When my husband and I noticed that a night club was opening in this particular area we both thought it was an odd choice for its location. However, the building is prefect for a night club/concert venue. While the building itself is perfect that doesn’t matter if it cannot attract clients or doesn’t meet city code/regulations. I wonder why type of research Sam did to determine the demographics and geographics of his target market. The night club would have to attract a decent population that does not reside in the area, mainly because it is a suburb with a lot of families.

According to the article the night club owner, Sam, was given a list of 10 things that the three neighboring businesses asked him to do so that his business didn’t impede upon their business. Sam said that he did “most” of the items on the list. This was one of his many mistakes. There either should have been an agreed upon compromise on the 10 items or Sam should have conceded to all 10. By not doing so he created an adversarial relationship, either intentionally or unintentionally, with others.

In the article it mentioned that Sam applied for a liquor license and signed some sort of agreement with the landlord acknowledging the type of business he was going to establish there. No where did Sam defend that he applied for the appropriate business licenses or followed the covenants of the strip mall location. So, I have to wonder if his business was doomed from the beginning. An agreement by the landlord is technically irrelevant if the business itself doesn’t meet the requirements of the covenants, codes, and/or regulations.

In addition, the article stated the neighboring businesses did not care for the type of “clientele” the night club served. Duh! What did Sam do to minimize their fears? It appears nothing, as he didn’t even fulfill the 10 items they asked him to. It does not appear that Sam took the time to build relationships with the other business owners. Sam owned another business for 20 years. Shouldn’t he have known better?

Even if you think a business plan is a waste of time, at least take the time to verify you can actually operate your business with no risk of being shut down shortly after opening your doors.

This shorter-version business plan can include items that are important for your business. There are many templates available, but I recommend creating a document that makes sense for your business so that you will actually use it on a regular basis.

When writing this short business plan consider the following sections:

1. Vision/Mission. When you started your business did you create Vision and Mission statements? If so, copy/paste them into this document so you can easily refer to them. Does the Vision or Mission need to be updated? Or do you need to re-evaluate how your business is following the original Vision and Mission? If you did not write a Vision or Mission, go ahead and create them now. The Vision Statement is more about the big picture – what do you want to accomplish.

The Mission Statement is about why the company exists, i.e., what is it that you are trying to accomplish with the services or products the business offers. Many Mission Statements include a brief declaration regarding employees, customers, and/or the community.

2. Product/Service Summary. Since many businesses are constantly changing their business offerings, it would be a good idea to include 2-3 sentences within the document that summarize the product/services you are offering. A business plan Executive Summary includes this information too, it is the basis for everything else in your document.

3. Target Market/Competitors. In this competitive environment it might make sense to re-evaluate your target market. Are the demographics of your customers the same as they were 18-24 months ago? If not, how would you describe your current customer? What about your competition? Have new competitors entered the market? How have they changed the way you attract or retain your customers? Have any competitors left the market or changed their focus? What were some reasons for them doing so? Can you gain insights as to how their exit might impact your business, either good or bad?

4. Tactical Goals. What are some tasks or projects that you want to complete within the next 9-12 months? For example, obtain XX number of new clients or XXX number of quality Twitter followers. Maybe you want to open XX number of new locations or add XX number of new products to your retail mix. The objectives should be measurable and realistic. You’ll use this information to create your strategies and plans.

5. Long-term Strategies. What are the long-term goals of your business? What types of activities will help you move from where you are today to that goal in 3-5 years? If you are a sole-preneur, would you like to add employees? If so, what would that look like for you and your business. If you have a retail operation, have you considered moving to a bigger location or adding stores? Think about what your business should look like in 3-5 years and create both long-term and short-term objectives to help you get there.

Remember to include a summary of the action steps you will take to achieve your objectives. For example, let’s say you want to attract 10 new clients for your coaching program. What types of activities could you engage in that might drive clients to your program? Establish Teleseminars, create a referral program or book speaking engagements/seminars. Where do you currently find your clients? Use that information to determine what activities you should be participating in to drive business to your door.

A short (or single page) business plan is easy to create. When you don’t have time to update your regular business plan, this is a great alternative. You can create these types of plans for different divisions, departments or product/service lines. Update your business plan at least once per year or when a major change occurs in your business or marketplace.

Consider the book by Jim Horan, the One-Page Business Plan to create this type of document for your business.

One primary disadvantage of a sole proprietorship is that the owner is personally liable for ALL business debts and lawsuits. Meaning a sole proprietorship, i.e., the business owner, can lose personal property (such as their house, cars, jewelry, etc.) and savings to cover business related debts or to cover the costs of lawsuits. The sole proprietor is also responsible for the mistakes made by employees, if any, that can result in lawsuits or loss of income.

