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anita-campbell

Anita Campbell

CEO of Small Business Trends

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The Best Solution to the Business Plan Dilemma

October 16, 2014

A few years ago there was a study that showed that a business plan doubles your chance for success. It’s the process of creating the business plan that has just as much, or more, value as the end result.

A common refrain these days is, “don’t bother with a business plan.”

One part of me understands why some make that recommendation. After all, who needs a lengthy business plan that takes forever to put together, only to be shelved and not looked at again? That’s a waste of resources.

But I’d like to suggest that the solution to the big-useless-business-plan dilemma is to change your approach to the business plan.

The real value of a business plan

A few years ago there was a study that showed that a business plan doubles your chance for success.

It’s the process of creating the business plan that has just as much, or more, value as the end result. Even more important than writing the words of your business plan, you must dig deep into your numbers. Doing so forces you to look critically at your business.

When you immerse yourself in your numbers, you gain an understanding of them that helps you spot issues in your business and opportunities.

Let’s look at an example involving sales forecasts. Often new business owners and startup entrepreneurs will make a rough estimate of how many sales the company can make. The typical estimate is some monthly sales number. Let’s say our hypothetical example is a B2B business selling site SEO audits. The back-of-the-envelope sales forecast calls for making 30 sales at $3,000 each, for $90,000 per month.

Problem is, they didn’t break that sales forecast down into enough detail. Had they broken the sales forecast into the number of sales needed weekly—or better yet, daily—they would have seen that there was no way, with their current sales approach, that they could get to their monthly sales forecast. They also would have had a better handle on how much time it takes, on average, to close one sale and also spotted a major issue.

By taking the time to measure their sales process through strict time tracking, the owner might have seen that, on average, it takes six hours working with a prospect on emails, proposal, conference calls, and documentation just to close one sale. Given the company’s current process, it would take 180 hours per month to achieve 30 sales. However, they have only one part-time sales rep. That sales rep has 120 hours per month to spend on sales. Clearly, there’s not enough sales rep to go around to achieve the forecast.

Had this business built a plan and “owned” their numbers, digging deep into them and not just doing a rough estimate, they would have seen that something had to give. One solution would be to hire another sales rep. Another solution would be to change their processes to reduce the time it takes a sales rep to close sales, such as by providing more self-serve steps on their website. If they don’t take action, the sales forecast will have to be reduced.

The point is, it’s easy to gloss over numbers when you use rough estimates. Unless you get granular with your numbers, you may not spot these problems until it’s too late.

Problems often lead to opportunities

In this case, there may be an opportunity. By confronting the problem, the business owner sees that by adding an additional full-time sales rep they can exceed their sales forecast. The added labor cost will pay for itself inside of 90 days. And by becoming more efficient in the sales process, more money will drop to the bottom line.

This fictional business problem is the kind of problem that new business owners, especially, face all the time. I’ve been guilty myself in the past. When we haven’t been detailed enough with numbers, we’ve ended up with a forecast that simply wasn’t realistic.

Creating a business plan and digging into your numbers can avert a business-threatening shortfall. But the even more exciting thing is that it can also propel you to look for opportunities to grow your company.

This article originally appeared on www.inc.com/comcast.

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