You’ve got a business plan don’t you?

40% of small businesses fail within the first year and of those who survive 80% close their doors within 5 years (Michael Gerber, The E-Myth Revisited).  Gerber explains that the overarching reason that this pattern persists is because talented ‘technicians’ decide to begin their own business banking on their proven talent and do not plan for the equally demanding roles as an entrepreneur and a manager.  On the flip side, 75% of franchises succeed at five years. How can this enormous discrepancy be explained? Gerber asserts that it is the standardization of operations, sales, personnel management, etc. that sets the majority of franchise owners up for survival and success.  So, what’s the takeaway?

First, I highly suggest that all of my clients read this gem of a book.  It will change your entrepreneurial world FOREVER. ‘The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It.’

Secondly, I suggest revisiting, or for some finally writing a business plan.  Here is a general outline of a business plan from the Small Business Association:

I. The Business
A. Description of business
B. Marketing
C. Competition
D. Operating procedures
E. Personnel
F. Business insurance

II. Financial Data
A. Loan applications
B. Capital equipment and supply list
C. Balance sheet
D. Breakeven analysis
E. Pro-forma income projections (profit & loss statements)
F. Three-year summary
G. Detail by month, first year
H. Detail by quarters, second and third years
I. Assumptions upon which projections were based
J.  Pro-forma cash flow

III. Supporting Documents
A. Tax returns of principals for last three years Personal financial
statement (all banks have these forms)
B. For franchised businesses, a copy of franchise contract and all
supporting documents provided by the franchisor
C. Copy of proposed lease or purchase agreement for building space
D. Copy of licenses and other legal documents
E. Copy of resumes of all principals
F. Copies of letters of intent from suppliers, etc.

Thirdly, the ‘manager’ role is typically the more challenging role for many of my clients. Mastering the art of managing not only themselves but their employees in order to run their business at an optimal level requires a call to leadership that many have not had to answer before. I will write further on this topic next week, for now, go get your copy of the E-Myth. If you do not find it enormously helpful, I will offer you a refund. Happy reading!

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