A sole proprietorship is also limited in the ability to obtain business financing. Financing for this type of entity structure is usually in the form of personal loans and credit cards because the business is not separate from the owner. Another disadvantage of a sole proprietorship is that it will be dissolved upon the death of the owner meaning this entity structure does not have continuity.

When choosing a business structure think about the future of the the business. Decide what the current and future business goals are for the company. Think about the longevity of the business and the protections afforded by organizing under a different form, such as a Limited Liability Company, S-Corporation or Corporation. Consider the ability to raise capital by adding partners or shareholders.

A sole proprietorship can be started simply by setting up “shop”, but unlimited liability is the main reason you should consider another form of organizational structure. Take into account the long term goals of the company and the protections afford by certain forms of organization. It is best to consult with your CPA or attorney to determine which entity structure makes the most sense for your business.

Ultimately, the owner makes the decision as to which form of organization is best. It is ease and relatively inexpensive to register an LLC, Corporation or S-Corporation with your local Corporation Commission. Visit their website to read the instructions and determine the fees based on the entity type you choose. If you decide you need help, there are many online sites that can help for a small fee.

It is particularly important for small business owners to establish tactical planning goals to help achieve success. It is much easier to create realistic budgets and to create action steps when there is a sound plan in place. It is imperative to allow some flexibility in this type of plan because of unexpected occurrences. Small business owners gain focus when setting goals and objectives for a specific period of time, such as 12 months.

A tactical plan usually includes between three to five goals that may be challenging, but are achievable. An example of tactical planning includes the notion of increasing sales by a certain amount within a one year time frame, such as increasing sales by twenty percent within the next 12 months. Or they may commit to adding a new group of customers during their plan time frame. Another example could be the reduction of employee turnover and operational costs. All of the above examples would be especially beneficial to the small business owner.

Because every business is different and their needs are unique, tactical plans are individualized and tailored accordingly. Tactical plans can promote teamwork because they promote clarity as to how certain goals will be achieved. Tactical planning allows everyone to be on the same page and to work together to reach specific goals. 

Small businesses, in particular, tend to run much smoother when specific goals are developed and a plan is put in motion to reach them. Although each business may have a different set of goals, it is important to strategically plan for the future and establish proper tactical planning to support the strategic plan. When plans are followed, goals are easily achieved.

Contingency Planning is usually a tiered process. Usually, when you put a Contingency Plan in action you start with the easiest or least dramatic change. For example, your cash flow is low and you are having problems paying the bills. Your first plan may be to secure or utilize a line of credit with your bank. If a line of credit is unavailable or maxed then you need to cut costs. You can approach your landlord and ask for terms to be renegotiated so that you can afford to stay in your current location. You can evaluate your current expenses to determine where you can easily and quickly save money, i.e., reduce marketing or advertising expenses, reduce meals and entertainment, etc. Or as a last resort, you might ask your staff to take a pay cut or layoff some of your employees, which is my least favorite option. These changes may help to increase cash flow long enough to get you through the tough times.

If you offer credit terms to your customers, you could consider factoring your Accounts Receivable (AR). This is a quick way for you to get cash from your AR, but factoring does reduce the overall amount of funds you receive so consider this option carefully. If you are still in need of cash but do not have any more available credit with your bank another option is to sell an interest in your business. The amount of cash you receive will depend upon the type of business you own and your willingness to give up a portion of ownership in your business.

As a last resort you may decide that you would prefer to sell the entire business rather than adding another owner. If a willing buyer cannot be found, you might be able to find someone who is willing to take over the business “as is” including all debts; this is called a transfer of ownership. Ending the business by walking away is not a very good option. There are usually assets that can be sold and/or Accounts Receivables that can be collected. While not easy, you can try to sell the business assets or portions of the business so that you can generate enough cash to pay your outstanding debts.

Whether your business is new or established, Contingency Planning is very important. It does not hurt your business to have a plan in place in case problems occur. On the contrary, this type of planning could very well help you survive tough economic times or an unforeseen disaster.

There may be other reasons why an investor would fund a business. They possibly would do it for ownership equity, to use their skills and experience as a extra-curricular activity, to keep ahead and/or updated on projects or developments within a a particular industry, or to simply mentor an entrepreneur. The benefits to having an angel would be the funds received to start up the business, getting management advice and potential access to valuable contacts they may provide to help you grow your business.  

Being an angel investor is also risky business. For an investor, if the business that he invested in does not succeed, he may lose part or all of his investment unless an “exit” strategy was arranged prior to funding the business. As the business owner, you may have to relinquish some management control over the business in return for the funds that you receive. You need to have a honest and cooperative relationship with the angel investor in order to keep him from taking over the business, but you also need to be able to follow through with your promises too.  

