Fred Glave: Hi, I am Fred Glave, a volunteer counselor with SCORE, Counselors to America's small business. We are doing today is a series of videos that will take you on a step by step process of how you form a small business. Now we are going to move on to the subject of business plans.
Speaker: What is a business plan and why is it needed to start a business?
Fred Glave: Business Plan is probably the most important thing you will do when starting up your business. Business plan really lays out what your business objectives are and what your product or service concept is and be able to explain why in very compelling terms it is something that the market needs and will buy. In fact, we encourage people when they write a business plan or write what we call an elevator speech, that's about a two minute speech that you will give anybody as the what your business is, what your product is and why it is so needed in the marketplace.
By compelling, we mean something that is immediately obvious to the listener. The listener has to ask, "So what?" after he hears your elevator speech. You need to go back and do some more work on it. Basically, a business plan in addition to laying out your concept and your product and service offering will explain your market, what portion of market you are addressing, much as David Krauskopf explained earlier and then go on to deal with the operational aspects of how you are going to sell, perhaps if you are manufacturing a product, how you are going to manufacture it, where are you going to manufacture it and it also includes such things as a management plan and staffing and personnel. Most importantly, a business plan will include a listing of all your capitalization and startup expenses and a complete set of financials to show how your business grows, when it becomes cash flow positive and when it becomes possible. So basically, a business plan is a road map. It lays out where you are going and as the old saying has it, 'If you don't know where you are going then any route will get you there.' So it is important that you do write a business plan and that it is something that you pay a fair amount of attention to. On the other hand, we don't recommend that you follow it slavishly. My favorite quotation is by Louis Pasteur and that is, 'Chance favors a prepared mind.'
Well, a prepared mind comes from writing the business plan, but most small businesses are successful in part, because of timing and luck. So when you go through your business you may find opportunities that don't fit exactly what you laid out in your plan, but they are the right opportunity for you and you will know it when they come along and because you have a business plan, you will know if you are making a change and you will be able to figure out the impact of that change on your business. But then again, on the other hand, you can't go chasing after every opportunity so you should try to stick to your business plan at least in broad form as closely as you can unless a real opportunity arises. But don't go chasing after every sale. It is a very common mistake for people to find an opportunity here, an opportunity there and they are not within the scope of the market definition or the customer base that they define. They will end up spending all their resources going after business that never materializes. So in sum total, business plan is basically a map that gets you there and at SCORE, we regard it as a very important step in the business plan, in the business startup process. Don't leave it out.
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