This question was in my e-mail (I’m protecting the identity and leaving out
some of the details):

I’m fairly confident on the business strategy I’ve written, but I am not very well-trained in the financial P & L planning side. I can create a sales plan, but below the margin line seems a little fuzzy although I get the big picture. I just started to work with an advisor through SCORE, and he has advised that I take a class at a local state college that is offered for this type of learning rather than for college credit. He also advised that I invest in a software program like QuickBooks.

This is probably a loaded question for you as I know you are selling your business planning tool, but I wondered if you could address the difference in the tools, and give me any advice.

I’m going to take a shot at this because I don’t have the time to wait for the class, although I am going to look into it. Our first trade show will be at the end of October, so we are on the go now and I’ll have to have some type of plan prior to that.

I don’t need it to gain capital, just to have a handle on the company planning and results.

My answer:

1. Business planning and bookkeeping are separate issues. Bookkeeping is recording every transaction that takes place, with amount, category and so on. Business planning is looking ahead and (among other things) projecting future cash flow based on assumptions about future sales, costs, expenses and so forth. People sometimes confuse the two because the financial standards are related, and the projected financials look a lot like accounting reports. For more on this, Planning is Not Accounting.
2. You do need bookkeeping no matter what; but you don’t necessarily have to do it yourself. You can’t manage your business without knowing exactly where the money came from and where it’s gone and what you owe. You can’t run a business without dealing with taxes, and that also requires keeping the books. And, for that matter, if you have the money and choose to spend it to avoid keeping the books (and you wouldn’t be the first, I assure you) you can hire a bookkeeper by the hour instead. Just remember that the bookkeeping has to be done. QuickBooks, since you asked, is for the bookkeeping, not the planning, and not the financial analysis. QuickBooks has a great reputation. It is the market leader in bookkeeping software (which most people call accounting software, or small-business accounting, but it’s actually bookkeeping). It does have competition, of course. And for bookkeeping software, in my opinion, you should use whichever one is easiest and works best with your bank, for importing data from the bank’s records.
3. Business planning isn’t as hard as you think. You don’t have to understand finance to succeed in business. Just managing your own cash flow is enough. For an initial business plan, aside from the strategy, specific steps and sales forecast that you already know, the estimates you’ll need include startup costs and expense budgets. These are lists, on spreadsheets. You can find explanations. You can do this. And the effort is worth it. It’s not that hard, and with just working it through, you’ll be able to see how profit and loss come together from sales and expenses, what the balance sheet is, and how cash flow brings profit/loss and balance sheet together.  And you can find people who know this to join you, or, if you have the money, pay them.

What really matters is cash flow, not sophisticated finance.

(Image credit: Dmitriy Shironosov/Shutterstock)

Here’s a question I received in an e-mail (edited to hide the sender’s identity):

“The major question I have is how you found the courage to pull through when the times were tough? I know that is a very generic question. but it’s what I am going through right now . . . [omitting the author's personal information, a description of a tough business situation]. I guess I want to know, when you were at your lowest point and everything seemed to go against you, how did you find the will to keep going? What caused you to keep pushing yourself past your limits?”

Courage is a flattering word. Saying we had no choice is more accurate. And not something I recommend for anybody.

I mistrust the “rah-rah” stories about entrepreneurship that make it about courage and pushing past limits. You should plan, reduce uncertainty, and go ahead with caution and awareness, not courage. And never bet what you can’t afford to lose.

Yes, there was a point in the history of Palo Alto Software at which my wife and I had three mortgages and $65,000 in credit card debt. Suffice to say that one thing worse than not getting your products into the retail channels is getting them into the channels, with all the associated costs, and then having them not sell.

Point No. 1: It wasn’t just me; it was my wife and me together.

Point No. 2: We did have a plan. I wouldn’t recommend doing what we did, because we bet more than we could have afforded to lose, which is dumb. We were painted into a corner, which is also dumb. But we did have a plan instead of just wild guessing. Dull and boring packaging had been identified as the problem, but instead of just repackaging the products we had, we decided to improve the product at the core. We did spend money we didn’t have on new packaging. More important, we contracted programmers for monthly minimums plus a percent of future revenue, to create a much better product. We didn’t just hope. We had reason to believe we could get through it by introducing a new product and getting that into the channels, with better packaging as well.

