Planning to succeed.pdf

CHAPTER

What You’ll Learn

in This Chapter

• Why you should

plan your business

• Choosing a

business identity

• Establishing an

online domain

Planning to Succeed

S o you want to start an online business—any busi-

ness for that matter. Great! So what’s your plan? Your

business plan, that is. One of the prime reasons busi-

nesses fail is that they don’t have plan. Some compa-

nies, when asked about their business plan, respond

with “I plan to be in business.” That’s a recipe for trou-

ble. If you haven’t written a business plan before you

open your business then your business is still in the

fantasy stage.

It’s not that businesses plan to fail—they fail to plan. No

matter what your business, you need to outline your

business goals and objectives, costs, revenue assump-

tions, and marketing plans. In short, a business plan is

a practical realistic planning tool for your business that

is your roadmap to success and how you’ll measure

that success.

Launching Your Yahoo! Business

Why Plan Your Business?

When you say “business plan” to most people, they think of a dry tome used

to raise lots of money that’s packed with market statistics and financial data

with mysterious terms such as “balance sheet,” “cash flow,” and “profit and

loss statements.” That’s true in most cases. These are necessary parts of most

business plans.

But that’s only half the story.

Business plans are not only used to acquire funds from investors or bankers,

or even obtain company resources. Yes. If you’re seeking a capital investment

for your business, a sound business plan is necessary for approaching funding

sources. If you’re in need of company resources for an in-house project then a

business plan is necessary for that too.

But a business plan is also a planning tool and a road map to success. It

describes your business, acts as your company’s résumé, and sets the goals

and objectives of your company. One that can organize your thoughts, for-

malize your intentions, and help sell your idea.

The real power of a business plan is that it forces you to think about the

important aspects of your business, whether it’s an ongoing operation or a

start-up. So, whatever your situation or whatever your objective, writing a

business plan will go a long way in helping you succeed.

Briefly, the reasons for writing a business plan include

■

Defining a new business venture

■

Determining whether your business will make a profit

■

Providing an estimate of your start-up costs

■

Devising an effective marketing strategy

■

Helping you compete in the marketplace

■

Anticipating potential problems

■

Supporting a loan application

■

Raising investment funds

■

Expanding a current business or product line

■

Defining new goals and objectives for an ongoing business

■

Measuring your business performance

■

Tracking your growth

■

Setting a value on a business for sale or for legal purposes

■

Identifying cash flow

■

Identifying the competition

CHAPTER 4

Planning to Succeed

■

Identifying the necessary human resources

■

Identifying the necessary management

■

Identifying other resources, office space, desks, computer equipment,

telephones, and more

As you can see there are many reasons

why you should write a business plan. But

there are even more important reasons.

American Express identified a number of

ways to achieve business success that are

directly connected to writing a business

plan. A business plan will force you to

think in creative ways about a business

that you haven’t before. A business plan

also forces you to set goals and provides

the tools to control the outcome. In short,

it can help you translate the raw idea of

your company into an actionable plan.

A proper business plan will list your

strengths while at the same time prevent

you from ignoring your weaknesses. It will

make you analyze your competition, build

the right team, know your customer, and

define your product.

So, why write a business plan? Because a good, well thought out plan reduces

the odds of failure and increases the chances of success. Without a business

plan, you leave far too many things to chance.

caution

Why Write That Plan

The consequences of not writing a

business plan are many. Dun &

Bradstreet tell us that some of the

many reasons why 80% of new

businesses fail within 5

years are

■

Running out of money

■

Failure to make accurate

financial projections

■

Lack of adequate funding

■

Poor cash flow

A good solid business plan takes

these mistakes into consideration

and prepares for them with good

financial projections and a realistic

sales and distribution strategy.

Major Reasons Why Businesses Fail

Writing a solid business plan can help your business idea come into fruition.

But it doesn’t guarantee your business will be a success. The following are

some of the common mistakes business owners make, and should be avoided

AFTER the business plan is written.

