Business Start-Ups

When I was researching how businesses change or pivot their business plans, I found this presentation about Venture Capital and when you need it and when you don’t, by Union Square Ventures in New York.

Venture Capital Presentation

Since I have no control over whether it disappears from scribd, I want to pull out a few points about venture capital. First, high risk capital wants a 50% plus return a year – and that’s going to compound over time – that’s double the money back in about 18 months and much more if the investment is long term.

Second, raising venture capital is a 3 to 6-month project. Don’t expect the cash to be easy or quick.

Third, 99% of new ventures don’t need venture capital and venture capital firms look at more than 100 business plans for each investment.

Fourth average dilution from the initial venture capital investment is 40% and on exit, the average entrepreneur who uses a VC owns less than 10%. The logic is that 10% of something big is better than 100% of something small but it does show there huge culture change required.

Venture capital is wrong for you if you’re too early in the start-up phase, your business is too small or you trade in n industry which doesn’t have barriers to entry to stop plenty of competitors rushing into the market to share in your early success.

The presentation offers bootstrapping up as an alternative to venture capital as i mentioned in Why Don’t Banks Finance Startups . I also agree completely with the comments that “cash in the bank makes you soft” and “sell, sell, sell – your customer is your best VC”.

It’s well worth taking a look at the presentation before you start thinking about wanting venture capital.

If you think about going down the venture capital route for funds for your young business, I recommend you read this blog post from Fred Wilson of Union Square Investments.

Why Early Stage Venture Investments Fail

It’s always good to understand the situation from the other side since it makes their demands seem more reasonable. You may not like them, but at least you understand why they are made.

It’s well worth reading for how the business plans are changed between the venture capital investment and exit and how success seems to improve when the business plan is changed.

I hope Fred Wilson doesn’t mind if I pull out a few quotes I particularly want to emphasise.

Dick Costolo, co-founder of FeedBurner, describes a startup as the process of going down lots of dark alleys only to find that they are dead ends. Dick describes the art of a successful deal as figuring out they are dead ends quickly and trying another and another until you find the one paved with gold.

This may not sound like the rational, straight line planning model you want to use for your new business but I think it’s a remarkably astute way of looking at business planning in a start-up. The planning helps you to think about the options and focus on those that you think have the best chance of success.

But the true test happens in the market.

Either customers buy… or they don’t.

You can go down lots of blind alleys if the cost of doing so is low. But if you are spending a million dollars on each blind alley, you’ll be out of business in no time.

Testing small is good… failing early is good when you learn what doesn’t work. It gets you closer to what will work. See The Lean Startup book by Eric Ries.

Most venture backed investments fail because the venture capital is used to scale the business before the correct business plan is discovered. That scale/burn rate becomes the cancer that kills the business.

This is interesting because it makes it clear that money isn’t the panacea to business start-up problems that many entrepreneurs think.

The answer lies in finding a winning strategy and proving it in the market.

Only when you are confident that you are right and you have the evidence that will stand up to third party scrutiny should you look for the finance to scale up your business.

After taking a look at Business Plan Writer as one option for business planning software, I thought I would review Sage Planning For Business which is again developed primarily for the UK market.

Sage Planning For Business Review

Sage is a big company and provides the most popular small business accounting programs in the UK so I had high hopes for their business planning software although I’ve been disappointed in the past by the accounting software.

Sage Planning For Business is available from directly from Sage (£25 plus VAT at the time of writing) or you can pick it up from various retailers like Staples (£30) and Currys (£39.99).

