Author Archive

Why Write a Business Plan

Posted: April 24, 2000 by Sutton Landry in Planning, Startup

Classic Cincinnati Post column from 1999

In today’s new economy, where business is conducted “at the speed of light” and all the rules of the old economy have been called into question, do you still need a business plan?  The answer is yes, you do, regardless of whether your business is new or old economy based, or whether you are looking for venture capital or a bank loan.  One thing that hasn’t changed is that a business plan is still essential for raising capital.

Increasingly, it is also required for establishing other types of business relationships.  In the past few years we have had clients at the NKU Small Business Development Center who have needed business plans in order to lease real estate, to secure trade credit, and even to be considered as a supplier for a Fortune 100 company.  Unfortunately, none of those clients had a plan prepared prior to receiving the request for it.  As a result, critical business decisions were delayed, usually for several months, until the client completed the plan.  A business plan is an absolute necessity in today’s business world.  You may never have needed one before, but if you plan to start a business or even stay in business, you will surely need one in the very near future.

Since you will need to write a business plan sooner or later, I recommend that you start on it now.  Writing a good plan, one that will help you achieve your particular goal, is a time-consuming process.  Even if you are a good writer, have good information about your business and customers, and have up-to-date financials, you can expect to spend between 50 and 100 hours writing a plan.  If you are writing a plan for a brand new business, you can expect to spend between 100 and 150 hours.  While the process is certainly time-consuming, remember why you are doing it:  to sell yourself, to demonstrate your knowledge of your business and industry, and to convince the reader of your ability to operate a successful enterprise.

The good news is that you don’t have to write the plan all in one sitting or as one giant essay.  You can write your plan in relatively short sections as you have the time to work on it.  Virtually all business plan guides, whether software or paper, follow a similar format that breaks down the essential information  into sections and subheadings for easy review.  This format makes it much simpler for you to write your plan in increments.  Here are the sections that you need to include in your plan:

Cover Letter:  Start with a cover letter addressed to the person you are meeting with.  Briefly summarize the history and financial performance of your company and then explain why you are there, i.e., to secure financing for a start-up, expansion, acquisition, etc.

Business Name and Address:  State the full legal name of the business, its address, and all communica- tions connections (phone, fax, e-mail, web site).

Ownership and Structure:  State the firm’s legal structure ( S Corp, LLC, etc.) and give the names of all the owners and the percentage of ownership that each of them has.

Business Description and History:  Begin with an overview of your operations:  what you do, where you do, and how you do it.  Be descriptive.  Assume that the reader knows nothing about your industry.  Educate him/her about what you do.  Give a brief history of the business emphasizing growth in sales and customer base.  Do not be bashful.  Describe the products that you sell.  Comment on quality, price, special features.  Explain who your customers are, where they are, and how you sell to them.

Management and Personnel:  Briefly describe the backgrounds of key management personnel in you business.  Include their resumes in an appendix.  Explain how many employees you have now and project to have in the future.  Describe their skill levels, the types of jobs they will be doing, and how readily they can be replaced.

Location:  Describe your facility and explain why it is appropriate for your business and for how long it will continue to be useful.

Inventory/Suppliers:  State who your key suppliers are and describe your relationship with them.

Economics and Accounting:  Explain how you make money in your business, i.e., what your gross and net profit margins are.  Explain how prices are determined and how you control your cost of sales.  Explain your internal accounting procedures, state who your CPA is, and explain what work s/he does for you.

Market Analysis:  Quantify the market you currently sell in or plan to sell in and describe your share of the market.  Describe each segment you sell to in detail.  Explain why customers need your products.

Current Marketing Strategies:  Explain your overall strategic concept and the combination of specific tactics that you use (sales reps, direct mail, targeted ads, etc.).

Growth Strategies:  Explain the strategies that you plan to use to continue growing.

Financials:  Include income statements, balance sheets, and tax returns for the last 3 years and projections for the next 3 years.

Appendices:  Include any pertinent information such as leases, current loan documents, customer lists, etc. as separate appendices.

Before you take your plan to a banker, landlord, etc., be sure to have it reviewed and critiqued by a knowledgeable individual who can point out any shortcomings or deficiencies.  CPAs, SCORE volunteers, or SBDC consultants make good reviewers.

Building a Brand Identity

Posted: March 15, 1999 by Sutton Landry in Marketing, Planning, Startup

Classic Cincinnati Post column from 1999

Several years ago I had the pleasure of working with a client who, like many others throughout the years, was interested in opening a sandwich shop in Northern Kentucky.  Like most other prospective small business owners, he was short on capital and long on ideas.  But in this particular case, unlike most others, those ideas were shaped by experience  —  valuable experience gained from working for the best fast food franchises in America.

Because of my client’s experience  —  and an acceptable amount of  cash and  personal collateral  —  we were able to put together a business plan that led to an SBA guaranteed loan to launch the sandwich shop.  Shortly before the scheduled opening, I dropped in to see how the shop was shaping up.  At first, I walked right by it, because I was looking for something else.

What I had expected to see was the typical mom and pop urban sandwich shop:  quaint, cute, and clearly a small business venture.  What I saw instead was what appeared to be a brand new chain or franchise food operation:  with a clever, yet descriptive name and first-class commercial graphics, signage, furnishings, fixtures, and menu boards.


