests that for every dollar spent on a Chinese-made item, 55 cents goes to U.S. businesses for services such as marketing and sales. So Americans are getting more than just cheap prices and unique products from overseas markets.
Many small businesses also support high-demand imported products that can’t be found or manufactured here: artisan crafts, furniture, shoes and clothing, and food and beverage products. These represent a lucrative market with margins that can reach up to 700 percent.
If you are interested in importing and selling overseas goods to the U.S. market – whether or not you’re actually based in the U.S. – you’ll need to do your research regarding both the country of export and the country of import (the United States).
Here are some business and regulatory tips to guide you through the process of selling imported goods in the U.S.
Review Import Rejection Laws and Trade Barriers
First, be sure to check U.S. trade barriers and local in-country laws to be certain you can actually export your chosen goods out of the country of origin into the U.S.
While the U.S. is very import-friendly, it does have safety and quality controls that are more stringent than other countries. Likewise, foreign nations sometimes restrict or ban the export of religious ornaments, rare or protected goods, animal by-products (such as furs and ivory), as well as pirated designer goods. There are several guides and links to information about import trade on SBA.gov’s Importing Goods page.
If you want to import or sell agricultural products into the U.S., the Food Safety and Inspection Service provides a checklist and other information to help you comply with laws that govern import of meat, poultry and egg products.
Build Relationships and Network on the Ground in the Export Country
As with all wholesale procurement, you will want to meet and greet the producer or distributor of the product(s) you will be selling. Try to establish whether the company you’re dealing with has export experience. Ask for references. SBA’s Doing Business Abroad guide can help you plan your trip.
Hire a Customs Broker
A licensed customs broker can help you navigate laws and regulations that apply to the transactions your planning, including licenses, calculation of taxes, duty fees, etc. A customs broker prepares all the documentation needed to import goods, just as a freight forwarder does for exporters. Customs brokers also facilitate communication between the importer and the government. Licensed brokers must have expertise in the entry procedures, admissibility requirements, classification, valuation, and the rates of duty, applicable taxes and fees for imported merchandise. The customs broker charges the importer a fee for this advice.
You can search for certified customs brokers at the National Customs Brokers and Forwarders Association of America. For international brokers visit the International Federation of Customs Brokers Associations.
Check License or Permit Requirements for Importing Certain Goods
Many imported and exported products are regulated by federal agencies and are listed in SBA’s Exporting/Importing Specific Goods page. If you import or export any of the products listed, you may need to obtain specific licenses and permits or complete additional paperwork. The page also provides information on how to get the appropriate licenses and permits. A customs broker can also help with this aspect of importing goods.
Get Assistance and Training
The federal government provides advice and seminars to small businesses interested in importing.
- Small Business Development Centers (SBDC) – Provide assistance for import businesses and fee-based seminars. Use the map to find a branch near you.
- SCORE – Provides online workshops and in-person advice from over 12,400 volunteer counselors across the nation. Use the search tool to find help near you.
- U.S. Customs and Border Protection (CBP) Contacts – Contact information to find assistance from any of CBP's offices in international trade, trade relations, and brokers.
- International Trade Administration (ITA) Services – ITA's import services, including counseling and a program/partner search.
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Payments On the Go – Turning Your Mobile Device Into a Cash Register
Have you considered dispensing with your cash register or offering more flexible payment options for your customers?
If you’ve ever purchased anything from an Apple store, you’ll recall that they don’t have a single cash register on the premises. Instead, all payment transactions are conducted by Apple’s employees using mobile devices.
But Apple isn’t the only one in on the act. More and more small business owners are turning to mobile payment platforms on site and on the road. And with smartphone use at an all-time high, new technology is making it much easier for small business owners to process credit card payments via smartphones and tablets.
For local businesses, particularly those that sell products on the go – at fairs, in restaurants, concession stands, and door-to-door – these payment solutions offer small businesses reliable options for accepting payments other than checks and cash.
When it comes to accepting payments via mobile devices, the following platforms are particularly geared towards small local businesses:
Used in more than 20,000 retail locations nationwide and processing more than $5 billion transactions per year, the market pioneer and current leader is Square.
How it works: Square is a very simple concept. Using a free app and card reader (or dongle) that plugs into an iPhone, iPad or Android device, businesses and their employees can collect payments by swiping cards through the device. Once accepted, the customer signs the touch screen with either their finger or a stylus, and can add a tip. A receipt is sent to the customer via text or email. The cost? Square charges merchants a 2.75 percent fee per swipe for most major credit cards and funds are deposited the next day.
