Business planning

Scope

Business plans can help perform a number of tasks for those who write and read them. They are used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used to attract key employees, prospect for new business, deal with suppliers, or simply to understand how to manage a business better.

Regulatory citations

• None

Key definitions

• Action plan: An action plan is a way to make sure a company’s vision becomes concrete. It describes how the company will use its strategies to meet its objectives.
• Business plan: Conveys the business goals, the strategies that will be used to meet them, potential problems that may be confronted by the business, and solutions to those problems. A business plan also lists the organizational structure of the business (including titles and responsibilities), and finally, the amount of capital required to finance the business venture and keep it going at least to a break-even point.

Summary of requirements

A good business plan follows generally accepted guidelines for both form and content. Although there are various sub-sections that some businesses use, a business plan has four main elements:

• Executive summary. The executive summary is the area that includes the company’s mission and vision statements, the objectives of the business plan, and a company description. The executive summary should also include a summation of the other sections of the business plan as well as a discussion of the nature of the business and its location. This section is also where market niches should be identified along with what advantages a company has over its competition.
• Market analysis. The market analysis describes in detail, the potential of the service or product being offered as well as how the company is intending to create and/or develop its customer base. A market analysis should identify a company’s customers and their demographics, industry trends, and who is seen as direct competition. This section also needs to identify price/cost structure and how that has been determined. Most importantly, the market analysis should define how a company will reach its customers i.e., direct marketing, advertising, sales calls, etc.
• Management plan. A business plan is as good as the people who implement it and the management plan section describes those people. Particularly in the early stages of a company, investors tend to put more stock in the management of the company than the product or service offered. This section should list the management team and key employees. This section includes an organizational flow chart that breaks down the duties of the principal members, as well as biographies and brief job descriptions. Also important to note here is the financial stake that each management member has in the company, if there are multiple owners/managers.
• Financial plan. In the financial plan section, you describe the money side of the business. Financial data and calculations are the make-or-break component of any business plan. This section includes the current financial status of the company as well as future projections. Included in this section are the balance sheet, profit-and-loss statement, cash-flow projections, and break-even analysis. Whether a start-up or an existing business, projections should be provided for three and five years out. These projections should be on cash flow as well as profit and loss.

Creating a business plan is a serious process. Considerable thought should go into each section, as a business plan, regardless of a company’s size, can make or break that company. Business plans do not have a specific length. They can vary in size from one or two pages up to a 100-page presentation, possibly even longer. The business owners decide how much needs to be said to present their business in a positive way to their customers, their investors, and the industry.

Creating a vision statement. A vision statement is part one of a two-part description of the overall business intent. Part two is the mission statement. Vision statements describe the future: where the business is going or where it wants to go. Mission statements describe today: why a company exists as a business and what it is doing to pursue the vision of the future. Together they provide direction for the business by focusing attention on doing things day-to-day to accomplish the mission, while taking steps to pursue the vision of the future which of course, is the long-term intent of the business.

A company’s vision statement should include three main parts:

1. Central purpose. The central purpose is the company’s fundamental reason for being. The central purpose should last for years and years. It does not change due to new technology, consolidations, or changes in staff. It’s important to note that some companies incorporate their mission statement into their central purpose and do not have a mission statement as a separate document.
2. Core values. The core values of a company are its essential and enduring tenets that guide every employee in their actions and decisions. These should be the inner beliefs held by everyone in the organization. They are the beliefs that do not change. Core values are what are brought to work each day by each individual, not what they are trying to become.
3. Goals for the future. The goals for the future are the third part of the vision statement. Some companies look at this as, “Where will we be in 10 or 15 years?” In expressing the goals for the future of the company, management needs to look past the current capabilities of the company and the current trends of the market place. Goals for the future should be visionary and allow employees, investors, and customers to see what the company will look like in the future. This is a snapshot of what the company will be, not what people see today.

These should be understood and shared by all employees within the organization.

