Business Planning

Overview

Creating a business plan is the most important aspect of starting a business. It is defined as a document that establishes the mission, goals and objectives of your enterprise. In detail, it explains how you intend to accomplish your goals and objectives. Essentially, the plan will become your road map to success. We want to thank Steve Windhaus for helping us with this chapter. His expertise is sure to guide you in the right direction in preparing your plan.

Anyone that has visited Kelly Poelker’s weekly VA chat knows that one of the first questions she asks VAs at any level (i.e., aspiring, new, or veteran) is, “Have you done a business plan ?” It amazes me the number of times the answer is, “No, do I need one?” You most certainly do! You wouldn’t start out on a family trip across the country without a map of how to get there, would you? Your business is no different. How can you know how you’re going to achieve your business goals and objectives if you haven’t established them? How can you know how to reach potential clients, what your operation truly requires and how much cash is required if you haven’t established who those potential clients are? To be successful in any business you have to know what you want to do, how you’re going to do it, and how you’re going to get there. It is not a secret that more than half the businesses today fail due to the lack of a business plan —don’t become a statistic! Remember, poor planning produces poor results.

There seems to be a common misconception that because it’s a “small business,” and you’re not looking for financing, that you don’t need a business plan. We talk to VAs regularly who are struggling to get clients, are trying to figure out what services to offer, and who are trying to figure out how to market to clients. These VAs have been in business for several months (sometimes years), they have their name, their website, a vision, and a huge desire to succeed—all key components of a business, but all missing one important factor—a solid business plan. We get carried away with getting that first client when it only takes a short time to put a plan together that will save you a great deal of time down the road. The amount of time required to develop the plan depends on the depth of research you want to invest in it. Regardless of the time required, put a plan together that is sure to get you good results. When you do, it will be much easier to find clients, keep them, and continually grow your business.

The lack of a plan can leave you feeling unorganized and unsettled. We highly recommend taking this step. Some may choose just to write a very informal plan, which includes just the basics, while others will be more elaborate. Either one is fine. Just be sure to do one, including the marketing, operations and financial elements of your business. You will see how motivating it is to write down all your hopes and dreams for your business. When we keep them in our heads, we have a hard time trying to keep track. On paper they have substance, and become better to evaluate.

Visit your plan often. We must regularly account for changes in the economy, competition, strategies, and market conditions while adjusting current strategies.

What goes into the plan?

The following information is provided to help you get started. Hopefully, it should provide you with the basics that should be developed and found in any business plan . The main components of a business plan are:

1. Cover Sheet

This is the first page of the plan and should contain the following:

  • Company name, address, phone number, fax number, and web address.
  • Company logo, if available.
  • Your name and title.
  • Date the document was drafted or revised.

2. Table of Contents

Every business plan should have a table of contents, especially when reviewing a hard copy, or when submitting it for review by another individual.

3. Company Overview

Write three or four paragraphs briefly describing the nature of your company and services. Include the legal business structure, location, general geographic area served, a general description of services offered, and something outstanding about your business – what makes it stand out from the competition.

4. Mission Statement

The mission statement describes the nature and philosophy of your business. It summarizes what you want your business to become. Keep the statement short and concise to 50 words or less.

5. Goals

Goals expand on your mission statement. I think it’s extremely important to write down the goals for your business – where you want to be six months from now, two years from now, etc. Expand on the mission statement to better define the marketing, operational and financial goals of your company. Some examples include:

  • Offer a menu of virtual assistant services directed to an underserved geographic market.
  • Incorporate partners within one year to meet the increasing demands for your services.
  • Maintain fiscal oversight of cash flow and cash investments in the marketing and operations of the business.

Set goals to shape your future. The Internet has opened up this huge new market for us and it’s all for the taking.

6. Objectives

You now expand on those goals with achievable and measurable objectives. You are setting quantified standards of success for this business. Examples include:

  • Have all home-based operations and the office fully operational in three months from start-up.
  • Achieve consistent, positive cash flow within eight months of start-up.
  • Establish a portfolio of 10 existing clients by the end of the 12th month.
  • Achieve annual net profit by the end of 14 months.
  • Penetrate the geographic target market with the advertising and promotional strategies by the end of June 2006.

When you achieve an objective in the business, reward yourself for a job well done. Go out for a dinner with your significant other or business partners.