What I Liked About Sage Planning For Business

1. I got my copy for free from Lloyds TSB and this version has business plans in the standard Sage format and the preferred Lloyds TSB version. I haven’t spotted the subtle differences yet. Just because you can get Sage Planning For Business free of charge doesn’t mean it’s good value since you have to factor in the cost of your time to use it.
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2. It allows you to build up financial projections over 3 years. I know this seems ridiculous when you don’t really have much of a clue what your business is going to do over the few months but it seems to make bank managers feel good.
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3. You can predict sales per product per customer/customer type. This is useful if your margins are likely to be very different depending on the type of customer since it captures your underlying assumptions of what you expect to do when.
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   For example, I used to work for a company that sold cutlery and silverware, and we’d get 40% margin on sales to independent shops, 25% to departments stores and 15% on mail order. You can also have different sales prices and margins for different months of the year, perhaps reflecting the retail sales in January.
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4. You can vary payment assumptions on your sales by customer type and even by month and also factor in a payment discount for prompt settlement.
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5. There are useful business tips throughout the program explaining how things work. For example there are explanations about PAYE and how to employ people.
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6. The Sage Planning For Business software links into other Sage programs like Sage Start Up and Sage Instant Accounts. I haven’t tried it myself but if Sage says it does, it will.
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7. It calculates summary reports by month for the Cash Flow, Profit & Loss Account and Balance Sheet. A little niggle but I’d have preferred that the numbers were formatted with the normal convention of negatives in brackets and with a comma to separate the thousands.
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8. It has an executive summary which automatically brings in graphs and key number summaries from the financial forecasts which is neat.

What I Don’t Like About Sage Planning For Business

1. It feels much more complicated and less intuitive to use than Business Plan Writer. If you’re nervous about preparing a business plan then I think you’ll find Sage Planning For Business scary.
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2. I found the way Sage Planning For Business treated wages and salaries as very simplistic after the sophistication of Business Plan Writer. My preferred way in practice is to build up the costs based on position/person name since you’ve got full flexibility over what they get paid and you have an audit trail for the build up of costs. In Sage Planning For Business, there are the number of people and an average monthly cost for each.
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   That sounds simple until you start thinking about how you want to add people to your business. It starts with you, then you might want someone in the warehouse on minimum wage from month 3, then some part-time administration help from month 6 and a sales person and another warehouse person in month 9. I think there’s going to be a lot of head scratching going on as you try to recalculate your average monthly cost per person. And it gets worse when you change your sales force and decide that you don’t need that second warehouse person for two more months.
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   I later found out that you could add extra categories of wages which gets around the problem but it shows what I mean by saying that Sage Planning For Business doesn’t seem that intuitive. Because I was only trying to do a one-year plan, I also got myself confused when I added a cost of £1,500 for month 5 and the software shows that this is an average cost of £333 per month. I thought I’d made a mistake.
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3. I can’t see any way to deal with the rent quarterly payment in advance problem without sacrificing the Profit & Loss account and forcing the payments into the quarterly months. For a big company like Sage I expected better for a predictable problem that has a significant impact on the numbers. The same problem happens in reverse for fees like accountancy where the charge for the year should be spread over the months but you may not receive and pay for the service until well into the second year.
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4. I can’t see any way of dealing with stock in the business planning software. I don’t understand this since it is a major factor for many businesses.

Overall Thoughts On Sage Planning For Business

Sage Planning for Business does the majority of things that I’d expect done by business planning software.

It is more complicated that Business Plan Writer and it feels it when you are using it.

Since you can get a copy of Sage Planning For Business for free from Lloyds TSB, it has to be worth a look to see how you feel about the complexity. If Lloyds is your preferred bank, then it is worth persevering with since you can produce a business plan in their preferred format.

If you don’t feel comfortable using it and you feel it is inhibiting your creativity and thinking, then try one of the other business planning software programs. Your time matters because, as a small business owner, there will always be more things that you could do.

Promotional Video For Sage Planning For Business

Here is a video to promote Sage Planning For Business

Have You Tried Sage Planning For Business?

If you have used Sage Planning For Business, I’d like to hear your opinions.

Did you find it easy to prepare a business plan?

Was there anything you particularly liked or didn’t like?

The full title of this book by Richard Walsh is

The Start Your Own Business Bible: 501 New Ventures You Can Launch Today

In my review on Amazon.co.uk, I rated the book at 4 Stars. This means it is good to very good.

