Business Plans

You own a business. What do you want to do with it? What are your goals? You need to decide. This is the beginning of your business plan. So, …

Step 1: What is the one goal that you want to accomplish?

A plan is a roadmap for getting somewhere. So, where do you want to go? Earn $2 million a year? Pay yourself a nice salary? Become the vendor of choice in your chosen field? Pay off your debt?

It is hard to serve more than one master. Decide what is most important, and then make your plan around that one thing.

Example: I want Acquisition Advisors to become the U.S. leader in the sale of companies with annual revenue between $5 million and $50 million.

Step 2: What specific, measurable gauge will you use to measure progress towards, and accomplishment of, your goal?

Revenue? Number of units sold? Locations? Profits? Payoff of interest bearing debt? Be specific.

Example: “U.S. leader” means “sell more businesses in our target size range, on an annual basis, than any other company.” Because it is difficult and time consuming to determine the number of transactions completed by competitors annually, we won’t worry about the comparison until we are selling at least 50 per year. So, our goal is to sell 50 per year.

Step 3: What is the manner in which you will accomplish your goal?

By manner, we mean some descriptive qualities of what is important to you – that add some character to who you want to be as you strive to reach your goal.

Example: At Acquisition Advisors, as we pursue our goals, we want to earn generous compensation for our principals and fair compensation for our employees. We don’t want to have to take substantial financial risk in the form of large amounts of borrowed funds. We also want to achieve our goal with honesty, integrity, and develop a reputation for adding substantial value to our clients.

Step 4: Why will employees want to work for you rather than another?

Now that you nailed down what YOU want (via the first three steps), get this clear … nobody cares about what you want to accomplish. Others (employees, customers, owners and vendors) are only concerned with themselves. Clearly, your only hope for reaching your unusually ambitious goal is to attract unusually talented employees and give them reason to expend unusual amounts of energy, commitment and creativity towards reaching the goal. So, why are they going to do this for you?

Studies show that employees want to be needed, appreciated, respected and a part of a winning team.

Example: Acquisition Advisors will attract above average talent by providing a workplace where employees feel needed, appreciated, respected and rewarded for their contributions. Acquisition Advisors will only hire exceptionally talented, enthusiastic and good-natured people. We’ll ensure that all employees understand the company goal and their roles in getting us there.

Step 5: Define the Customer You Intend to Serve

Just as your personal goals don’t do much for others, they do little for your business either, other than provide a target towards which energy is spent. For real business planning you need to get something perfectly straight – your business only survives and thrives if it creates customers. More specifically, it must do a great job of satisfying the needs of customers to a level that compels them to purchase your product or service at a price that covers your costs. Beginning with Step 5, you must focus on your customer. The first step is to define, in great detail, your customer group(s).

5a. Describe the customer(s) that you serve.

Example: Acquisition Advisors serves owners of mid-size private U.S. companies that wish to “cash out.”

5b. Describe the various pertinent needs of your customer(s).

Example: Sellers of mid-size companies need skilled assistance in “making the business sale occur” in an orderly, professional, confidential, low risk, low cost and high-value manner.

5c. Describe the condition or “realities” of your customer(s), as they relate to your offerings.

Example: Sellers of mid-size businesses …

… are often unaware of the complexity, risk, time, cost and uncertainty inherent in the business sale process.

… are often use to “handling things on their own,” and are prone to attempt to “do it themselves,” specially when presented with the cost of hiring a talented and competent advisor.

… often have a sale price and all-cash terms in mind, and that price is typically set emotionally rather than rationally based on what the market will actually bear. Launching a sale process with unrealistic pricing almost always leads to tremendous amounts of wasted time, money and emotional energy.

… listen to their trusted advisors for advice, typically their accountant, banker, attorney or financial advisor.

… often enjoy the excitement of having buyer-suitors; flattery of interested parties; and “tests of wealth” (i.e. offers to purchase their business), but this does not mean that they are ready to sell.

… will only delegate the sale task to a specialist if they:

a. understand the benefits and perils of not doing so, and

b. become convinced, without reservation, of the quality and integrity of an available specialist.

5d. Describe the customer’s values and priorities.

Example: Sellers of mid-size companies …

… are emotionally attached to their business, and they derive a substantial amount of their identity from their association with their business.

… want to “make a great, parting ‘deal,’” if and when they sell their business.

… often, the decision to sell ends up being less about financial issues and more about emotional, personal and/or relationship issues.

Step 6: Describe the specific customer WANTS and NEEDS that you will satisfy better than your competitors.

Example: Sellers of mid-size private companies waste tremendous amounts of time and money because of their lack of knowledge about how businesses sell, for what price and terms businesses sell, what adds and detracts from business value, etc. Sellers also have few good choices for representation. Acquisition Advisors will offer exceptional and highly visible products and services that educate and assist business sellers in these areas.

Step 7: Describe, in detail, the products and services that you will offer your customer group(s). Do the same for competing products and services.

Place on a single chart, according to the important features and benefits to the customer, your products and/or services and those of your competitors. How are yours different? How can yours be meaningfully different? In a crowded field of car rental companies, Enterprise chose to meaningfully differentiate themselves by offering delivery (i.e. “we’ll pick you up”).

Example: Acquisition Advisors will publish books, tapes, seminars, newsletters, conferences and news columns of exceptional quality that educate our target market about:

a. Things they need to know that will save them time, money and hassle.

b. Consulting services offered by Acquisition Advisors.

Step 8: State of the Union

8a. Describe where you are today, in detail.

Financially (income statement and balance sheet);

Products and Services (conduct an analysis of profitability of each);

Operationally (people and tangible assets such as equipment and facilities);

Customers (numbers, types, locations, and diversity of each);

Marketing (strategy, programs, budget);

Sales (talent, programs, budget);

Truth (formal sources of honest customer feedback);

Product Improvement (mechanism for feeding customer feedback into the product improvement and development process).

8b. SWOT Analysis. List your company’s strengths, weaknesses, opportunities and threats. Rank each in order. With opportunities, estimate the cost (labor and money) and probable profit of each. With threats, list each potentially business-killing threat in order of probability and then include how these risks could be mitigated. Include estimated cost in labor and money for each mitigation strategy.

Congratulations. You have decided what you want; how you will attract your employees; whom you serve; what the needs are of those you serve; and outlined the products and services that you will offer to satisfy their needs. You have also taken a detailed “State of the Union.” Well, now what are you going to do? What steps are you going to take towards reaching your goal?

Step 9: Make Your Plan.

This part is not as hard as it seems. Simply look at the data that you documented in steps one through eight, then ask yourself, “What do you need to do?” Answer the following:

9a. What threats have unacceptably high probabilities? What can we do about them?

9b. What employee moves do we need to make? Whom do we need to get off the bus? What people do we need to get on the bus?

9c. Which products, services, projects or initiatives need to be eliminated, or vastly improved, for lack of profitability?

9d. In what areas, or with which products or services are we most successful, and what would the results be if we focused more energy (or all our energy) in that direction?

9e. Which company policies or standards need to be changed to develop a culture or organization that will be able to reach our goals?

9f. In what areas are we deficient and need to improve (such as in the customer feedback or the product development area).

These are just some of the important questions that will arise out of steps one through eight. All you have to do is make your to-do list and then add timelines, time-based goals and Voila! You now have a business plan. Now work it.