7. Financial Requirements

This section should be mandatory for anyone “starting from scratch” or a VA firm that has not yet achieved positive cash flow. Every business venture requires the investment of capital. Without exception, money needs to be in the operating account at all times. Ultimately, you want to be able to provide a matrix that lists the sources and uses of funds:

Sources

Cash

$20,000

Uses

$20,000

Operating Overhead – 6 months

10,000

Office Leasehold Improvements

4,000

Advertising

5,000

Business Plan – Market Research

1,000

$20,000

In the example above, the VA has determined the need for $20,000 cash for the first six months of operation. An existing VA needs to project monthly cash requirements to the point in time when the company achieves positive cash flow.

The next seven elements of your business plan relate specifically to marketing. These are the most critical sections of that document. Marketing involves everything you have to do in determining a need for your service, creating awareness of your service to potential clients, making those potential clients want your service, and then selling your service. This determines from where the money will come so pay close attention. The effort, research, and answers you get will ultimately determine the answer to a very important question – why solicit my services when there are other VAs and other sources of similar and like services out there?

8. Marketing: Services Offered

Be specific here and provide detailed descriptions for each of your services. For example, don’t simply state that you offer word processing. Elaborate on the media used. Do you provide insertion of charts, graphs and images? Do you perform word processing in Microsoft Office, Corel, Smart Suite or Star Office?

Delivery of the finished product can also be an important service. Do you provide hard copies, e-mail attachments, CD ROM or zip disk copies of the finished product?

By the way, make note of the expenses you will incur for each of the services provided. They are not operating expenses that occur whether or not you are making sales; they happen when you perform a specific service. Examples of these types of costs include registering a URL, “burning” documents to a CD and mailing it to the client, subcontracting website development, contracting ISP or website hosting services for the client, and producing and conducting a mass mailing to a client’s customers. These are called “costs of sales.”

9. Marketing: Your Customers

To whom do you intend to sell your services — people, companies, or both? You really need to do some research. Who are the typical VA customers? Examine your competition. Are there types of businesses that could use your services, but are not targeted by the competition? Do you want to concentrate on start-ups (in business for one year or less) or existing businesses?

10. Marketing: Geographic Target Market

Some VAs may want to focus on face-to-face contact when selling their services. They will likely concentrate their efforts in local markets encompassing cities, counties or major metropolitan areas. Others may want to open up to whatever market offers opportunity. They want to rely on a website and promoting the business on the Internet, as well as locally in face-to-face networking. Do make note of the expenses involved in promoting your business in the local and grander markets. For example, a website is useful to all VAs. However, local geographic target markets will not place as great a demand on advertising and promotional dollars as a VA focusing on the national level.

11. Marketing: Pricing

Try to learn as much as possible about the pricing offered by the competition. You may think that is very hard to do, but not so. You will find VA fees are easy to view at several competitors’ websites. Make only a temporary decision. You have a vision of what are the expenses for each service, and what kind of profit is desired. On that basis, set a fee structure for each of your services, including retainer fees. They can be the most lucrative, consistent source of income.

12. Marketing: SWOT

In the market research phase, we uncover the truths about our business and the market. With our own business we perform what is called a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. This analysis is the most critical part of your marketing plan. Everything else in your marketing strategy is determined by the SWOT analysis.

Most likely you will have just completed a thorough review of your business in preparing the business plan . That means you have already determined your company’s philosophy, as well as the vision and mission statements. This is the first step in preparing the SWOT analysis–a business review. A SWOT analysis is very subjective, but should be based on objective market research. You can produce better quality results by being objective and not overanalyzing. Look at where your business is now and where you want it to be in the future.

Secondly, make a list of your company’s strengths and weaknesses. Maintain a separate list for each. Strengths and weaknesses are driven by internal factors , based on comparisons to the competition, and include aspects of your business that add value to your service. For example, strengths may include a unique service offering, business location, or quality processes and procedures. Your weaknesses might include lack of marketing expertise or length of time in business compared to the competition. Think about things like image, communication, direction, efficiency, responsiveness, job knowledge, planning, flexibility, etc.