Here is my review.

As a business coach, I sometimes get calls that start with “I want to start a business but I don’t know what kind. Can you tell me a business where I can make a lot of money?”

The short answer is No. It depends so much on you and where your skills, interests and passions lie.

But this book gives you some answers to that question. It tells you about 501 different ideas for starting a business separated into categories based on how much money is needed.

For each business idea, you get a concise summary of what’s required which will help you to narrow your focus. Then you can start to research deeper into the particular business types that interest you. Not all the businesses will be practical. You can’t suddenly become a lawyer, an accountant or architect because you normally need to get a degree and then take professional qualifications. The journey can be long before you reach the end. Other types of business, including what I do as a business coach, don’t have any of these mandatory qualifications but it’s still best to get relevant experience before you risk starting a business.

As a general rule, the harder it is to get into a particular type of business, the more money you can make. That’s a simple application of supply and demand. If demand is high and supply is short, prices are high but it will attract new people unless it’s tough to break through and become established.

If you already know what business you want to start, then this book isn’t for you. If you see it in a bookshop, it’s worth reading what it says. When you already know the business type, there are plenty of niche specific business books on Amazon so search for the “(trade or profession) + marketing” or “starting a (trade or profession) business”. Just be wary of authors who take a cookie cutter approach and have written the same book for many types of businesses by using the find and replace facility in Word. With care, you can find books written by genuine experts in the trade you’re interested in.

I don’t understand why there are so many bad reviews. What can people expect from a book that takes a short look at so many types of business.

I originated rated this book with Five Stars but because time has passed with an update, I’ve knocked one star off.

You can buy the book from Amazon.co.uk or Amazon.com

Specialist business planning software is a great way to help you to out together a business plan to take to a bank or other financial backer.

I’ve written before about the different types of business plans.

It’s The Thinking In Business Planning That’s So Important

I believe in the thinking that goes into preparing a business plan and I believe in capturing the assumptions for what you thought would happen at a particular time. It’s a great way to see how you are learning and how the business environment is changing.

I also know that your business plan is going to be wrong – and it may even be out of date before the ink has dried.

Business Planning Software Makes The Thinking Easier By Automating The Process

It therefore makes sense to take way the pain of business planning by using specialist software which helps you to combine words and numbers. If you know what you are doing, you can do it in Word and Excel but it gets complicated very quickly.

I’m going to buy and review various business planning software solutions designed for small businesses so that I can help you and also be in a better position to make recommendations to clients and prospective clients.

You Need A Business Plan

I want to help you to plan your business.

I don’t want to do the business planning for you.

In fact, I believe very strongly that it’s a bad idea unless you struggle with words and numbers.

It’s a matter of ownership.

You need to own the plan – it must be yours and not the person who wrote the words or cranked out the numbers.

The Problems Of Lack of Ownership Of Business Plan

I saw the problems of lack of ownership too often in the bigger businesses I’ve worked in where managers say things that contradict both the words and the numbers in the plan.

The inevitable result is a complete lack of credibility.

Either the plan or wrong or the managers are saying what they think the other side wants to hear… and they believe neither. This is one of the reasons why Business Start-Ups Fail To Get Cash From Banks.

Business Planning Software I’ve Reviewed So Far

Business Planning Software Option 1

Business Plan Writer Review

Low cost, easy to use but limited functionality.

Business Planning Software Option 2

Sage Planning For Business

More comprehensive but more complicated. More expensive but you may be able to get a free copy. It may not be a bargain if it takes a lot of your time.

Business Plan Writer is the first business planning software I’ve reviewed with the start-up business owner in mind.

It is available from http://businessplanwriter.co.uk/ and has been written for the UK market but before you jump in and buy, you should read my review.