Too often, organizations create a vision statement that takes up a page or more. Some get bogged down in numbers and statistics that are not part of a good vision statement. A good vision statement is about possibilities and the future. It tells those who read it, what’s different about this company from all the others in the industry. An effective vision statement gives a plan for conducting business that is concise, memorable, and doable.

Action plans. An action plan is a way to make sure a company’s vision becomes concrete. It describes how the company will use its strategies to meet its objectives. A good action plan defines:

• What the desired action is,
• Who is responsible for the action taking place,
• By what time it will be accomplished,
• What resources are necessary, and
• Who should know about it.

Example. A business owner may state the business’s action plan as, “We will have five trucks operating at a profit within the first 12 months of the business’s operation.” Although this is the beginning of an action plan, it is not complete as it is missing some important parts. A better way to state this action may be:

• XYZ Company will have 12 trucks in operation by the end of calendar year 2007.
• Joe business owner will research the feasibility of purchasing new and/or used trucks and will buy the trucks for XYZ Company based on analysis and input from a financial advisor.
• Trucks will be purchased at a rate of three trucks per quarter, with the purchases taking place within the first 30 days of each quarter.
• Budgeted amount for the purchase of these trucks will be $1.2 million, which is an average of $100,000 per vehicle.
• Correspondence pertaining to the purchase of these vehicles will be distributed to the operations, financial, and permitting departments for their review.

When completing an action plan, three questions need to be asked:

1. Does it list all the actions that need to take place? In the example listed above, we have said the company will purchase 12 vehicles for $1.2 million but where is the money coming from? Does someone need to secure financing first, or is the money already held within the company? Does an additional action step need to be identified pertaining to financing before the actual purchasing action takes place?
2. Is it clear? Is it apparent who will do what and by when? If an action plan is clear, then anyone, inside or outside of the company, should be able to read it and understand exactly what’s going to take place, when, and by whom.
3. Is it current? Action plans are an ever-changing work in progress. They cannot be written and then locked away in a desk drawer, never to be seen again. A typical business plan may include a 30-day action plan, sometimes referred to as an immediate action plan, a one-year plan, and a five-year plan. An immediate plan may deal with such things as purchasing the company’s first truck, obtaining necessary permits, licenses, and bank accounts, and developing an initial customer base. One-year and five-year plans will address expansion and what is needed to grow the business and continue to be profitable. One-year and five-year plans are extremely important when trying to secure financing as they show a true understanding of where the company plans to be in the future and how it expects to get there.

Policies and procedures. Effective business policies and procedures will:

• Convey a consistent understanding of the organization’s purpose, philosophies, policies, and good business practices to everyone involved;
• Provide employees with guidelines pertaining to their authority, responsibilities, and expectations;
• Promote consistency, improve efficiency, and increase overall profitability; and
• Spell out the expectations, responsibilities, and opportunities that apply to the employees and the company.

Many business owners, particularly small business owners, understand what it takes to run their business profitably, but often forget to convey to their employees and associates what is expected of them to assist in this process.

Policies are broad statements that provide the basis for action or decision-making. Procedures are the mechanisms and details used to implement the policies. The development of policies and procedures normally follows these steps:

1. Form a committee to gain input;
2. Assess the workplace and business to identify policies and procedures needed;
3. Develop policies and procedures;
4. Implement policies and procedures and train all employees;
5. Make changes if necessary, such as regulatory changes; and
6. Keep records.

A policy and procedure manual could be seen as a playbook for a business. A playbook for a football team for example, tells every player what their responsibilities are for every play. If followed correctly, each player on the field knows where they should be, what they should be doing, and how their actions relate to and affect the total team’s success or failure. If everyone does their job, they make a touchdown. A company’s policy and procedure manual (playbook) should do the same thing. It defines each employee’s role, where they should be, what they should be doing, and how their actions apply to the continued success or failure of the company.

As the company grows, the policy and procedure manual may also grow from a one-page document to a notebook full of specific directives and expectations, divided up into sections of the company such as Administration, Sales, Employment, Finance, Management, and Safety. The size of the manual is not as important as the content.