Note that if you accept more than $1,000 in card-not-present payments during any seven-day period, Square will defer depositing the amount in excess of $1,000 for 30 days (more here). Square also offers Square Register, which can convert any iPad into an all-in-one cash register.
2. Intuit GoPayment
Intuit GoPayment is similar in concept to Square. Merchants get a free app and card reader that can be plugged into a smartphone or tablet device. It also synchronizes with QuickBooks, making it easy to manage your sales records; you can also buy add-ons that allow you to print receipts. Intuit’s pricing model is also slightly different than Square’s, with two options: 1) A 2.7 percent fee per-swipe (3.7 percent for keyed transactions), or 2) merchants can pay a monthly fee and pay a lower per-swipe rate, maybe a better option, depending on how you use the reader.
3. PayPal Here
Launched earlier this year, PayPal Here includes a free credit card reader and app, as well as a range of add-ons. For example, merchants can use their device’s camera to scan checks and cards (useful if you don’t have your card reader on you), as well as access their own PayPal account to make purchases. PayPal Here charges slightly less per swipe than its competitors at 2.7 percent. It also purports to be more secure, thanks to card reader technology that encrypts cardholder information before it is transmitted to the device.
The Bottom Line
This is just a brief overview of some of the players. A quick search online will deliver a host of reviews that can help you make an informed decisions about which platform makes sense for your needs. It’s also a good idea to talk to other business owners to gauge their experience of these platforms. The SBA Community Discussion Boards are a great place to start.
Talk to your accountant, too, so you have a clear view of how a mobile payment platform will fit into your cash flow management processes.
About the Author:
SBA Learning Center
This course is about market research. Specifically, understanding and using market research to find qualified small business vendors. See the Government Contracting Classroom for more information.
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Other Courses You May Like
Get Local Assistance
Counseling, mentoring, and training from an SBA District Office, SCORE Chapter, Small Biz Development Center or Women’s Biz Center in your area.
Useful Online Tools and Guides to Help Small Business Comply with Laws and Regulations
From starting and growing a business to managing operations day-to-day, one thing is certain in business – dealing with laws and regulations.
Whether you are hiring your first employee, formalizing your business structure, or applying for a license, you’ll encounter a hairball of ever-changing federal, state and local rules and regulations.
To help business owners unravel the hairball and get answers, SBA.gov offers a variety of helpful tools and resources.
1. Comply With Universal Business Laws
Whatever your business type, size or industry, there are many universal laws and regulations that will apply to you.
To help you navigate this landscape, SBA.gov’s Business Law Guide provides an overview of common business laws and regulations that currently impact small business. These include licenses and permit requirements, employment and labor laws, tax regulations, advertising law, finance, intellectual property, workplace health and safety, and data privacy laws.
In addition to this general guide, SBA also offers some useful step-by-step guides and tools that can help new business owners, in particular, take the right steps towards compliance:
- SBA Direct – This interactive and customizable tool gives you quick access to information you need by filtering content from across the SBA.gov website and matching you to business resources, advice and training in your region.
- 10 Steps to Starting a Business – This includes information on key legal steps that all new business owners need to be aware of as they start up.
- 5 Steps to Registering your Business – This provides information on incorporation, registering your business name and obtaining a tax ID.
- Hiring your First Employee – These 10 steps outline what you need to do to ensure you comply with key federal and state regulations when hiring.
- Business Licenses – All businesses need some form of license or permit to operate legally, even home-based businesses. To help you determine what your business needs, use SBA.gov’s “License and Permit Search Tool.” Simply enter your zip code and business type to see which licenses and permits apply to your small business along with links to web pages, application forms and instructions.
2. Comply With Specific Industry Laws
In addition to information about the laws and regulations that impact most small business owners, SBA.gov also includes a large selection of Industry Guides that provide resources, information and guidance for small businesses that operate in specific highly regulated industries.
As well as regulatory guidance, these guides also provide information on training, financing, and business growth strategies. For example, the Manufacturing Guide includes information on financing options, advice on "lean manufacturing," and an overview of free and low-cost in-person training programs to help small manufacturers expand and grow.
If you operate in a federally-regulated industry including agriculture, alcohol, tobacco, aviation, wildlife or fishing, among others, you’ll also need to register for a specific federal license or permit.
