A key element to the success of most new companies is their access to capital. Among the many sources of capital that we've talked about in the past are personal savings, friends and family, business loans, and angel investors and venture capital companies. All require providing some level of information about the plans you have for your business.

Even if you are already in business or don't need to raise capital, you can run your businesses more efficiently and effectively with some good planning. This is especially important if you are starting or running a business based on some new innovation or technology.

There are 4 types of planning I work on with clients:
• Strategic planning.
• Business planning.
• Market planning.
• Financial planning.

You may wonder why so much planning and what is the difference? They all seem the same.

Work ON your business

Before I go any further, let me stress the importance to every entrepreneur and business person to take time out each week to work ON your business. This is where you will tell me you work 50-60-80 hour a week — how much more working do I want you to do on your business?

The key word here is ON. People work IN their business, doing day-to-day functions, making sales, talking to customers, paying bills.
Really successful entrepreneurs know they have to take time, step back and work on the business. That includes planning.  

The important part of planning is the process, not necessarily ending up with a 50-page document that sits in your computer never to be seen again. We all know or should know that a goal not written down is not a goal; it's only a thought that can't be shared, measured or accomplished.
The same is true of a plan for your business. Let's talk about the four types of planning.

Strategy

Strategic planning is taking the big broad view of your business. I often engage in strategic planning that does not even require a written document but a series of pictures of your company. What are your mission, vision and purpose? What problem are you solving? What do you want your business to look like in the future? Where are you going?

Business

A business plan tells an investor how you plan to operate your business to make revenue and profits. One of the biggest mistakes entrepreneurs make is to focus most of their energy on the product or technology as if the success of the business depends on it. This is important, but it's not the most important element for your businesses success.

The most important thing is if you are going to make money. OK, I hear all the time: "Money is not the main reason I want to own my own business." But let's be realistic. If you are not making money, all you have is a full-time hobby.

Marketing 

Do not mistake a marketing plan for advertising. A good marketing plan is critical for your business. You need to know who your target customer is. If you don't know who you're aiming for, how do you know when you've found them or even how to find them?

One of the biggest mistakes people make is to find out how large they think a market is and then say, "I only need 1 percent of this market and we will be rich."

Find out what your perfect customer looks like, how many there are, how you're going to reach them (this is the advertising piece) and how you're going to convince them to buy what you have to sell.

Determine who your competition is and — make no mistake — everyone has competition!  How do I compare with them? What makes me unique; why will my customer buy from me instead of them? When you really understand your market you can really do great things with your business.

Financial 

Finally comes financial planning. I save it for last because you need to know elements from the other three plans to make good financial estimates for your business. That's the difficult part of planning, but it can be done intelligently and provide valuable information.

Best projections are built from the bottom up, not from 1 percent of the market that we talked about earlier.

What milestones have you achieved already, and what is your timeline for future accomplishments and milestones? When you know where you want to take your business and how you plan to get there, who your customers are, how to reach them and what your competition is doing — now you have the answers to a lot of questions that we can translate into financial estimates.

Key questions 

• How many am I going to sell?
• What am I going to charge?
• How many employees do I need?
• How much am I going to pay them?
• How much do I need to spend on advertising?
• What will my rent, utilities and other overhead cost me?

Now let's add one question to all of these: when?

If you can answer these and other questions about your business — plus say when you can have a financial blueprint for running your business — the answers will help you grow. They also will keep you from getting into unexpected difficulties with money and let you prepare instead of finding out one day you don't have money to pay bills. 
 
• • •
All this planning may seem intimidating and overwhelming, but most entrepreneurs and business owners have the answers or the capability to get the answers if they take a little time to work ON the businesses instead of just in it. The hard part is taking that time to focus and put that information down on paper (or computer).

Fortunately there is a lot of help out there for you on the Internet, with your CPA, with other professionals or in our office. 
 
       

Loretta Daniel is director of the Murray State University Regional Business and Innovation Center. She can be contacted at 270-809-6071 or loretta.daniel@murraystate.edu.