Now finding an angel investor is a different business altogether. You need to know where to look to find the investor that will best suit your business and is willing to fund and take a risk with you. The typical investors usually are in their 40′s, educated and wealthy. They’re usually community orientated people who want to help potentially successful entrepreneurs which in turn makes them more successful. Make your business presentable. Ask people in your network if they know of any Angel Investors or groups in your area where Angels gather. Angel investing is risky but can be extremely beneficial.

The main reason people write a plan is to obtain funding from a bank or investor. But they generally dread the process of actually writing the plan. The three How to Write a Business Plan books sitting on my shelf may potentially overwhelm the entrepreneur with their long lists of items to include in said plan.

The real value comes from the information you gain about how to start the business, how to run the business and how/when to make changes to the business. The details that go into the plan are important and provide helpful information about the industry and business in general.

Write your plan today. Now is a perfect time to start a new business (yes, a down economy is a great time and they say things are starting to look better albeit slowly…). Listen to this interview with Dave Lindbeck from InStep Coaching at Talk About Success: Creating a Successful Business Plan.

In 2005 very few people were planning for an economic recession to hit 2007/2008. I am guessing that many business plans written in 2005 did not list a contingency for an economic downturn. Today, though, many business plans will include disclosure about the risk of the current economy. Almost every business has experienced a decrease in sales. Few businesses are an exception to this, but there are a few businesses thriving in today’s economy.

So how do you plan for contingencies? Consider at least 4 or 5 possibilities that could go wrong. Then make a list of how your business would deal with these challenges. There are simple ideas, many of which are being implemented by companies today. The most obvious is to reduce costs. Many companies look to lay-offs as a way to save cash. But there are other, sometimes more effective, ways to reduce expenses. Another would be to reduce the number of products or services, or even to expand your offerings. There are many alternatives to back-up plans. You might need to consider extreme ideas too, for example, one of my clients considered finding an investor or seek a willing buyer.

Even if the What If never happens, you will have analyzed the strengths and weaknesses of your business from a different view point. Which just might aide in the long-term success of your business.

• Decision Maker. The ability to make decisions timely and effectively is a requirement. There may be times when you will have to decide which employees to hire, fire, lay off, etc. What about a customer that actually hurts your bottom line rather than contributes to it – would you have the guts to fire a customer? If you don’t your company may continue to service a customer that takes up your company’s resources in lieu of new customers who might prove to be much more profitable.
• Willing to ask for help. Many small business owners are hesitant to ask for help or outsource their operational functions, such as bookkeeping or sales. Asking for help or outsourcing is different than delegating to an employee. When you ask for help you admit that you cannot do it all yourself or that something is outside your area of expertise. This is okay. No one is an expert at everything and entrepreneurs shouldn’t expect to be any different.
• Communicator. How would you describe your communication skills? How about your listening skills? How would your co-workers describe your communication style? The ability to communicate clearly is a must for any small business owner.
• Leader. Are you a natural leader? While leadership skills can be learned through training and experience, some people have a natural ability to lead. How would you describe your leadership skills? Don’t worry if you are not a natural leader, sometimes this skill evolves as your business grows. They key is to knowing your strengths or weaknesses in this area so you can make improvements.
• Technical Skills. In order to start a new business either you or one of your partners must have the technical skills for the business offerings. Just because you are good at web design doesn’t guarantee your success as an entrepreneurial web designer, but it helps. While this is obvious, I’ve seen a few small business owners operating businesses where they lacked technical skills to do so. It makes the battle to succeed that much more difficult.
• Business Know-How. Operating a new business isn’t just about providing a product or service to your customers. You need to know how to run a business. The simple things like hiring, firing, scheduling employee shifts, ordering inventory, sales, filing applicable sales or income tax returns, etc. There is so much more to owning a business than just providing your product/service.
• Planner. Planning for your business before you open your doors is a great idea. Once you open your doors the planning must continue. If you don’t have the patience for details, hire someone who does. Your business is going to need on-going planning as you establish and change your strategic and tactical goals.
• Trustworthy. Do people trust you? You’ll be establishing relationships with customers, employees, vendors, the community, etc. It’s important that people think you are looking out for their best interest and that they can trust you. Sometimes trust takes a long time to build, but when trust is broken it’s almost impossible to rebuild it. While you may be a person with very high integrity, how you are perceived by others will determine if they trust you.
• Motivated. Starting a new business takes time and patience. Few new businesses are profitable in the first year of operations. That doesn’t mean you won’t be able to take home a salary, but it might. In your first year it is possible you’ll change your business strategy two or three times until you find what really works in your market. Know that you will be working long hours and the monetary results might not be what you expect yet you’ll still have to give your business your full effort every day.
• Adaptability. Customers preferences change, the economy fluctuates, new regulations are established, etc. You need to adapt. Quickly. Most people do not like change, but as a small business owner you need to be able to change frequently, efficiently, and effectively to remain competitive.

The prediction is that more millionaires will be born out of this economic recession than in any previous downturn. Will you be one of them?