by Michael Iverson

Any competent financial executive will say “a business needs a sound financial plan” to tie the numbers to a business owner’s strategy. Well, its time to demystify this statement!

Yes, you need a plan. But how you develop the plan will depend on your business objectives. Question number one: Why are you in business?

-I want a good, stable life style maintaining business.
-I want to increase my net worth so I can retire early and enjoy the good life.
-I’ll start a ground breaking business, grow it quickly and sell it so I can move on to the next adventure. I don’t want to get bored!
-I want to create a legacy for my family.

You might hear yourself in one of the answers above, or maybe you have a unique reason for starting a business. No matter – there are common elements to be explored as you develop your plan.

Here are some basics:
*sales, marketing, operations, finance and accounting, industry characteristics, competitors, buyer profile, products or services, and what pain point does your business intend to solve?

Wow – sounds like a lot of work. But keep in mind; if you are in business to create a nice income/lifestyle with moderate growth then you may choose to keep it simple and short. You may only need a two or three page plan with limited need for market analysis and competitors. Your financial plan may be just the number of hours at a specified hourly rate that you need to work in order to achieve your goal. Why spend hours on a 40 page plan when two to three pages is enough?

On the other hand if you plan to grow your business beyond a few people in order to create a net worth exit opportunity or a significant enough business to leave as a legacy to your children then a more detailed comprehensive plan will be needed. This means the plan should include all of the elements noted above, with enough market data to support your business premise. You’ll need details to specify what exactly it will take to grow your business.

Details like:
-Monthly financial projections for 12-24 months
-Annual projections for 3-5 years
-Assumptions outlined that support projected sales and expenses (pricing, number of clients, new products, marketing initiatives, comparative plans, product costs and more)
-“What If” scenarios to illustrate the potential ups and downs.

It is easy to think of the plan as the tool. And it is – a well developed plan helps you manage to your expectations. It provides business measures to keep things on track. Ever hear the old saying, “If you don’t measure it you can’t manage it”? But often overlooked is the value gained in going through the planning process - whether it’s a simple two page plan or a full blown book with multiple chapters. The business idea will be refined and honed, and valuable insights achieved. Once the planning process is complete and documented, with a set of financial projections that tie to your vision and help you see what success looks like and what it might cost you in dollars to do it – you’ll be ready to execute your idea! (Don’t forget, however, the plan is dynamic, meaning it will need updating and modifying on a regular basis!)

In the following case study I’ll illustrate two key elements I have found among successful entrepreneurs who have implemented a planning process:
1. They start with the end in mind.
2. Execution, execution, execution…..

Jump to the Case Study