■

Many companies fail to anticipate the amount of working capital

needed to operate a business. Though their financial projections are

sound, they run out of money before adequate income from sales hits

the bottom line.

■

Don’t waste working capital when starting a business on frivolous

expenses. All your working capital should go for one thing: making

sales!

Launching Your Yahoo! Business

■

Don’t be a target of the IRS. Pay your taxes on time. Pay them first

before you pay any other expenses. The last thing you need is a lien

against your business revenue. It’s very tempting to save your tax pay-

ments and employee withholdings for last. Don’t do it.

■

Remember that most businesses are seasonal. So plan for your indus-

try’s highs and lows. Have enough cash on hand for the slow months

or diversify your offering to keep your doors open and your business

humming along.

‘Tis the Season

Something to keep in mind: If you can, the best time to start an online business is near late

summer to early fall so you have time to build your store, work out the details, and build

site traffic before the holiday rush. Even though you may not offer holiday items, most

products can be used as holiday gifts.

If you do run into trouble, here are some tips on how to overcome setbacks in

your business.

First, keep the names of a good accountant and attorney handy. And if you do

run into problems, seek help and counsel from someone you trust, preferably

someone in an industry like yours. They probably have experienced and over-

come a problem like that you are now facing at one time or another. Also,

don’t hide from the problem. Avoiding meetings or phone calls with vendors

or whomever else raises a red flag in their minds, and they may interpret it as

a problem even more serious than it is. And always keep an upbeat attitude

around your employees, no matter what the problems may be. You don’t want

your best employees getting anxious and looking for work elsewhere.

Look at the problem. If it has to do with cash flow, look for ways to reduce

everyday expenses. Cut back on entertainment and travel expenses. If your

cash flow is seriously affected, consider cutting back on non-essential employ-

ees. If faced with this decision, start by cutting administrative personnel. Keep

those that generate the income for your company.

Most importantly, do everything you can to pay your bills on time. Your credit

rating is the lifeblood of your business. If you can’t make a payment on time,

talk to your vendor and work out a plan to deal with the situation. Be proac-

tive and be prepared to offer a payment plan when you call them. Above all,

don’t make promises you can’t keep.

Finally, take a breather to relax and unwind. Take a walk or go to a movie.

Then come back with a clear head to tackle the problem.

CHAPTER 4

Planning to Succeed

Some Tips Before You Start

Here are few basic tips to keep in mind even before you start thinking of your

plan. These tips are especially useful if you’re looking to fund your business

plan.

■

It pays to take a class or two on running a business while reading up

on business plans (try Que’s book Write a Business Plan In No Time ). You

should have a general knowledge of the different aspects of a business

before you sit down to start your plan. There are many fine courses

offered by your local community college, seminars by non-profit organ-

izations, and small business programs offered by the government. Take

advantage of these and spend a little time learning the ins and outs of

running a business.

■

Open a separate business checking account with the name of your

business on the checks. Ask your bank about getting a credit card mer-

chant account so you can accept credit cards at your new business. You

may be required to provide a deposit to get a merchant account. This is

normal for a new business without a track record. So make sure you

have the cash for this.

Choosing a Business Identity

A rose by any other name may still be a rose, but what you name your busi-

ness will affect how the market perceives you. A business name that may

seem catchy or cute can often translate into something misleading or ineffec-

tive. Because the name of your business is the first interaction a prospective

customer has with your business, if they don’t understand what you sell, it

could lead to lost income.

Here are some ideas to keep in mind to help you avoid that first misleading or

even unpleasant impression.

■

Don’t just make up a name. Creativity in business names is a good

thing if not taken too far. Don’t butcher the English language to the

point where your business name has little or no reflection of what your

business does. Sure, companies such as Cingular or Amazon have

names that don’t match their product or service. But they have the

marketing clout to create name recognition. As a small company,

unless you are related to Bill Gates in some way, your marketing

budget for unique brand recognition will most certainly come up short.

Don’t make potential customers see your name and ask, “What in the

world does that mean?”

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