Have questions about legal and regulatory matters? Find answers on the SBA Community Discussion Boards. For more complex issues, always consult an attorney.
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Email, Phone and Social Media Monitoring in the Workplace – Know Your Rights as an Employer
Do you know how much privacy your employees are entitled to? For example, if you feel employees are abusing their work privileges, is it legal to intercept emails or phone conversations to find out what they’re up to and confirm your suspicions? Can you ask potential job candidates for their Facebook profile log-on information?
Here are some general guidelines that can help.
Screening Job Candidate’s Social Media Profiles
There has been plenty of coverage in the media recently about companies and public sector organizations asking job candidates for their Facebook passwords as part of the employment screening process. Many of the employers who do this are in law enforcement and are on the lookout for potential illegal activity. But businesses have also been known to use this approach to get a better handle on who they are about to hire.
Although there is no federal law prohibiting this, the Department of Justice considers it a crime to violate social media terms of service and enter these sites illegally. Asking an employee or candidate for their log-on information means you and that individual are both in direct violation of Facebook’s Terms of Service which states the following: “You will not solicit login information or access an account belonging to someone else” or “You will not share your password... let anyone else access your account, or do anything else that might jeopardize the security of your account.”
Many states are also now looking to make this practice illegal.
The Bottom Line: Simply asking for access to personal passwords is a clear privacy violation and is both offensive to the candidate and unethical. Employers and managers should also be careful they’re not accessing profile information to determine an employee’s religious, sexual or political views. If it’s determined that you used this information to discriminate against an employee, you may be found in violation of equal employment opportunity and privacy rules.
Monitoring Employee Social Media Activity in the Workplace
A recent report by Gartner suggests that by 2016, up to 60 percent of employers are expected to watch workers' social media use for security breaches. Currently, no specific laws govern the monitoring of an employee’s social media activity on a company’s computer (employers are on the lookout for unauthorized posting of company content – videos, documents, photos, etc.). However, the U.S. National Labor Relations Act does address employee rights in regard to the use of social media and acceptable social media policy. There has also been a ruling against employers who fired workers for complaining on social media sites about their workplace conditions.
The Bottom Line: Provide employees with a social media policy and be sure to include information about what you consider confidential and proprietary company information that should not be shared. For more tips on social media monitoring do’s and don’ts check out this article from Small Business CEO: Considerations for Social Media Use in the Workplace.
Intercepting Email or Phone Conversations
Increasingly sophisticated ways of storing and accessing email have made it easier than ever for employers to monitor email accounts. But is this an invasion of privacy? The law is fuzzy.
The Electronic Communications Privacy Act (ECPA) of 1986 prohibits the intentional interception of “any wire, oral or electronic communication,” but it does include a business use exemption that permits email and phone call monitoring.
This exemption often comes under close scrutiny by courts, and includes several elements. Generally, if an employee is using a company-owned computer or phone system, and an employer can show a valid business reason for monitoring that employee’s email or phone conversations, then the employer is well within his or her rights to do so. Likewise, if employees have consented to email or phone monitoring (in their contract of employment, for example), then you may monitor their calls or emails.
But here’s the rub: the ECPA draws a line between business and personal email content you can monitor – business content is ok, but personal emails are private.
Tip: If in doubt, consult your legal counsel. Develop and share a monitoring policy with employees (for example, in your employee handbook). If possible, get them to agree to it. Courts often look at whether employees were informed that their calls or emails might be monitored in the workplace, whether there was a valid business justification for the monitoring, and whether the employer complied with established policy.
- Protecting Employee Privacy: Health Information Rules for Businesses
- How to Prevent and Detect Business Identity Theft
· U.S. Equal Opportunity Employment Commission: Prohibited Employment Policies/Practices
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Meet George Carlisle, Serving and Assisting Small Businesses in Washington, DC
When a friend or family member asks what you do to help small businesses, what do you say?
I am always excited to explain to them that I work for the U.S. Small Business Administration in the Washington, D.C. Metropolitan District Office as a Business Development Specialist where I service and assist small businesses within the Metropolitan area to help them manage and expand their businesses, obtaining government contracts thru the 8(a) Business Development Program and guiding them thru every stage of turning their businesses and entrepreneurial dreams into a thriving success.
What’s your favorite thing about what the SBA does for small businesses?
