In this episode, host Andrew Bowen asks the question, “Why do people even need a business plan?”
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Andrew Bowen: (AB) Renee Hode: (RH)
AB – It’s another beautiful day here in Charlotte, and we’re glad to have you back for another episode of our B2U podcast, bringing business to you. Brought to you by CBRbiz.com. As always, our goal is to connect you to the information you need to start and run a successful business.
Today, we’ll be continuing the third and final part of our conversation with Renee Hode from the Central Piedmont Community College (CPCC) Small Business Center. So far, we’ve talked about how to get funding and if your idea will even make money. If you haven’t yet, check out the rest of parts 1 and 2 at CBRbiz.com.
Renee, welcome back.
RH – Good to be back!
AB – We’ve had a good conversation so far about making money and then getting money to help make money, but what’s next? I think once you start bringing money into the conversation, you need to have a plan about how to get the money, make the money, and how to keep the business going past the initial funding. So why do people even need a business plan, and where does one start?
RH – A business plan is essential in terms of seeking funding. For anyone who’s going to be going out to an investor and seeking a bank loan, it’s a necessity. You absolutely need it for funding. It does serve as the road map for the business owner, so it’s recommended and advised that they have a business plan regardless of whether or not they’re going for funding.
AB – In the timeline of things, where does a business plan come in? Do people come in with this great idea but have not yet started putting anything down on paper, or do a lot of people come in with a basic framework and need help putting it together? I guess what I’m asking is: Where does a business plan fall in the things we talked about?
RH – When you look at our previous conversations, we talked about the business concept. The business concept is where the individual starts off, and then they talk to their customers, get that feedback and refine their business idea to make sure it meets the demand for the customer. Once they do that, and before they take the next step to go out and get funding from a banker, is when they’re going to sit down with us or other colleagues to go over putting the plan together.
AB – Ok, so it’s kind of a living document to some extent?
RH – Absolutely. It will be a living document, it will be refined over time, and it turns from a business plan into a strategic plan that will help them continue to grow and build their business.
AB – What are some of the main components that need to be in one? I’m not really familiar.
RH – Well, what it’s really going to start off with is the most important section of the business plan, which is the executive summary. It’s generally one page to two pages, and it’s what the business owner will complete last, which is really going to recap everything they’ve done throughout the course of the business plan.
From there, they’re going to cover their mission statement and their vision. It’s important that they can articulate what they’re trying to create with that business. They’ll go through the description of the company: What is it they’re selling–product or service? Who are their customers?
Your plan will go over that competitor analysis that we talked about earlier. They’ll talk about how they planned to market the product or service—a SWOT analysis will be included—and then one of the most important sections is going to be the cash flow statement. That’s what’s really going to detail whether or not the business is going to make money, when it’s going to make money, and, if they’re getting funding from a bank, how they are going to be able to pay back that loan.
AB – You said, ‘when it’s going to make money.’ Does that imply that a business may not make money for some period of time?
RH – They’re going through the pains of the start-up and taking on cash—the initial cash infusion. It’s not unheard of for a business to go a year until they’re profitable or even further out than that, but we need to hit profitability before you’re out of business. We have to look at those numbers and make sure it makes sense for them to go forward. Again, going through that financial analysis really examines the feasibility from a financial standpoint, and that’s a portion of the business plan.
AB – It’s really reassuring to know that not all businesses open the doors and are already swimming in cash.
RH – No, very rarely does that occur. I think as business owners we think that’s going to happen. They have that million dollar idea so to speak, and they think the day they open the doors that folks are going to come out and that they’re going to be on a cash flow positive, but that’s not the case. That’s why a lot of planning and preparation is required, and that’s why we go through the process of writing a business plan. Sometimes it’s overwhelming for folks to come out and think about creating what could be a 20-30 page document. What we will start them with is a business model canvas. I’m not sure if you’ve heard of that, Andrew?
AB – No, please give us a little bit more information about that.
RH – The business model canvas is a one-page sheet that really delves into the major components (your customer, your market segments, etc.), and it’s something that someone can sit down and put together that’s a visual piece that they can use for themselves as well as for a potential investor or others that they’re working with to get buy-in for the business. But it’s really a consolidated or condensed version of a business plan, and it’s a great starting point.
AB – Is that something that’s free, or do people have to come to the Small Business Center to use it? How does someone access that?
RH – They can go on businessmodelcanvas.com, or the Business Strategyzer, and they can download it. We have it available on our website for download as well. We find that it’s an easier way for someone who may be overwhelmed by looking at the large business plan. At least they’re getting their unique value proposition down on paper, and they’re really identifying their market segments and the major components that they can build from.
AB – Sounds like a great place to start.
RH – Absolutely.
AB – Alright, so when it comes to the business plan, did we get all the components in there? I kind of stopped you at cash flow.
RH – Yes, after our cash flow projections, it’ll be summary and really tying it all together; it does vary in terms of what some individuals will put into a plan, but the major components we have addressed. The management team will be something that will be listed in there, and in terms of the legal entity—What structure will it take on? Will it be a sole-proprietorship, an LLC, an S-Corp, a C-Corp.?
AB – Sounds like important stuff. We’ve talked a lot about what a business plan really looks like and how to formulate it. The Small Business Center has a lot of resources, but what about actual help? I know the first couple of pieces we talked about earlier in the podcast were the ability to have a point person that really helps the business owner through the process. Is that something you do with the business plan as well?
RH – Yes, we do have business counselors that can help in terms of giving feedback, review, and analysis of a plan. But what we really like to point them to as a starting point is our free seminar on how to write a business plan. It will go over all of the basics and get them started with writing the plan before they come out for counseling. We do also have specialized software—Business Plan Pro—that’s available at the Small Business Center, so individuals can come in and have a private space where they can be working onsite and putting the plan together.
AB – So the seminar is where people start; do you have a calendar on that, or do you put them on CBRbiz.com?
RH – Yes, they are on CBRbiz.com, as well as the CPCC Small Business Center website, and that particular offering on writing a business plan is offered on a regular basis, so it should be out there once a month; we also offer it online via webinar if that’s more convenient for folks that can’t get out to a session.
AB – That’s great because I know a lot of people’s schedules don’t always line up with programming.
RH – Absolutely.
AB – That’s great, Renee, thank you. It sounds like we’ve got a one-stop shop for getting a business started at the CPCC Small Business Center.
RH – Yes, we’re happy to help anyone. If an entrepreneur out there has an idea, or they’re looking to grow their business, we are here as a community resource, and we can help them in several ways.
AB – Renee, thank you again so much for coming onto our show; it has been an absolute pleasure hearing from you. This was the third and final segment of our conversation with Renee Hode from CPCC’s Small Business Center. Renee, anything you’d like to add before we go?
RH – No, I’d just say thank you for having me; it’s been a pleasure.
AB – It’s wonderful to have partners like you willing to come on the podcast and help us out. Listeners, if you want to learn more about starting a business and funding it, then visit CBRbiz.com or follow us on Twitter @CBRbiz. Stay tuned for our next podcast.
Thanks for tuning into CBR’s B2U podcast presented by CBRbiz.com until next time. We mean business.