The ABCs of the Business Plan
|By RON CHEPESIUK|
ABOUT NINE YEARS AGO, DALE VON Dohren, owner of San Jose, California- based Landmark Landscapes, had a successful woodworking business. Then he saw an opportunity in the landscaping business and decided to change his focus. But rather than plunge right into a new business venture, von Dohren stopped, sat down and wrote out a two-year business plan that realistically looked at what he had to do to get established in landscaping.
The business plan detailed von Dohren’s objectives and the resources he needed to make the business transition successful. “I used the business plan to integrate my woodworking business into the landscaping industry,” von Dohren recalled. “I haven’t had any problems, but without a plan, I wouldn’t have been able to figure out where I wanted to go and the best way to get there.”
A business consultant would call von Dohren a wise businessman. Others in the green industry can certainly learn from his experience, whether they are breaking in or are established. It would seem like a no brainer to assume that other irrigation and green industry companies are using business plans. Otherwise, how can they manage and plan their business or convince outsiders, such as a bank or a venture capitalist, that they should invest in their company?
The sad truth is that a paltry number of green industry businesses operate with a business plan. Judith Guido, Guido and Associates, a Moorpark, California green industry consulting company, revealed that based on her experience only about six percent of all green industry businesses operate with a business plan. Compare this to a recent PricewaterhouseCoopers survey which found that half of the growing companies in America not only have a master business plan but also mini-business plans to help them focus on what they must do to stay profitable.
“We don’t have time, green industry companies without a business plan say,” Guido revealed. “My answer is, ‘Why don’t you, considering what’s at stake?’ Those without a business plan operate out of a reactive, not a strategic mode, chasing after customers who aren’t profitable.”
So what is this thing called a business plan and how can it help a green industry business grow and succeed? Basically put, a business plan defines your business, identifies its goals and provides you with a road map on how to reach them. Business experts strongly advise anyone wanting to start a business in the green industry to first have a business plan in place. “The business plan is a necessity for anyone starting a small business,” Guido said.
Research is an important first step in getting that business plan together. You can use several sources to do it: personal insights from working in and/or observing the green industry, information gathered from the library, Internet and the Small Business Administration (SBA) Center at your local university, interviews with customers, suppliers, industry experts and “defectors” from competing businesses. Von Dohren added, “Networking at industry association meetings helped me a lot in putting my plan together.”
But before sitting down to research and write your business plan, you need to ask yourself some basic questions: What kind of services will your company provide, and what niche will it fill in the market? Who will buy your products and why? How are you going to reach potential customers? Where are you going to get the money to start your business?
“Being focused on doing a thoughtful and competitive business plan will answer those questions,” said Ken Hutcheson, president of U.S. Lawns, an Orlando, Florida-based landscape maintenance franchise with more than 200 franchisees in 28 states. “The business plan forces you to be realistic and to look at the big picture. The opportunities may seem infinite, but every company has finite resources.” U.S. Lawns requires that their franchisees have a five year business plan in place.
“We encourage our clients to do a three- to five-year business plan and then take a look at it at least once a year to see what’s changed,” said Tom Oyler, green industry consultant and a partner in the Wilson-Oyler Group. “Products and services change, the market changes, management and personnel change. Risks will pop up.” The Wilson-Oyler Group, a landscape consulting company with offices in Florida and California, has done many business plans for green industry companies.
A savvy green industry company looks at the business plan as the foundation upon which to build its business. Then they use mini-business plans for specific tasks or objectives, or as the basis for planning.
Bozzuto Landscape Company in Laurel, Maryland, has a five-year long range business plan, which is “tweaked” periodically by its management team, according to Tom Davis, company president. But the company also does an annual business plan and a budget, which they revise after the fiscal year’s first quarter. “Business owners in our industry need to be constantly looking at the environment and the world around it,” Davis said. “They need to ask themselves: What’s going to happen to the economy in the next 12 to 18 months, and how will it affect my company?”