The SBA’s Section 8(a) Business Development Program provides various forms of assistance in management and technical assistance, financial assistance, government contracting assistance and advocacy support to foster the growth and development of businesses owned and controlled by one or more socially and economically disadvantaged individuals. As a Business Development Specialist I am able to assist these firms during their nine-year tenure in the program in servicing them to access the resources necessary to develop their businesses and improve their ability to compete in the mainstream of the American economy.
Is there a particular small business “success story” that comes to mind when you think about how the SBA helps people?
There is a small business in Lanham, MD named “Management Solutions Consulting Group, Inc.” This small business was interested in going after a sizable federal contract, but they did not have the resources and the experience they needed in order to successfully perform as a potential contractor on the contract. This caused a great deal of discouragement with their forecasting goals for the year. They came to our office and met with me and shared their concerns. Immediately I was able to recognize their problem and recommend a solution with one of our servicing vehicles we use in order to strengthen the support that many of our small businesses lack and the service product was “ The SBA Joint Venture “ . I shared with them how partnering with another firm in pursuing the contract could give them the added support they needed in areas that their business was inexperienced. They agreed and thought the recommendation was great and I walked them through the entire process. They were connected with an established business within their industry and formed a Joint Venture Agreement in order to bid on the procurement. After several months, they were notified that they were awarded the contract! This enabled them to exceed their Federal Procurement contracting goals for the year, as well as hire several new employees to the company in order to work the contract. They were excited about the SBA’s programs for small business that were available to them for their continued growth, and all I did to assist them.
Do you have any advice for entrepreneurs and small business owners out there?
Take advantage of the SBA Programs and services that are provided through their local District Offices, as they offer numerous resources to assist the small business community. The District offices realize that small businesses are the foundation of our Nation’s economy and are ready and willing to service them with their small business needs.
Anything else to add?
The U.S. Small Business Administration’s staff is comprised of various talented and skilled employees from various walks of life with business backgrounds, who are dedicated and work as a team so that small businesses throughout the country achieve entrepreneurial success.
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Why and How to Beef Up Your Business Credit Score
Do you know your business credit score? Feel unnerved about relying on your personal credit score for business transactions? As a business owner, taking steps to separate your personal and business finances is a smart strategy. Obviously, this means implementing a strategy to build good credit in your company’s name.
What is Business Credit?
Business credit is much like your own personal credit score – it’s a proxy for your business’ ability to repay its debts. When you start a business, this type of credit may not be at the top of your agenda. But as you plan to expand and grow, establishing good business credit will be helpful if you decide to apply for a business loan.
Who Monitors Your Credit?
Business credit, also known as trade credit, is the single largest source of lending and is monitored by business credit bureaus. These bureaus gather data on trade credit transactions and produce business credit reports for the benefit of credit issuers. Credit is measured on a scale of 0-100, with a score of 75 or more being the ideal range.
Good Business Credit Can Open Doors and Bring Many Benefits
Establishing business credit is about so much more than trying to improve your chances of securing a loan. SBA guest blogger and business credit adviser, Marco Carbajo, offers these 10 reasons to start building credit in your business’ name:
1. Protect your personal credit ratings – With corporate credit, your business debts and financial obligations would be reported only on your company’s credit reports—not on your personal reports. As a result, your personal debt to credit limit ratio would not be impacted by the debts of your company.
2. Protect the corporate veil – By separating personal and business credit, you eliminate the risk of commingling funds – and this includes the commingling of credit.
3. Limit personal liability – By building a creditworthy company, creditors and lenders will be less likely to require a personal guarantee to secure financing.
4. Conserve cash flow – Many suppliers, businesses, and vendors will extend credit to your business with net 30-day to 60-day terms. This allows you to conserve cash while obtaining the products and services your business needs.
5. Limit accumulating personal debt – You can obtain financing for your company without supplying a personal guarantee. Funding programs like accounts receivable financing, trade credit, and merchant cards protect you from facing a lot of personal debt.
6. Maximize financing opportunities – Many lenders, creditors, and suppliers will only extend credit to businesses that meet their corporate compliance guidelines. This includes a business credit listing and ratings with the major agencies.
7. Build a business asset – A business with established credit history and available credit is attractive to potential buyers and investors. It improves the appearance of your business’ funding capacity and stability.
8. Limit inquiries – With business credit, you can stop relying on your personal credit to obtain financing, which limits the amount of inquiries being pulled on you personally.
9. Receive larger credit limits – You can obtain 10 to 100 times greater credit limits from lenders as an established creditworthy business than you can as an individual.
