2005 Winter/Spring Volume No. 5
A 3-to-5 Year Business Plan
The Best Way to a Better and Brighter Future for You and Your Business
Many portable sanitation business owners are happy keeping it simple. They run a hundred or so units and a truck or two. They are small and they want to stay that way. That’s okay for them, but if you see the potential for growth and can hardly wait to make your business future better, then you should consider writing a business plan to direct your business three and five years down the line.
A current and up-to-date business plan is like a blueprint. It should show where you are today, how you got here, where you are going, and what it’s going to take to get you there.
While no one can predict the future, your business plan can make realistic projections. Ask yourself where you can be in three and five years, and how you will get there? By actually mapping out your business’s future using growth projections and attainable sales figures, you will take an enormous step closer to actually attaining your goals. If you don’t plan for success, you are less likely to get there. As they say, “If you fail to plan, you plan to fail.”
Admittedly, most businesses don’t take the time to create a solid business plan unless they are trying to attract investors or financing. And even fewer who have a business plan make the effort to update it and keep it focused on the future.
For most entrepreneurs, there are about a million things they would rather be doing than writing about their business. However, those who do take planning seriously happen to be the fastest growing and most profitable companies in portable sanitation. If you would like to join them, it’s time to get started.
You can slow down and relax in the off-season, but try to find at least an hour or two per day to work on your 3-to-5-year business plan, the effort could pay better, in the long run, than all the service work you did during the busier service season.
With a solid plan as your roadmap, you’ll be better situated to adjust to the surprises and setbacks that inevitably come along. You’ll see the future more clearly than your competitors and you will be more likely to achieve your goals.
First, gather your financial information. Include the last three full years of income statements and balance sheets, if you have been in business that long. It is helpful to try to keep each of these statements on their own page, as this makes year-to-year comparisons very easy. Include your most recent interim period statements also.
Examine the statements with a critical eye. How much growth have you achieved? Can you reasonably expect this growth rate to continue? What can you do to make it increase? Can you be doing better in some segments of your business? Are there any operational issues that jump out?
State your goals
Start by simply writing down your goals in a few short, clear sentences. Don’t worry about how it sounds at this point. Nobody will read your first drafts, but you. Write in short, declarative sentences such as “ABC Portable Toilets will grow from $500,000 in annual billing to $750,000 in five years.”
After stating four or five solid, realistic goals, put the goals aside. Now you will map out a strategy to reach them.
Don’t overstate your market potential, don’t underestimate the competition and don’t set unreasonable targets. If you’re writing the business plan for outsiders, they are likely to disregard it entirely if they don’t believe your plan reflects current market realities and good old-fashioned common sense. And if you’re writing the plan for yourself, exaggerating the business’ potential during the planning process will only lead to disappointment in the future.
Dedicate yourself to reviewing and, when necessary, revising your business plan at least every six months. Don’t be afraid to change direction, or throw the whole thing out the window and begin again from scratch.
After you have finished with your goals, you may want to share them with family members and those key people who can support you in your efforts to make the business plan a reality.
Develop an outline in three main sections:
1. Business Plan Summary
This is a brief (less than one page) synopsis of where your company is today, where it plans to be, and how it plans to get there. Hint: Don’t attempt to write this until you are done with everything else. This will be a brief summary of your findings.
2. General Information
Section I — The Opportunity.
Describe the industry and the product. You can get general information from the Portable Sanitation Association Inter-national at www.psai.org. Include ideas such as how rapidly the industry is growing, how it is maturing to offer new products, and how your company is poised to take advantage of these trends.
Section II — Your Business.
Provide a brief history of your company including your experience, how and when you started, and how you have gotten to your current position in the market. If you are writing for outside financing, give an overview of how business is conducted including how you find customers, how service is conducted, and how pricing is determined.
Continue with a location analysis describing where you conduct business and trends in your area that can help your business succeed. Include information about your target market and your competition.
Next, write a customer value proposition (CVP) stating who your customers are, what you plan to do for them, and how you distinguish your company from the main competition. Think about the CVP as a way of explaining what benefits your company provides to customers.
Section III — Key People.
Describe the experience and previous success of key managers or salespeople who will help you achieve your business goals. Don’t use resumes but rather emphasize their achievements relevant to your company in a one-paragraph summary.
3. Business Plan Summary
If you have a limited understanding of accounting principles you may need some professional help on this section. Fill-in-the-blank templates are widely available. Many plans fall apart in this section because the numbers look irrational. The financial plans are often either too optimistic to be plausible, too pessimistic to justify a project, or just incomplete.
Section I — Previous Income Statements.
Here’s where you include the three years of past income statements you gathered at the outset of the project. If you will be using the business plan to obtain financing be sure that you explain large variances, both good and bad. You’ll need to be able to answer any question the bankers or financial backers will have. Explain how you resolved problems in the past and how you expect to resolve them going forward.
Section II — Financial Projections.
These should go out three to five years and show three scenarios: best case, worst case and most likely case. Base the most likely scenario by showing a projection of the current growth rates. If you are planning to add employees and equipment, project how these additions can increase business and add that to your most likely figures. Remember that new employees will probably be less effective than current employees for at least the first year.
If you find it difficult to construct worst and best scenarios, take the short cut. Apply a multiplier to your most likely scenario. For example, your best-case scenario could double your most likely revenue while your worst-case scenario could cut it in half.
Section III — Risk Factors.
Openly state potential risks (reasons why your company could fail). Entertain a few likely “What if?” scenarios. For example, what would happen to your business if the construction market fell 20% due to an increase in interest rates? What would happen if a large consolidator came into your market and bought your competitors? Don’t be too pessimistic here. You don’t want to scare off investors or scare yourself into becoming too conservative. However, it will impress investors if you consider risk seriously. It will also help you to go forward with eyes wide open not blinded by “rose-colored glasses.”
Section IV — Summary of Sources & Uses of Funds.
Describe where you expect operating and investment capital to come from and where you will put it to use. Also if appropriate, describe how and when your investors can expect to be paid back.
Making Your Own Luck
A good business plan is as much about the journey as the destination. The effort that goes into it will help you think through some important issues and it will help you get to know your own business better.
If you still aren’t convinced that you can and should write your own business plan, then get some expert help. Many good books are available on the subject. Government agencies such as the SBA or entrepreneur development organizations exist to offer classes and/or counselors to help you with your plan.
By getting a clearer picture of where you have been, where you are, and where you are going in the portable sanitation business, you won’t need luck to become the next self-made millionaire in this industry. You’ll have planned it.
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