Creating a Money-Making Business Plan

In my experience (at least with the small businesses I’ve worked with), a business plan is often considered an “unimportant” waste of time, and many small business owners forego creating one.  The truth, however, is that a Business Plan can be incredibly beneficial for a business.  Not only can a business plan create a “Guide” for a company and its employees, but a good plan can also be taken to the bank in order to try and raise funding for a small business.  It can attract investors as well, and it can help focus a business owner’s vision in order to make the business as profitable as possible.

While there are tons of business plan models on the internet today, I can’t help but want to throw my own cap into the ring as well.  There are the business plans that a lot of general businesses use to satisfy mentors (or spouses), and then there are the types of business plans I’ve worked on, the type that big businesses pay tens of thousands of dollars (and hundreds of thousands) of dollars before they ever so much as sign a rental-lease agreement.

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The difference between a “General” Business Plan and a Business Plan that Makes Money comes down to one very important thing…Research.

When a small business owner includes research into a business plan, they are showing banks and investors that they are not going into a business venture blind.  A well-researched business plan shows forethought, logic, and realistic thinking.

Therefore, to create a business plan that will help raise money, a business should include the following elements in their business plan:

  1. The Mission Statement: In Bookkeeping Money-Saving Tip # 15: The Mission Statement, I discussed the importance of having a Mission Statement.  It is just as important to put that Mission Statement into the Business Plan.  Consider it the “Sales Pitch” of the Business that basically tells an investor the Business’s main goal.
  2. An Introduction:  The introduction is a fairly simple concept.  You create a page or two (or three) about the basic business concept.  What is the business selling?  If there is a location, where will that location be?  Will the business have an inventory  and if yes, where will that inventory be kept?
  3. Demographics:  Demographics are an excellent option to add to a business plan because it exhibits that you know who your ideal, targeted customers are and who they can be.  The demographics can help a business see where they should be focusing their marketing dollars, and how to theme their business to attract those ideal clients instead of creating a business that tries to “attract everyone.”  (Read Paint a Target on Your Customers for more information on how to do your own demographic analysis.)                                                             teamwork 2
  4. Competition Analysis:  You know the expression, “Keep your friends close, but your enemies closer”?  This expression is just as true in business as it is in life.  You should know what your enemies (ie, your competition) are doing in their businesses, because every choice they make could potentially harm or help your own business.  Therefore, creating a section that lists ALL of your local competition, as well as what products they are selling (that you may or may not sell as well) and what prices those products are marked at.  The more you know your competition, the more you will be able to create a business model that grinds theirs into the dust (should that be your wish).  Either way, it shows investors that you have a strategy to stay afloat despite what your competition is doing.
  5. CompassLocation Analysis:  A large majority of businesses draw their customers from within 10 miles of their location…TEN MILES. However, the more unique that business and its products are, the farther distance a customer is willing to travel in order to buy what that business is selling.  On the flip side, the less unique a business and its products are, the smaller the distance a customer is willing to travel to make a purchase.  For example – Disneyland has a very unique product; people are willing to fly from all over the world to experience the unique product that Disneyland offers (and that no one has been able to yet duplicate).  Another example – Souvenir shops.  Souvenir shops all sell the same products, and they all try to rent space where the tourists are.  The end result, tourists have so much choice on what souvenirs to buy and where to buy them, they don’t need to go far from their hotels to get what they want.  (In fact, they often buy from within the hotel).  So, in order to create a competent location analysis, you need to include the demographics and competition within YOUR 10-mile radius.  (You can read more about Location Analysis in my article entitled:  BOOKKEEPING MONEY-SAVING TIP #4: Analyze Your Business Location.)
  6. Marketing Plan: At this point, you should know your competition AND your customers, so you should have a pretty good idea how you can target your marketing campaign directly to your ideal customers.  Let your investors know as well.  Include a section just about marketing.
  7. The Dollars and Cents:  No investor is ever going to invest in a business that looks as if it is going to fold its doors as soon as it opens (unless that business is a non-profit).  Investors want to know that a business is going to make money and that they will recoup their initial deposit.  Therefore, the dollars and cents is one of the most important things to include in the Business Plan.  If the business is already open, then bankers would ask for a “Profit and Loss” Statement, as well as a “Balance Sheet.”  But whether the business is in operation or not, another excellent idea to include is the “Pro Formas” or basic monetary projections.  You can create a Budget and include it Graph line: up and down 1in the dollars and cents section, and you can project from that budget how you plan to make more money (or save money).  Calculate Budgets with Low Income-Expense Projections, Mid Range Income-Expense Projections, and High Income-Expense Projections.  That way, the investors will know that the business will still say afloat even in “Hard Economic Times.”
  8. An Executive Summary: The Executive Summary is basically the bare minimum summary of what the business has created plans to accomplish.  It takes the main points from each section, and presents them in a direct manner.  The Executive Summary is basically your “In Conclusion” statement, however, this summary is going to go at the BEGINNING of your Business Plan.  Most investors never really read past the Executive Summary (unless there is something in the Executive Summary that doesn’t make sense), so in essence, the Executive Summary can be the main section that makes or breaks your business plan’s goal:  to raise capital.   Therefore, make sure your Executive Summary has ALL the main items you want an investor to know, and put it right after your Business Plan’s Introduction.  Consider the rest a guide for the business and backup for the more thorough investors.