10. SAVE MONEY! Businesses obtain more favorable rates on lines of credit compared to an individual. For example, you may pay up to 13% interest on a $100,000 line of credit whereas a business could qualify for an interest rate of 7%. That would save you almost $40,000 in interest alone.
What Affects your Business Credit?
There are many factors that affect your business credit score: payment history, the amount of credit you have available, the age of your credit profile, and even the frequency of inquiries made on your profile.
Steps To Build Credit
More than simply applying for a business credit card, there are some very specific steps you should take to properly build and manage your credit score. This blog explains more: 6 Ways to Establish and Maintain a Healthy Credit Score for Your Startup or Small Biz.
Remember: if you are a sole proprietor, you’ll need to incorporate your business first (this creates a separate legal entity for your business).
- How a Credit Score Downgrade Impacts your Life
- Six Factors to Consider when Choosing a Credit Card for Your Small Business
- Why Should You Apply for a Business Credit Card?
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3 Principles That Turn Planning Into Management
I’ve been reminded twice in the last week about how important planning is to business, and how too many people misunderstand what a plan is supposed to do. My reminders came from two different people doing startups. Neither of them needs a business plan to show to investors. Both need business plans to figure out what steps to take and when, and how much money they need.
This reminds me of these important principles of business planning that everybody should keep in mind.
1. Form follows function
You’re probably aware of this as a general principle of good business and a lot of other things. It also applies to business planning. What this means in practice is that a business plan is only the formal, carefully edited and produced document that you fear and dread when it’s going to be submitted to banks or investors as part of a process of raising money.
Most of the time, as in the case of both entrepreneurs I dealt with recently, a business plan isn’t formal, isn’t carefully edited, and isn’t produced like a document. Instead, it’s a collection of related thoughts, lists, tasks, dates, and basic business numbers. It’s not for outsiders to read, but for you, the entrepreneur, to help you sort things through and organize what to do. And it doesn’t matter what form it’s in, as long as it helps the business figure out the next steps.
Those business pitches, the summary memos, the elevator speeches you read about? Those are not instead of the business plan; they are outputs of the business plan.
2. It’s about management
The objective of the business plan is better management. It’s knowing what to do. Too often, people tend to think the objective of the business plan it to present the business to outsiders, as if it were a sales tool to summarize the business to banks or investors. Instead, it’s a tool to help with the management.
For example, a good strategy summary in a business plan sets priorities and focus. It doesn’t have to be brilliant; it has to be practical. It defines a target market, market needs, and a product offering to match those needs. It establishes what’s most important and – frequently vital – what isn’t important.
And, as an additional example, the nuts and bolts of the business plan ought to be about concrete specific tasks, people, and resources. The plan should define milestones, business activities, and specify responsible parties, start dates, ending dates, and deadlines. The plan should establish how performance will be measured and the numerical goals. And the plan should project basic numbers, including sales, cost of sales, expenses, and cash flow.
The easiest way to test a plan for how well it does with management is to ask yourself how you’ll know whether the business is on track or not. If the plan doesn’t have a lot of specifics that can be measured, then it won’t help with ongoing management. You have to be able to use the plan to check the numbers and results, review, revise, and then correct the plan. It’s a tool for management, not an end in itself.
3. It’s not accounting
Portions of a useful business plan look a lot like accounting statements. For example, a projected income looks like an income statement, and a projected cash flow looks like an actual cash flow statement.
However, the huge difference is that planning is about the future, while accounting statements are about the past. The future is an educated guess that is valuable for how it builds on assumptions, how it connects the spending to the revenue, and how it helps with managing the business later because of plan-vs.-actual analysis. The past is a report on a database of actual transactions.
Because of this vital difference, accounting has to be an accurate report on an actual collection of transactions, but planning has to have simplifying assumptions and aggregated numbers. For example, depreciation in an accounting statement is a report of a detailed database of assets, purchase price and purchase dates, accumulated depreciation, and so forth. Depreciation in a business plan, on the other hand, is an educated guess of the total.
The good news is that keeping this difference in mind makes the planning projections easier. You don’t have to invent a fictional reality in detailed transactions. Instead, you create educated guesses of major categories.
Conclusion: all three of these basic principles serve as a reminder of what business planning is supposed to be, what it is supposed to do, and how it can help you in your business.
About the Author:
Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 44 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including The Plan As You Go Business Plan, published by Entrepreneur Press, 2008.