The Importance of Professionalism

Posted: February 15, 1999 by Sutton Landry in Marketing, Operations, Planning, Startup

Classic Cincinnati Post column from 1999

In the era before personal computers, when the typewriter was the “word processing” tool of choice, there was a saying that reflected the prevailing behaviors and attitudes in the corporate business world, “No one was ever fired for buying IBM.”  In short, no one was ever fired for buying brand name products or services with a universal reputation for quality.  As I learned during the past two years while conducting interviews of large employers in the region for a task force of the Northern Kentucky Chamber of Commerce, that same attitude still prevails today.  Purchasing managers value the assurance of brand name quality and are reluctant to try Brand X, the typical small business.

So how can the small business owner compete in such an environment?  How can s/he hope to make a sale to a large organization?  The answer is by being professional, even more professional than the brand name competitors.


Simple Steps to Reduce Risk

Posted: January 18, 1999 by Sutton Landry in Operations, Planning, Startup

Classic Cincinnati Post column from 1999

Circus analogies are often used to describe what it’s like being a small-business owner. The juggler, the plate twirler, and the high-wire walker are among those analogies most commonly used.

Of these, the high-wire walker, the solo artist working high above the crowd without a net, whose each and every step is fraught with danger, is the most accurate analogy of all. But it doesn’t have to be.

Small-business owners often ignore the kinds of things that can help minimize and manage the risks of operating their businesses. They assume that they have to work without a net, when in fact, they can take some simple steps that will protect them, their families, and their businesses from many of the most common hazards.

Protect yourself and your family with insurance. Not just health and life insurance, which are certainly important, but disability insurance.

Every year I meet at least one individual whose business has been severely affected because of a prolonged illness or an injury. Depending on what state your business is located in, as a business owner, you may not be eligible for workers’ compensation coverage. In any event, you should acquire long-term disability insurance from a private carrier.


Inventory All Your Assets at Year-End

Posted: December 21, 1998 by Sutton Landry in Money, Operations, Planning

Classic Cincinnati Post column from 1998

December is a month of mixed blessings for small business owners. For retailers, many of whom will do as much as 45% of their total annual sales during the month, December sales are absolutely vital, and they look forward to them with anxious anticipation. But regardless of what holiday season sales are, small business retailers, and manufacturers, know that at year-end they will face one of their least favorite tasks — the dreaded annual inventory.

This year I’d like to suggest a different approach to year-end inventory. By all means count all your merchandise, raw materials, and work-in-process. But do more than just count it. Analyze it, too. And while you’re analyzing your inventory, take time to analyze your other assets as well, assets like your planning processes, your capital equipment, your operating space, your employees, your customers, and your professional advisors.

As a small business owner, you have limited resources. That is a given. In practical terms it means that you can ill afford to have those limited resources invested in unproductive assets of any kind. As you inventory each asset category, you want to identify unproductive assets that you can sell off, thereby generating cash for new opportunities that will help you grow and improve your profitability.


Upgrade Your Business Toolkit

Posted: November 9, 1998 by Sutton Landry in Money, Planning, Startup

Classic Cincinnati Post column from 1998

When my wife and I bought our first house some 20 years ago, we quickly discovered how woefully inadequate our apartment dwellers’ tool kit was for the demands of home ownership.

Two screwdrivers, a hammer, and an adjustable crescent wrench simply weren’t sufficient for the kinds of problems that we had to solve.

Most small business owners have a similar kind of experience. The tool kit that may have served them well as consumers, or even as novice business owners, is often no longer equal to the tasks at hand and needs to be upgraded.

The business tool that most often needs upgrading is the accounting system.

Many small business owners assume that this means changing from a manual to a computerized accounting system, but that is not necessarily the case.

The key upgrade is to go from a cash basis accounting system to an accrual basis system. Only an accrual basis system, one which accurately matches revenues with direct costs regardless of when cash is received or paid out, provides business owners with information they need to effectively manage. Only an accrual system can pinpoint problems, like those with pricing, that directly affect profitability.


Ignoring Details Can Be Costly

Posted: October 12, 1998 by Sutton Landry in Operations

[Editor’s Note: This was the inaugural column published in the Cincinnati Post!]

Entrepreneurs aren’t known for their patience or for their attention to pesky details. They are known for their abilities to recognize market opportunities, muster resources and act quickly to take advantage of those opportunities. As a result, many new businesses are launched with little attention to the tedious but important formalities required by all levels of government.

If you are one of these entrepreneurs, you need to put your house in order, right now. The longer you wait, the more difficulties you are likely to encounter.

How difficult will it be to do this? That depends on such things as what state you are in, what name you choose, what type of operating entity you select, whether you have employees, whether you need to collect sales tax, whether you are leasing space for your business, whether you have investors or partners, whether you have borrowed money, and how long you have been conducting business outside the law. Let’s look at two examples.

Meet Jane Jones, a college student in the Greater Cincinnati area living at home in Anderson Township, Ohio. Her parents bought her a computer when she was 6 and she has become quite the cyber expert. A family friend approaches Jane about designing a Web site for his business, they negotiate a price and delivery schedule, and Jane starts to work. She is now in business for herself. She decides to take a basic approach to her business name and chooses ”Jane Jones, Web Designer.” In this specific case, she doesn’t need to do anything else except pay her taxes at year-end as a sole proprietor.