“I was in business for nine years before I wrote a business plan.”
—Tammy Finch, owner, WebTech Services, Inc.
“We wrote a business plan when we started our business in 2006.Then, within six months, all our assumptions changed.”
—Don Dawson, president, IT360, Inc.
Many small businesses have a love-hate relationship with business plans. Most agree they need one, but the process of creating it can seem overwhelming. Small business owners quickly learn that if they are seeking outside financing, whether through a bank or an angel investor, a written business plan, including financial forms, will be required. But even if a business doesn’t need outside funding, having a business plan allows all owners to be on the same page with the direction of the business. Businesses that have the discipline to review their business plans at least annually find it helps them manage their business.
Getting It Down on Paper
“I attended a free SCORE seminar where one of my customers was speaking, back in 2009. I really went just to support my customer,” says Finch. “But when I got there, I met several SCORE volunteers who had been business owners themselves. I was at a critical decision point with my business—whether to purchase the building I had been renting.” Finch reports that SCORE volunteers helped her think through that decision. “I didn’t have anyone to bounce ideas off of, so they were very helpful.” Ultimately, she chose to continue renting her property, deciding that she wanted to stay flexible on her location, and wasn’t interested in getting into property management. “Now that I look back on it, I’m so glad I made that decision,” Finch reflects.
At that time, Finch didn’t have a business plan for Web Tech Services. “I knew I should have one, but talking with the SCORE volunteers really motivated me to do it,” she remembers. She pulled some sample business plan templates from the SCORE.org national website to serve as a starting point. Now she updates the plan annually when she does her corporate renewal. “It really helps to get it down on paper.”
Web Tech Services had been growing, and in addition to her husband and daughter, Finch had hired a few extended relatives. As the business grew, Finch was spending more time supervising employees and less time connecting with customers. “Thinking about my business plan helped me realize that I wanted the company to stay small and mobile. I wanted to keep the connection with my customers, and not be too focused on finding and supervising employees.” Finch had also considered opening a store in Canton. “I had been doing research on competitors and possible locations,” explains Finch, “but again, my business plan helped me realize that wasn’t where I wanted to focus.”
Through the growth process, Finch reports that the SCORE mentors continued to help her. “They followed up, checking in regularly to see how things were going. They were sincere. I could tell they really care about small businesses.” In fact, Finch decided to join SCORE. “I help with the technology side of things, and have done several seminars on social media marketing. Sometimes I even get new business from my SCORE workshops.”
A Sounding Board for Business
Dawson and Matt Machala founded their business, IT360, in 2006 and focused on providing 24/7 IT support to small- and medium-sized companies at reasonable prices. They weren’t looking for outside financing, but still put in the time and effort to develop a solid business plan before they opened their doors. “Then within the first six months, everything we had put in place changed,” reports Dawson. “We moved to a managed service provider (MSP) model. When we started the business, the customer called and we fixed his problem. Now we have the technology to see a problem before there’s an issue.”
“We’re like On-Star for your business,” explains Machala. “We can see your hard drive going bad and replace it before it fails. We know when your server is having problems and can be there waiting to fix it when you open the door in the morning—before you even know it’s going down.” So IT360 transitioned from the concept of an hourly rate to fix problems, to the model of a monthly fee to keep things problem-free—a major shift from their original business plan. “Honestly, we didn’t go back and update the written portion of the plan,” says Dawson. “What we did do is incorporate the financial information from our original business plan into a set of spreadsheets that we use to manage the business.” As assumptions change, they update the spreadsheets and use them to make decisions
“We used SCORE as a sounding board,” says Dawson. “We were pretty young when we started the business. The SCORE mentors have been in business a long time and are willing to open up and share information. “They’re willing to listen to Don and me argue,” jokes Machala. Dawson and Machala also found valuable information at a lender’s forum sponsored by the Small Business Administration at the Holiday Inn City Centre last summer. “We listened to lots of financial people and learned a lot,” remembers Dawson. Through self-funding, they have been able to grow from their initial three clients to over 200 in just five years.
Dawson and Machala report that their toughest decisions have been related to growth. They didn’t want to grow too fast and lose the connection to the business. “The decision to hire the first employee was a big one,” says Machala. “We’ve found that once we make the commitment to hire someone, we have to work hard to earn the business to keep him busy. We work hard, take care of our customers, and have fun doing it.” They now have seven employees and just posted another opening.
Like many small businesses, they wrestled with the rent vs. buy decision. “I always envisioned a company on Water Street,” says Dawson. Currently, they’re in their third Water Street rental location. “We’re still looking at the pros and cons of purchasing as the business grows,” explains Dawson. “But now we’re focused on refining our processes with the idea of adding a location in another city.” iBi
» Key Elements of a Business Plan
- Executive summary. A succinct explanation of your business, including key objectives and business goals. Write this section last.
- Business description. Describes your perception of the company. How will your business grow and profit?
- The market and competition. Honestly acknowledges competition and describes how your company will differ from other providers.
- The product or service. Describes the core of your business.
- Marketing/selling. Explains how you will access the marketplace. Will you advertise, attend trade shows, establish a website?
- Management and personnel. Explains how you will staff and manage your business; includes profiles of the owners and other key team members.
- Financial data. Contains the balance sheet, profit-and-loss statement, break-even chart and cash flow analysis.
- Investment. Based on cash flow, shows what the investor will receive as a return.