Small Business Pillar - Measure Twice, Cut Once

Small Business Planning Pillar #8: Measure Twice, Cut Once

Small business planning document looking good. The ground work has been done. But before you cut loose, check, check and check again.

We’ve spent a hectic few days/weeks building content for our small business planning document. Layer on layer of information has been added. All made sense at the time but does it make sense now? Does it contradict itself at any point? Almost certainly.

So before we go public, there’s time to interrogate hard. Fine tune and tweak our assumptions. Weed out the inconsistencies.

The best way to approach this stage is to take your inner circle and small business planning document, find a change of scenery, coffee shop, beach hut, or whatever and brainstorm and interrogate until you drop. The less formality to this session the better, but here are a few areas you might like to consider:

19 ways to interrogate your small business planning document before you go public

- Have you underestimated costs? Prices may have gone up since you started planning.

- Are your assumptions reasonable or wildy over-optomistic?

- Have you really listened to your market research or are you just picking out the bits that endorse your big idea? (this one is really common by the way)

- Have you planned to be successful? (sounds bizarre but if you can only show a marginal profit in your forecasts, you may as well open a building society account instead.)

- Is the planning consistent? If you’ve talked about 10% year on year growth in the narrative, for instance, is that reflected in the financial summaries?

- Have you got any evidence of real demand for your new product/ service?

- Are your financing options realistic and sensible?

- Will a bank really lend you that much unsecured?

- Are your sales and profit forecasts steeped in a sense of reality and can you substantiate them? (Beware, “securing 1% of the total widget market” is not substantiating. It’s dreaming.)

- Have you allowed for enough working capital? Whatever figure you think you need, double it.

- Have you been over optomistic in lead times before going to market? Build in plenty of slack. What are the cash flow implications of a two week delay?

- Have you discarded certain information because it’s getting in the way of damn good business idea?

- Have you assessed your competition rigourously enough? If there are no competitors at the moment, there will be. What effect will that have?

- Do your financial ratios fall within generally accepted levels? Even great small business startups tend to fall within these norms.

- Have you got contingencies built in? Have you really interrogated the “what if” scenarios.

- Have you got a plan B or plan C?

- Have you sufficently covered your business for less tangible costs, ie maintenance, corporation tax, interest payments, capital depreciation, research and development (hence replacement costs)?

- Have you sufficiently thought through less glamorous parts of the process such as route to market.

- Have you shared your plan with an accountant or bank manager? Their conservatism will be a great foil against your entrepreneurial exhuberance.

This process should give you the assurance that you need that your big idea has a pretty good chance of succeeding. However, it has another benefit. You now know your business plan inside out. Through your “what-if” analysis you have answers for any questions that may be put to you in relation to your small business.

And I mean any questions. How I cringe to watch “Dragon’s Den” when the entrepreneur-to-be falls at the first hurdle. Peter Jones asks “what are your first three year profit projections?” er… um… er….

There should be no question that could be asked that you cannot answer.

It is a great feeling when you have achieved this and will give you huge confidence when standing in front of some often intimidating (and wealthy of course) individuals.

Ten Pillars Of Small Business Planning – Introduction

Small Business Planning Pillar #1: How To Start A Business Plan – Mindset

Small Business Planning Pillar #2: Strategy

Small Business Planning Pillar #3: Mini Business Strategies And Postage Stamps

Small Business Planning Pillar #4: Changing Gear: Seed Money & Intrapreneurs

Small Business Planning Pillar #5: Rapid Content Building

Small Business Planning Pillar #6: The Four Financial Statements

……Small Business Planning Pillar #6.1: Profit And Loss Statement (P&L)

……Small Business Planning Pillar #6.2: Cash Flow Statement (Forecast)

……Small Business Planning Pillar #6.3: Balance Sheet Statement (Forecast)

……Small Business Planning Pillar #6.4: Financial Assumptions

Small Business Planning Pillar #7: Business Metrics