It’s important to remember that the policies and procedures need to be clear, consistent, and current. A good playbook doesn’t say, “Just go down the field and I’ll throw you the ball.” A good policy and procedure manual doesn’t say, “Just show up at work and we’ll figure it out as we go.” With some careful thought and attention to detail, a company’s policy and procedure manual will result in a “touchdown” for the business in employee satisfaction and continued profitability.

Strategic partnerships. Strategic partnerships are corporate agreements, formal or informal, under which two companies involved will complement each other by providing a capability the other does not have and does not want to develop.

An example of a strategic partnership would be a long haul and a short haul carrier agreeing to service each other’s customers for the financial benefit of both companies. Another example would be a flatbed carrier partnering with a dry van carrier to provide service for a key customer.

Support structuring. Strategic partnerships, if explored carefully, can be an excellent source of revenue and can help assure continued satisfaction of your most valuable customers.

Most business owners hope their business will grow in size and structure. Others want to remain a one person, one-truck business. Growth can be good, but it can also generate a whole new set of problems that some business owners don’t want to deal with. Even if a one-truck business wants to remain that way, it may be necessary to develop a support structure to help succeed in business.

With growth goes more responsibility. Every small business owner will come to a point in their life where they may not be able to do everything themselves anymore. The decision to add departments, supervisors, and employees or to outsource various aspects of the business is an important one. It’s important to remember through this process where control of the business needs to remain. A business owner needs to decide what to keep under direct control, what can be handed over to others within the business, and what outside entities can be utilized.

In the trucking industry there are various areas of business that may want to be considered for outsourcing. As a one-truck business a business owner may not have the time and resources to deal with every aspect of the transportation industry. This is where developing a support structure through outsourcing may be a viable choice.

Common areas that a small trucking business may use outside businesses in creating their support structure are licensing, permits, and accounting. These three areas are heavily regulated, can involve tremendous amounts of time, and can directly affect the continued success and life of the business. Business owners can certainly do these things on their own or hire employees to deal with them, but there are excellent companies out there that can take the worries of “are you doing this right” out of the owners’ hands and allow them to concentrate on customer service, revenue building, sales, or driving the truck — whatever they do best.

As a company grows it also needs to make decisions in the areas of equipment repair and maintenance. Many truck drivers perform basic maintenance on their vehicles every day. Some do major repairs as well. Unless a business is in the business of being a mechanic, it needs to look to others for help in this area. The company may hire a part-time person to do minor repairs and maintenance, while using a major repair facility for the big jobs. Eventually it may be feasible to have a repair facility and do all the work in-house. The size of the fleet and the current profitability of the company will help dictate what direction to go in this area.

Another area of concern is in office staffing. A small business may be able to handle everything on its own to begin with, but now phone calls are being missed, customers are being ignored, and the reputation of the business is starting to falter. Business profitability should not falter due to the “I can do it cheaper myself” mentality.

Whether office personnel are hired directly, or a temporary staffing service is used, it’s important to continue to present a professional attitude and appearance to customers and the industry. If no one can get through on the phone, or all they get when they call is a recording saying; “we appreciate your business, please hold…” they will quickly go somewhere else. If the business is a one-truck business conducting business from the driver’s seat, a landline or “800” number at a message center may be an option.

As the business continues to grow, areas that were originally outsourced can be brought in-house with the development of specific departments and the hiring of competent management and personnel in those areas. When considering this step look to people for their expertise in the specific area or department which is being created. A good driver doesn’t always make a good dispatcher. Just because someone has a good safety record doesn’t mean they’d be a great safety director. A company should do its homework and hire the best.

A good businessperson knows when it’s time to hire others and delegate duties for the betterment of the organization. Don’t worry, you’re still in charge. You haven’t given away the keys to the company (or the truck); you’ve expanded your thinking to include the help of others, toward your continued success as a business owner.