What I Like About Business Plan Writer

1. The cost of Business Plan Writer is very low – I paid less than £40 for the one year small business version. There are also versions for Co-operatives and Social Enterprises.
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2. It is intuitive to use for writing the words and doing the numbers. You don’t have to be a business planning expert and it has sample plans to help guide you along the way.
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3. The words and numbers are combined into one plan for export into Word (if you want to make it look pretty) or directly into a pdf.
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4. I like the idea of the mini-plan which helps you to plan the plan. If you’ve ever written a business plan, you’ll know that it can be very daunting.
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5. The words and numbers are both broken down into separate smaller sections. This is the old “How do you eat an elephant? One bite at a time.” approach and it works.
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6. The sales forecast can be built up from 20 different products/product groups where you forecast the quantity sold, sales prices and direct variable costs. This gives you a choice to choose between cash and credit assumptions for sales and costs. This area for the product sales and margins is the critical section and I have a bee in my bonnet that it is too often skimped over by professional accountants in planning and reporting. I like the way that Business Plan Writer encourages you to think carefully and also focuses on the drivers – units and prices – rather than total values.
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7. The plan saves itself each time you update it.

What I Don’t Like About Business Plan Writer

What I Don’t Like About Business Plan Writer – Words

1. The size of the fonts is too small for me. I’m finding that I’m having to squint at my PC when I can normally read the screen fine. This makes using Business Plan Writer tiring and uncomfortable if you no longer have 20/20 vision but are too vain to have glasses.

What I Don’t Like About Business Plan Writer – Numbers

My accountant hat has come out – I am a chartered accountant, even if I don’t trade as one.

That means I know that I can do anything I want with a spreadsheet although it can take many hours to build a complex model tailored to a particular client or business sector. Unfortunately for Business Plan Writer this means that I’m a hard taskmaster on the numbers.

There is a big trade-off between being simple to use and creating valid information which presents a meaningful picture. Business Plan Writer keeps things simple, I’d have added some more complexity to give more flexibility.

1. The months are headed 1, 2, 3, 4 rather than January, February etc. This has the advantage that you can start in any month but if you have a seasonal business (e.g. retailer and Christmas) and it takes you longer than you expect to prepare and present your business plan, you may be shuffling your numbers along and you may get confused. I’d have liked to have seen a table where you can define the months to make the plan easier to review.
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2. You can set a flag for whether your business is registered for VAT or not but I’ve tried it twice now and neither time did it work out the VAT correctly -although the rate is set at 20%, it is only calculating at 1%. I’ reported this to the author of the Business Plan Writer who accepted it as a bug which was fixed within 24 hours. I’m impressed. Bugs happen – if Microsoft can’t get it right with their huge resources for developing and testing software, then smaller developers will also have the occasional problem – what’s important is that they get them fixed.
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3. I like the simple way you can set up the model per product for cash or credit sales and purchases. If you think you’ll have both, you can set up cash products and credit products. The standard assumption is you’ll be paid in the following month – that’s sales in June will be paid in July – and you can’t change it. Most businesses I see have Days Sales Outstanding of between 60 and 90 days because of the standard net 30 day terms – items sold on 15th June become due on 31 July and most of the money from the good customers comes in the first two weeks of the next month. Other customers have to be chased hard. It’s an added complexity but I’d have liked to have been able to choose between more credit options.
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4. The numbers need to be checked after you’ve done your plan – I am sure that a change on one product created a change on another although I couldn’t repeat the experience.
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5. Overheads gives you plenty of flexibility to build in the costs you need but there is the big assumption that expenses for the Profit & Loss account and payments for the cash flow are the same. This is where simplicity causes conflicts with valid information.  For example, if premises are a significant cost for you (e.g. you’re starting a shop) and you have to pay rent on the quarterly days in advance, you’ll either get the cash flow or profit forecast wrong to give a better view of the other. This may dent your credibility with a bank. Since you’re forced to choose, I recommend that you work at getting the cash flow right and let your accountant worry about how costs are spread over the periods in the Profit & loss Account.
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6. I like the fact that you are encouraged to build up your personnel costs by person from their starting dates but I couldn’t get starting dates to stick unless I also set a leaving date first I assumed they left at the end of the year, (just don’t tell the staff). The guidance notes aren’t up-to-date either since the monthly spread of costs seems to be new functionality. There are separate flags for employers national insurance and pension but they are combined into one total. I found it easier to turn these off until I was happy with the numbers and then turned them back on.
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7. You can introduce assets at the beginning e.g. if you have a van which you transfer into the business but this is treated as equity rather than a loan and it is only on these assets introduced that depreciation is calculated. assets bought in month 1 don’t carry any depreciation throughout the year. This is wrong although it doesn’t affect the cash flow as it is a non-cash expense. For some strange reason the depreciation charge all happens in month 12 in the Profit & Loss Account.
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8. I couldn’t find any way to handle stock. I know from my own modelling experience, this can get incredibly complicated but it would have been nice to have a stock build/reduce facility – even if it was one amount up or down each month – to make the cash flow more representative. Again using a shop as an example, you’re going to need stock when it opens and you will probably increase the value as the store gets more established and sales grow.
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9. The numbers are built up in detail but the reporting is done as a high level summary for the Profit & Loss account. I like the summaries since they don’t overwhelm you with numbers but I would like to be able to print out the details and choose which to include in the business plan. When you get asked a question like “What assumptions did you make about rent and rates in these property costs of £6,500 per month”, it’s nice to be able to show the detailed analysis without having to flounder around with “I think I assumed rent of £3,500 and rates of 40% of the rental cost.”
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10. You can have two loans in the business which I think is good but I’d have liked to have been able to give them labels to make it clearer what money is coming from whom.
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11. The Profit & Loss account and cash flow are monthly, the balance sheet is just for the end of the year [even though it doesn’t say]. Personally I’d have liked to see a monthly balance sheet although this is another complexity. It’s just that it helps to show how any cash problems have arisen.

