10 Immutable Law's Of Writing A Successful Business Plan

1.) You will write more than one business plan

I wrote a different or updated business plan every year while I was the CEO of The Vermont Teddy Bear Company.   My first one was in 1981, and my last one was the when we went public.   That business plan was called an offering document, that basically stated what we were going to do with the money made from selling 1,300,000 shares of stock for 10 dollars each.

I thought my first business plan was great.   I took the time to learn the individual pieces of a business plan with help from The Small Business Administration. I put together a corporation and begin selling my teddy bears in Burlington, Vermont from an outdoor peddler’s cart.   I thought I was going to make enough money to take care of my family and myself…I was wrong.   The next year I wrote a plan to increase my wholesale business, by recruiting sales reps from all over the country to sell my bears at Gift Stores and department stores around the United States.   Again that plan failed.   I kept trying to sell my teddy bears in the toy market by attending toy shows and events like that.

It wasn't until I change my business plan and wrote one saying that the business that I was in was not the toy business but the market of gift-giving.  That was my best business plan to date, I got really good at planning.

The next plans highlighted how we were going to use radio advertising to sell our teddy bears throughout the United States.  Our sales went from 400,000 to 1.7 million to 5.6 million to 10.6 million to 17 million dollars.  Our work force grew from 15 to 600 people.  It took good planning to accomplish those goals and be named the best company in America.

The second last plan I wrote was a business plan for a public offering which made our company worth over $110,000,000.  My penny stock that I started the company was worth over $20 dollars a share.

Point here is that writing a business plan is very important to your success it's important that you embrace it and understand the important pieces of it.   Trust me you will get better if you keep on trying.

Business plans are really an assumption that you're going to make or sell something or provide a service and people are going to buy it.  You forecast your sales.  That's the hard part.

So many new adventurers into business have some idea but never considered how they could sell that idea.   They think their idea is so good people are just going to want to buy it because it's their idea.  Nothing could be further from the truth.   It's the sales forecast part of the business plan that changes.  You fix your marketing and selling part of it or you will fail.

2.) The marketing and advertising part is the most important part

The marketing, selling and advertising portion of your business plan is the most important part.  If you don't know how to do the marketing, advertising, and selling part of the business plan, chances are your business plan will fail.

It does not matter how good your think your idea is.   If you cannot sell it, you will fail.

Another very important reason why the marketing and selling part is very important, is because it adds the most value to your company.  An idea is worth about 10% of a company, the financing is worth about 40% of a company, and the marketing and selling is worth about 50% of the company.

Understanding this is key to your success, especially if you are looking for an investor.  An investor might like your idea, but if they think you have no idea on how to sell it, they will want to take control of your company day one because investors know that the marketing is the most important part.

The single biggest reason why the Vermont Teddy Bear Company was such a successful IPO (initial public offering) was that the sales and marketing was a proven formula.  The more I spent on advertising the more sales I got.  My cost for the advertising and marketing was 25% of my gross sales.  This means, for every 25 dollars I spent, I got back $100. This number was verified in audited financials for over 4 years.

3.) Cash flow will give you all the answers for your business plan

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A cash flow is the most important part of a business plan period.  It tells you how much money you start with and how much money you want to spend.   A cash flow done right lets you know how much money you are going to need to raise or borrow.

Two parts to a cash flow:  how much money you’re taking in (sales) and how much you are planning on spending, like wages, rent, legal, phone, marketing, equipment etc.

A cash flow projection does many things:

• It lets you know how much money you need to raise or borrow
• It shows you the months you will be cash poor and the months you will be cash rich 
• It sets your sales goals – VERY IMPORTANT
• If done properly, it shows you how much money you pay yourself
•  It helps investors, bankers, partners, see how you plan on spending your money
• It can tell you that you are in the wrong business 
• It is a path or road to making your dream company come true.

A cash flow can be done in many ways.  It is really a good guess on your part of what you think you can bring in and what you think your costs will be.   I recommend that you spend very little time on your costs and more time on your income part. 

Let someone knowledgeable, (Businessplanpathways.com) look at your cash flow and ask questions about it and make suggestions. 

I have seen too many cash flows from members that I work with that shows how much they think their new company needs to spend on equipment or products, when they have no sales or sales plan in place.  Big mistake!  That is a sure sign of failure.

A friend of mine, who blacktops driveways, was telling me he wishes he could have his own business of blacktopping.  He said it would take about $300,000 in equipment to get started.  I said to him, you can rent the equipment right, by day or week or month.  He said yes, and then I said why would you buy equipment for $300,000 when you don’t even have one customer?   For him to get started in business it would take very little money (maybe business cards and advertising) but it would take time and sales skills to get customers.  Once he gets a customer, rent the equipment.  Once he gets a lot of customers, then and only then think about buying equipment.

I have seen too many plans that shows too little money being budgeted for sales and marketing.

I did a cash flow every year when I was the CEO of Vermont Teddy Bear.  I did a projected amount of how much I was to spend a month and how much I thought I would have in sales that same month.  If my sales projections were off, I would then adjust my cash flow spending.  If I knew that my cash was going to be a little short, for example, in January when we were getting ready for Valentine day.  I put every effort into not running out of money.

For your business to be successful, you need to embrace cash flow statements.    

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