The business plan helped Bozzuto Landscape Company immensely when it was small and working hard to establish itself in the industry. “I don’t think we could have grown to the size we are today without a business plan to guide us,” said Davis, whose company now has about 210 employees.
Kujawa Enterprises in Oak Creek, Wisconsin, will do mini-business plans when it’s considering or planning to introduce a new product or service, or as a way of letting their bank or regular vendors know what the company’s plans are for the future. “I know we have a track record, but it’s always a good idea to keep those with whom we work informed about what we’re doing,” said Ron Kujawa, CEO and chairman of the board for Kuwaja Enterprises. The company averages 90 to 100 employees in the winter and 150 to 165 employees in the summer.
The good news: doing a business plan is not a mysterious process. Yes, as we have seen, the tool can take many forms, but it does follow a standard format that contains certain basic sections. It should include the following items.
Your company’s background
Describe your company by including the following information: a short history (unless you are a new company), key personnel, the company’s age, number of employees, annual sales figures, the location of the facilities and the form of ownership. “Identifying key people in the company will help to show how it’s going to be run,” Oyler said. “Whom do you have in place to be future company managers? Name specific people if you can, and explain what they do. How are you going to compensate and keep them? What personnel are you going to need in the future?”
The Industry and the market
“Here you need to talk about the dynamics of your industry, as well as analyze your section of the market,” Oyler advised. ”In doing that, you will need to answer these questions: What is the competitive environment like? What are your product, pricing, promotion and distribution strategies? What is your business’s value to the customer?
This is the section in which you will need to discuss any products or services unique to your company. Oyler gives a couple of examples: “Suppose your company is in the lawn fertilizing business and you have a unique process. Or you’re in irrigation and have a unique controller mechanism or system. Talk about the uniqueness of those systems in this section.”
Production and manufacturing
Describe the processes with which your company is involved and provide your production facility requirements—that is, the size, layout and capacity of your business. Include the requirements for your inventory, equipment and supply chain, and details about any fixed cost allocations.
This section is important because you identify your source of funds, and the amount of money that you expect to make. “If you need financing and don’t have it internally, you need to explain where you’ll get it,” Hutcheson said. Work closely with your accountant to develop realistic projections. Otherwise, as Guido explained, “Overly optimistic financial projections will make a banker or investor skeptical about the validity of your business plan.”
Opportunities and threats
In crafting a business plan, always be realistic and honest. It’s in your company’s best interest. “Using the information you’ve collected, you now need to write the best and worse case scenarios for your company,” advised Oyler. “Do your research and see if new developments open up opportunities.”
This section provides an overview of your business plan. “The executive summary outlines and sums up your business plan,” Oyler explained. “It should be clear, concise and written so that it can be read in 10 minutes or less. The executive summary is what your banker or a venture capitalist will read. If they don’t like the executive summary, they won’t read any further.” Obviously, you will do this section last, after you’ve written your entire plan.
Two key requirements are necessary to make your business plan successful, experts said—inputting and monitoring. You should get data and opinions from as many sources as possible. “The real benefit of doing a business plan is not in the plan itself but in the planning,” Kuwaja revealed. “The dialogue and discussion that takes place is invaluable.”
If the task of doing a business plan still seems daunting, rest assured, plenty of help is available. First you have technology. “A lot of software is available to help with a business plan,” said Hutcheson. “All one has to do is get on the Internet and search.” U.S. Lawns has a standard template its franchisees use to do a business plan.
A consultant can be helpful, whether you want help with the entire business plan or just for the research, planning, writing, editing or feedback phases. Are they expensive? “Not really, if you look at a consultant as an investment,” Davis said. “We used consultants early in our history and they really helped a lot.”
And remember—a business plan is not a static document you throw into a desk drawer or keep on a dusty shelf and forget about. “Be flexible, review the plan periodically and be ready to make significant changes if the market downturns, or customers change or opportunities arise,” Guido said. “A well written business plan will improve your bottom line while preventing you from wasting your time going after the wrong things.”