Why every small business ‘needs a plan’
Lisa Stevens of Wells Fargo explains the value of small businesses having formal business plans to ensure they have the foundation for long-term success.
Since the launch of the Wells Fargo Business Plan Center, 10,000 small businesses (like the one pictured above) have gone online to develop formal business plans. We asked Lisa Stevens, head of Wells Fargo’s Regional Marketing, Small Business & Pacific Midwest Banking, about the value of a plan.
Q: You see potential small business owners every day, most of whom are passionate about their idea. In your experience, how willing are these entrepreneurs to work up a business plan – and how prepared are they to follow where it leads them?
Stevens: Every business – big or small – needs a plan to ensure it has a strong foundation for long-term success. While many business owners have a plan, for most it’s in their heads and not in writing.
We know from experience and research that in general, small business owners benefit from having a formal, written plan. In fact, according to a Wells Fargo/Gallup survey, only one in three business owners has a business plan. Yet those who do have a formal, written plan are more confident and optimistic about their future, with plans to increase hiring and capital spending, and anticipated higher revenue within the next 12 months.
At Wells Fargo, we want to help every small business owner create a formal business plan to organize their goals and future strategies. That’s why we introduced the Business Plan Center, which features free online tools that guide small business owners in creating and updating their business plans, and helps them achieve their goals. Since the launch, we have helped 10,000 small businesses develop business plans.
Q: What do you see as the biggest advantage of online planning tools for busy small business owners?
Stevens: Convenience. By creating a business plan online, small business owners are guided, step-by-step, through a series of “prompts” to complete their business plan. The Wells Fargo tool, for example, includes detailed descriptions for each section on what to include, along with examples from different types of small businesses. When finished with an online plan, owners can download their plan or share it via email.
With a well-thought out business plan, business owners can stay focused on their company’s objectives as well as track their progress. Written business plans have several key benefits and can:
- Help a business owner prioritize how to spend time and money most effectively.
- Guide the decision making process and point a business in the right direction.
- Help a business obtain financing to grow or expand. For example, for an SBA and some larger loans and lines of credit, lenders may require a formal business plan before providing credit.
- Lay out current and future obstacles to help anticipate and avoid potential risks.
- Help owners navigate internal challenges.
Check-out the story of one small business owner in Montana — Michelle Huie, founder of Vim & Vigr, which makes fashionable compression socks — who credits her success to having a written business plan.
Q: What are the most important things to include in a business plan?
Stevens: The challenge for many small business owners is getting started. I believe there are five critical components that should be in any business plan:
- Company overview: A description of the business, products or services you intend to sell, your business structure and a detailed marketing plan.
- Analysis: A thorough analysis of the market and competition.
- Marketing plan: A map to set your business apart from competitors with key messaging to reach your target audience.
- Financial data: Your starting balances, how you plan to make money, and sales forecasts. Our new Business Plan Tool will help generate financial statements – such as a detailed cash flow statement, profit-and-loss statement, and balance sheet.
- Executive summary: A business recap – who you are, what you sell, who you sell to, and a financial summary.
Q: Small business owners can find guidance in all sorts of places. What makes Wells Fargo the right place for them to get guidance on a business plan?
Stevens: We are the primary bank for one in 10 small businesses in America, and we know business owners’ challenges and needs from working closely with them. We use this insight to identify the guidance and financial education resources we offer to help them succeed financially.
The Business Plan Center, our latest offering as part of Wells Fargo Works for Small Business®, features free tools and is a natural extension of our support for small business owners. Having a business plan is important for obtaining financing for a business, so it makes sense for Wells Fargo to offer business planning resources and guidance.
The Business Plan Tool is also accompanied by a Competitive Intelligence Tool that provides key insight on their business and competition within the industry that can be used as part of the planning process. It also includes learning resources in the form of videos, articles and infographics that focus on business plan essentials including operations, financials and marketing. All of the support we offer online through WellsFargoWorks.com is complimentary and available to anyone, whether a Wells Fargo customer or not.
Q: What advice do you have for small business owners on sticking with their plan?
Stevens: We know from working with about 3 million small business customers that business owners are working hard to run their business, and they have limited time. But we also know most business owners can benefit from taking the time to put a business plan in writing. Having a plan for the future can help clearly define your path to success.
Small business owners should view their business plans as living documents and update them as needed. Having an out-of-date business plan won’t help, as it should really serve as a detailed and relevant roadmap for the next few years.
Be honest with yourself in your business plan and consider challenges and opportunities. For example, setting unrealistic sales forecasts could lead to cash flow issues and potential cost cutting. If you have a strong idea, let it stand on its merit.
Last, be sure to use resources available to you – your peer and professional networks, your banker, and online tools to help you plan for the future.