Business Plan Writer doesn’t split the direct labour and salary costs between the net payment in the month and the payment of PAYE tax and national insurance to HM Revenue & Customs the following month but I don’t have an issue with that. It keeps things simple and it is prudent on the cash which is the way to be.

Despite my concerns on the numbers forecasting, I do think that Business Plan Writer is useful if you want to get a broad-brush view of the financial feasibility of a business idea. The challenge for any business start-up is to build up sales and margins fast enough to stop the start-up costs and day to day expenses causing the business to run out of money.

Overall Thoughts On Business Plan Writer

It is easy to use and if you want business planning software to help you to focus and write the words in your business plan, then Business Plan Writer will be a big help.

Unfortunately I have significant concerns on the numbers side for anything but the simplest of businesses. It would be OK for me with my business coaching and training because I don’t have to worry about stock/work in progress or equipment.

It will work less well for consultants and designers who build up work in progress on projects and only invoice when stages are complete and the lack of stock means it’s not suitable for retailers, distributors or manufacturers unless you process other people’s materials or receive it on free issue.

I had hoped Business Plan Writer would do a bit more to help small business owners get to grips with their numbers.

I’m a bit believer in the “do it yourself” approach to business planning and then having it reviewed by a professional. This way it is your plan.

Business Plan Writer is at the cheap and cheerful end of the market for business planning software. It is very useful if your needs are simple.

Business Plan Writer Is Recommended

Recommended for those business owners who:

• want to work on the business planning words and will let someone else worry about the numbers or
• for those whose financial requirements are very straightforward or
• who want to get a broad-brush view on the feasibility of a business idea.

Have You Used Business Plan Writer?

If you have used Business Plan Writer, then I’d like to hear what you think of the software.

Did it help you to write a business plan or did it frustrate or confuse you?

Update On Business Plan Writer

Following my review I had a good chat with the software author, Dave Kilroy and he’s taken many of the points on board.

There is a multi year version of Business Plan Writer coming out in the next few weeks and then in the winter, there will be a version that deals with the issues that I’ve raised.

I think it’s important that Business Plan Writer stays simple to use.

