In the aftermath of management scandals at Enron, WorldCom, Tyco, ImClone, and others, even the "soft" section of a plan, naming the management team, plays an important role in building the plan’s credibility. "It takes a different set of skills to launch and start a business than to manage and grow a business," says Mr. Orion. "Smart entrepreneurs will recognize when they have passed their skill set and will bring in good management."
The financial section of the plan should include an honest evaluation of the company’s needs. "You rarely hear the founder of a start-up say, ‘I estimated and budgeted right and had plenty of money,’" says Ken Yancey, CEO of the Service Corps of Retired Executives (SCORE), a Washington, D.C.–based program that provides mentorship and consulting assistance to small businesses. "Particularly in a down economy, you need to make sure you’re honest about your early capital requirements. We’re talking about money for traveling, software, computers, telephone lines, and server leases."
These days, Mr. Yancey adds, it’s important for a business plan to prove the company can bootstrap – a far cry from the dot-com boom, when lavish office expenses were common. Companies must show where they need to spend money and where they don’t.
Extra expenses weren’t something Ms. DeLaRosa initially planned for. After consulting with her local SBA Small Business Development Center, she learned her expenditure projections were way off.
"You don’t realize how many expenses there are, running a business," she admits.
To avoid such mistakes, entrepreneurs can develop a plan with input from a variety of sources, from outside experts to bankers to employees.
"Entrepreneurs often work with consultants, but they don’t get enough people involved in the business plan who are on the other side of the fence," says Rebeca Romero, CEO of Centinel Bank of Taos in New Mexico. "Many people are scared to bring in a business plan when it’s not complete, but I’d much rather have someone come in and say, ‘This is a rough draft – what do you think?’"
Also, it’s clear from investors that business plans aren’t just for start-ups. An established company will have a different, larger readership for its finished business plan. "If you’re already in business and don’t have a plan, you want to involve those stakeholders important to you and your organization, whether they’re clients or financiers, so they have a concrete understanding what your business is," says Mr. Yancey of SCORE.
Mr. Villalobos believes entrepreneurs who are shopping around their business plans will benefit by being realistic about financial projections. "Investors want to be told the truth," he says. "They’ll work with you even if times turn bad, but don’t fudge around and say you don’t have a [financial] problem."
Not getting a loan right away forced Ms. DeLaRosa to rethink her business plan, which meant examining the market more closely. Last year, she received a $35,000 line of credit to help boost production – and celebrated her first profitable year.
Her re-evaluation even prompted her to make a change in her product line. "I’m glad
I didn’t get that [first] loan," she says. "It gave me more time, which meant making less costly mistakes."
Templates for Success
Helpful sites for writing a business plan:
•B Central (www.bcentral.com/articles/bizplans/101.asp): Straightforward article on how to put together a basic plan.
•PlanWare (www.planware.org/freeware.htm): Provides links to freeware sources and papers on financial forecasting, strategic planning, and capital management.
•SBA’s Business Plan: Road Map to Success (www.sba.gov/starting/indexbusplans.html): No-nonsense outline of sections and content for start-up company plans.
•SBA Online Library Reading Room (www.sba.gov/library/sharewareroom-starting.html): Contains downloadable ZIP files covering format and strategic thinking behind a plan’s organization.
•Vfinance (www.vfinance.com): Capital matchmaking site provides free business plan template. Registration required.