While I cannot guarantee that this business plan format will raise capital (after all, there are many other factors that investors take into account besides the business plan), I will say that a well written business plan can tip funding in a business owner’s favor.  You really have nothing to lose by creating a thorough, well-researched business plan – but you do have everything to gain.

Diary of a Bad, Bad Bookkeeper: Paypal

Betty Bookkeeper Headshot

Dear Diary,

Betty Bookkeeper HeadshotToday I got an intriguing email.  The email was a confirmation from PayPal.  It said that we had spent $150 on an online order.  Since the company does not have a PayPal account, I knew it was a scam – a Phishing Scam, where some con artist is trying to get access to our account.  When you click on the links in the email, you are taken to a fake PayPal page where you are encouraged to log in and verify the purchase (or deny it), and then the fake website captures your real log in details and the con artist can then empty out your PayPal account.  Any good back office person knows – you never click on links in emails from financial websites (because it’s easy to “cloak” the website links).  You always go directly to the original website and log in there. 

Obviously the PayPal notice was a con…but it got me thinking.  Our company does not have a PayPal account…but we could.  It only takes a few minutes to set up, and then you can make payments from any checking account or credit card account that you link to it. 

So I opened one. 

Then, I went online and made a purchase to Office Depot. 

When I checked the bank balance online, I saw that the payment was debited as a PayPal account to Office Depot.  As far as I’m concerned, the explanation from the bank is simple enough to satisfy the boss.  Now, I don’t need to forge checks unless I really want to. 

Now the only question is…what should I buy

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In this mini story, there are actually two cons I’ve brought up:  The Phishing Scam and The PayPal Weak Link. 

The Phishing Scam is an actual scam where a thief sends a fake email encouraging you to click on the link in the email.  By doing so, they can capture your login information and then clean out your bank accounts.  PayPal Emails are the most common financial cons.  After PayPal, sending emails from banks would be the second most common way con artists get information from their victims.

There are three easy ways to spot these scams: 

  1. Banks and financial institutions have standard, precise emails already created that always use the same verbiage.  Phishing emails, on the other hand, often have misspellings and/or sentences that don’t make sense.  If anything doesn’t seem right with any financial institution’s email, it probably isn’t from your financial institution.   
  2. When you open the email, you will see the “From” address is not necessarily from the financial institution it claims to be from.  Whatever is after the “@” sign is the website address.  Anything in addition to the normal address probably means the email is a scam.  (For example:  …@paypal.fakesite.com or …@fakesite.paypal.alerts.com.)  Both the paypal.fakesite.com and the fakesite.paypal.alerts.com are completely fake because whatever comes before the .com is the site.  That means, these sites would be fakesite.com and alerts.com…not PayPal.com.   
  3. And finally, banks and financial institutions openly encourage customers to NOT click on links from their emails because Phishing Scams are so common.  Instead, they will tell you to go directly to their actual website to log in so that you can verify if the email is from the bank or not (and thus the alert is fake or not). 

Also, it’s common to get emails from banks you don’t even have an account with.  If that happens, obviously you can ignore those…but if you are concerned that an embezzler has opened an account in your name, just print out that email and go down to the bank to see if you have an account or not. 

AND when in doubt – go directly to the source…never click on the links in an email from a Financial Institution. 

As for the second con – The PayPal Weak Link: 

It is very, very easy to open a PayPal account and link it to a checking account…any checking account.  PayPal has a very simple verification process, which means that creating a PayPal account is easy for anyone with access to your checking account information, including your bookkeeper.  From there, it is very easy to steal money because PayPal and the bank account link together in order to create instant money transfers.  Plus, money can be sent to anyone with another PayPal account, and everyone takes PayPal these days (including airlines and other travel agencies), so stealing becomes very easy.

Therefore, to protect yourself from someone linking a PayPal account to YOUR checking account, you need to link it first.  In other words, you need to be the one to create a PayPal account with your checking account.  PayPal only allows a checking account to be linked ONCE, which means no one else can use the checking account information.  Once you have linked it, keep that information to yourself.  There’s no need to share it with your bookkeeper or anyone else because business’s should stick to using Bank Bill Pay and writing checks…Period.  PayPal should only be used by one person…the creator of that account.

Thus, if you don’t have a PayPal account, start one immediately in order to protect your checking account.  If PayPal does NOT let you create a PayPal account, then an embezzler has already linked to your checking account, and you need to consider closing it.  This is one of those huge companies that you just can’t avoid, and you really shouldn’t avoid.