One of the most powerful things you can do when negotiating is to see things from the other person’s perspective.

To find out why banks don’t finance business startups I want you to put yourself in the bank manager’s shoes when he meets an eager entrepreneur looking for cash to finance the great (ad)venture.

• I don’t know you.
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• You’ve got no track record of running your own business successfully.
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• You’ve got little management experience.
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• You don’t know the trade you want to go into.
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• You haven’t done your homework.
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• The proportion of money you’re putting into the business is much less than the money you want to borrow.
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• You’ve got no security to cover the loan so the bank can’t get its money back if things go wrong.
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• Your business concept isn’t proven.
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• Your presentation and business case is badly explained with little logic and pie-in-the-sky numbers.
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• You don’t have a management team in place so the business can carry on if anything happens to you.
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• There’s nothing special about your business which will cause customers to choose you rather than your competitors.

I could go on but long lists of bullet points are tough to read.

It’s easy to criticise banks and in many cases right to do so.

But business startups are making rejection inevitable by making unreasonable requests.

If you think as the bank manager thinks, you’ll see that he’s got a number of interests:

1. He wants to protect his own position. He doesn’t want to look like an idiot and propose a no-hope situation to the credit committee to get final approval for the loan. He’ll lose the respect of colleagues and his boss and make them more reluctant to back his judgement on other proposals.
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2. He wants to protect the bank. A bank isn’t there to provide risk capital and one bad loan which doesn’t get repaid takes away the profit from many good ones.
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3. He wants to protect you. If your proposal is only so-so but you’ve got security (e.g. your family home), the bank can protect its position but you’re taking big risks.

Banks are in the business of lending money but it’s much easier to lend to an existing business with a proven record of sales and profits and with a stable and experienced management team in place.

Banks want to invest in winners (and avoid the losers).

The big question of you want to get finance from a bank for your business startup is “How can you give them confidence that you are a winner?”

It starts by trying to avoid the black marks that I listed at the start of this article. The more of them that apply to you, the less willing a bank will want to finance your startup business.

So what can you do instead?

First, can you put more money into the business yourself. I’ve known entrepreneurs who have money but didn’t want to risk it in the business. That sends a very clear signal to the bank about your confidence in the business idea. If you’re not confident, there’s no reason why the bank should be anything other than very nervous about risking its cash.

Second, can you borrow the money from family and friends or even have them as silent partners who own part of the business? My advice is to formalise any agreement – what interest you will pay, when you hope to repay the cash, what happens if you don’t? Also, if shares are involved, what happens if one person wants to sell up? It’s a good idea to get legal advice but it can be expensive and that creates a chicken and egg situation.

Third, think about what you can do to bootstrap your business. The sooner you get your business making profit and generating cash, the less finance you will need. I hate to hear business owners talking about “breaking even in year 3.” Look at how you can boost your revenues and trim your expenses by avoiding unnecessary costs at the early stage of your business.

Focus on what’s critical and delay the nice-to-have items.

Take advice where you can. From other entrepreneurs and from professional advisers. Often good advice is a lot cheaper than bad advice or no advice. It saddens me when I see essential money wasted on marketing that obviously won’t work because there’s no clear message or offer.

You may want finance for your business startup but it can often be used to disguise mistakes and inaction. These only become clear when the money runs out.

I regularly read the Harvard Business School blog and many of the articles are for big businesses but one inspired me to give you my own thoughts.

If you are thinking about starting a small business, see how you measure up to these three personality traits:

• Practical
• Purposeful
• Impatient

First, if you’re starting a business, you need to understand that the world is very different from being employed.

There’s no one to look after you and do the things you don’t like to do or the things you don’t know how to do unless you find someone competent to delegate to. The brutal truth is that there are plenty of jobs that must get done and you’re the person who is going to have to do them.

That’s why you must be practical.

You can’t have your head in the sky without your feet firmly planted on the floor.

Ask yourself the difficult questions you might have been avoiding and get yourself a plan.