Next, make a list of opportunities and threats. Opportunities and threats are external forces. Like strengths and weaknesses, they are based on comparisons to the competition, but also include an examination of general market trends impacting your particular business sector. A sample opportunity might be creating strategic alliances with other companies. A sample threat might be competitor pricing. Opportunities and threats can also be determined by the general economic conditions in your geographic target market. A sample opportunity can be the growth of the types of businesses that would seek your services. A sample threat might be a recession resulting in the closure of the types of businesses that would seek your services.

After a thorough review of all your lists, you can then determine in what areas you can use your strengths to identify opportunities in the market—opportunities that give you a competitive edge. Then identify what weaknesses could pose potential threats.

After completing the exercise above, take the results and give them substance by ranking them in order of importance based upon your business goals and objectives. The SWOT analysis can be beneficial in determining your niche in the marketplace. The thought process alone can prove beneficial for you.

13. Marketing: Advertising & Promotional Strategy

Okay, you decided on a geographic target market. You have done your research to determine, more or less (this is not rocket science), what kind of clients are out there and how easy or difficult they will be to capture as clients. So how is your competition advertising to this market? Do they have websites, brochures, participate in local trade shows with exhibits, and advertise in the local Yellow Pages? What kinds of promotional strategies are they using to create awareness of the company? Do they sponsor a local youth sports team, participate as a member of the local chamber of commerce, and retain membership in the IAVOA ? Pay close attention of what successful VAs do. There’s a reason why they succeed. They don’t spend advertising dollars and participate in promotional types of activities if sales are not to be gained from those investments.

Now you want to develop a matrix of advertising and promotional expenses for the next three years. You examined the service, target customer, the geographic market, pricing and SWOT.

Media

Year 1

Year 2

Year 3

Website Development

$500

Website Hosting

240

$280

$300

Yellow Pages

1000

1100

1200

IAVOA Membership

75

65

65

Chamber of Commerce Dues

250

260

300

Brochure

500

300

Business Cards

50

50

50

Total

$2,615

$1,755

$2,215

Remember, you will want to develop these costs by month for the first year. Cash flow is critical, and there are several of these expenses that must be timed to coincide with the availability of cash funds, as well as when the target customer is most likely to be exposed to the advertising.

You’ve come so far — congratulations! Now that you know how you’re going to get on the road to success, you need to implement your plan of action. Establish a detailed plan of advertising and promotions. See the Marketing Strategies for more information.

14. Marketing: Sales Projections

It’s now “crunch time,” especially for the startup. It’s easier for the existing VA firms with a track record to project sales for the next three years than the startup, but this should be done. How else are you going to be able to determine what will likely be required, in cash, to achieve positive cash flow?

The next two sections of the plan relate to the expenses of operating your venture. They will describe how you wish to run the business, and the expenses involved with each.

15. Operations: Ownership & Management

This may or may not be an important section. If you are only self-employed, this section is not necessary unless you plan to enter into a partnership or hire employees at a later date in the next three years. You want to note job duties and responsibilities if more than one person is a part of this VA firm. In any case, you want to list expected costs associated with compensation, benefits expenses and any other cost associated with personnel.

16. Operations: Operating Expenses

Make a line-item listing of all the expenses that you will incur, whether or not the sales are being made and revenues collected. Typically, these include utilities, office supplies, travel, equipment maintenance and purchases. Don’t ignore any of these expenses simply because you are home-based. At income tax time, a home-based business can deduct a portion of the residence expenses if you own the home. Typically, a portion of real estate taxes, home insurance, electricity, gas, water and certain home repairs qualify as deductions against the home-based company’s expenses on the profit and loss statement. You will want to review IRS publication 587 on the Business Use of the Home. For those located outside the home, your expenses are easily recognized and itemized.

17. Financial Plan

Your financial plan provides an account of your financial needs, sources of funding, and a basic outline of what will be required to succeed. Every business plan should project into the next three years. No, that does not mean you should expect the income and expenses to be exactly like that, but we all like financial planning. We all want to see what can potentially occur, financially, if our plans come to fruition. However, for most entrepreneurs, VAs alike, developing financial projections can be a headache. On the other hand, there are VAs who provide bookkeeping and accounting functions to their clients. This process, for them, will be relatively easy, whereas market research could be their Achilles heel. Given the importance of these projections, we have devoted an entire section on understanding and developing them in Virtual Assistant – The Series.

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