Yes it might change.

That’s what a plan is for – to get your thinking down on paper so you can think about the implications and consequences. It also acts as a great record of what you are thinking because your ideas will change as you learn more.

The second point is to be purposeful.

This comes back to planning too.

Have a clear destination.

Clients know that I use a short quote from Chinese philosopher Confucius to them – “a man who chases two rabbits catches neither.”

It’s much better to decide which rabbit you want and focus your time, energy and money on getting it.

I believe that your big task as a new business owner is to find ways that you can create value for customers that’s different or better than your competitors.

The last trait is impatient.

I see two types of entrepreneurs.

The first is very patient and accepts that it takes time to develop a market, to make sales and especially to make money.

The second is impatient.

I prefer the second.

Focus your business on taking action and getting results.

You do need to do some thinking upfront. Otherwise, you can very quickly make expensive mistakes.

But you don’t know for sure that something is going to work until you’ve taken action and seen the response.

If it doesn’t work, check that you’re clear on the purpose and then change what you’re doing.

I like these three personality traits for starting a business. If you’d like to read the original article on the Harvard Business School blog, go to Three Traits of Successful Entrepreneurs

It’s no surprise that I am a big believer in the advantages of planning and preparing strategic plans, business plans and budgets.

It’s the process of planning and how it helps you to clarify your thoughts and see problems and weaknesses in advance which is often more important than the plan itself although it can be very valuable to capture your thoughts and assumptions in writing. Your memory can play funny tricks.

But I find that many small business owners are confused about planning and because they are confused, they either don’t do it or their plans don’t help them as much as they can.

And because they don’t plan, actions taken don’t produce the results expected.

There’s a fine balance between thinking and doing.

Too much thinking and not enough doing means that you don’t make the progress you want. I met one lady who had spent five years planning here business without ever trying to take it to market and proving the concept – and she wanted me to help her do more planning. I decided not to play.

Too much doing without thinking means that precious resources (time and money) are squandered. I’ve known plenty of people who leap into a new marketing campaign without taking 30 to 60 minutes thinking about what they want to achieve and why potential customers should take action.

There are five types of planning suitable for small businesses:

• A strategic plan – this answers the big questions about how and where you are going to compete and keeps you focused on the 3 big business risks.
• A business plan – which is written to attract resources from third parties, usually loans from a bank or equity finance from venture capitalists. The purpose of a business plan is to “sell” your business idea and provide sufficient credible proof that people want to become involved.
• A budget or annual operating plan – this is a detailed plan of action for the next year with numbers that you’ll be using to compare your business performance against.
• A project plan – a very detailed action plan to implement one particular project.
• A one-page campaign marketing plan – I really like the idea in Guerrilla marketing that you can quickly create a winning campaign by thinking through and answering a few carefully chosen questions.

Confusion happens when you mix up these five types of plan or think that one plan will serve for all five purposes.

Here are some quotes about planning which help reinforce the advantages of planning:

“Planning is bringing the future into the present so that you can do something about it now” (Alan Lakein)

“Let our advance worrying become advance thinking and planning” (Winston Churchill)

“Good fortune is what happens when opportunity meets with planning.” (Thomas Edison)

“Plans are only good intentions unless they immediately degenerate into hard work.” (Peter Drucker)

“In preparing for battle I have always found that plans are useless, but planning is indispensable.” (Dwight Eisenhower)

Planning is thinking about the future – what could be, should be, may be – and turning it into the actions which will help you to create the future you want.

Planning is the start but not the end.

Successful action must follow the planning stage so your plan needs to have your commitment.

There’s a useful acronym, SMART which helps you to create the right kind of action focused goals:

• Specific – be clear on what it is you will do and achieve
• Measurable – so you can be certain you’ve succeeded
• Achievable – your goals should stretch you but not overwhelm you.
• Relevant – to your bigger objectives
• Time bound – to create some urgency. Even with a great plan, day-to-day problems can mean you delay what it is important for you to do today.