Ironically, the worst financial problems came after the product had taken off in channels. This is typical in small business–growth can cause cash-flow problems. We were really broke, but we had money owed to us that would eventually be paid.

Point No. 3: We had no choice. That’s not something we’re proud of. We had moved from Palo Alto, Calif., to Eugene, Ore. We’d been in our own business for more than 10 years. Entrepreneurs with 10 years’ or 15 years’ staying power aren’t considered great hires by many companies, and Eugene didn’t have a lot of jobs.

If our business plan hadn’t worked, we would have had to sell our house to pay the debts. We would have had to pull three children out of private colleges. We put that off, increasing the risk with borrowed money and, happily, the result was Business Plan Pro. It became No. 1 in its category within seven months of initial release.

This story is dangerous because it seems to imply that business is about persistence in the face of very high risk. In fact, in front of groups, when this comes up, I say, “Do as I say (better planning, to avoid ever having no better alternative), not as we did.” Take a good hard look at your business and your other alternatives and keep your options open. We survived, but don’t think courage and the will to keep going will ever substitute for a realistic business plan, sales, customers and capital. Used wrong, you can end up digging yourself deeper into a hole.

(Image: Mare Salerno/Shutterstock)

(This is number 3 on my list of top 10 startup mistakes.)

I don’t refer here to the full formal business plan document that many startups need; I’m referring to planning, which all startups need. Set your long-term goals, your priorities and the meaningful milestones you’ll need to hit along the way.

Don’t ever confuse the plan with the plan document output. Don’t ever think the plan will last, or will be correct. The plan will be wrong, but the process of setting it up and tracking results will help you steer and manage your startup.

Never do something just because it’s in the plan. But never fail to plan. Plan right, understanding that it’s the planning process that runs your company, not the static plan document. Plan to change the plan often, as assumptions change.

All business plans are wrong–but vital.

Are you teaching a class on starting a business? If you are, then I’d like you to be aware of course.bplans.com.

That’s where I’ve put up a full curriculum/syllabus including lesson plans, exercises and assignments, online videos, and more than a dozen PowerPoint slide presentations complete with slide-by-slide notes and distribution-friendly photos and graphics.

This is material I’ve worked on for years, originally just for my own use as I taught a course in starting a business for undergrads at the University of Oregon. I’m not going to be teaching that course this spring, after 11 years of it, because I’m more involved with angel investment via the Willamette Angel Conference. But I do want to make it available to others. Why not?

The whole curriculum is free to professors on that site. And, just so you understand the motivation, yes, the coursework requires Business Plan Pro, Guy Kawasaki’s The Art of the Start, and my books the Plan-As-You-Go Business Plan and 3 Weeks to Startup (co-authored with Sabrina Parsons). So my company, Palo Alto Software, does make money by selling those to your students. But we have academic pricing, so your students can get all three for less than the $130 average cost of an entrepreneurship textbook. I’d like to think everybody wins.

That’s at course.bplans.com. You’ll find instructions there to get your free registration as a teacher. This was done especially for SBDCs, members of the National Association for Community College Entrepreneurship, community colleges and undergrad business education classes. We’ve been a sponsor of the ASBDC network for 15 years now and of NACCE for two years; so we like to think we understand those needs.

Palo Alto Software Offering Business Plan Workshop to Lincoln County Business Owners – Oregon

It’s not a secret that Oregon is a great state to start a business. If you are a business owner in Lincoln County you know the challenges of staying open and staying solvent. Do you have a plan to thrive in this changing economy? Palo Alto Software can help you develop a solid business plan for your business. This software company, based in Eugene Oregon is following up on this past summer’s Small Business Boost by offering a workshop on their Business Plan Pro software. This workshop is being held in conjunction with the Small Business Development Center at Oregon Coast Community College, which is dedicated to the success of businesses on the Central Oregon Coast.

The workshop will be held at Oregon Coast Community College, Newport campus in South Beach. It will be a three hour workshop starting at 6:30 p.m..

Please call for reservations at 541-867-6200  Ext 202

Palo Alto Software’s head of Training and Education, Sean Serrels, will be leading the workshop. The evening will focus on existing businesses using Business Plan Pro to manage operations. The first part of the workshop will demonstrate the power of computerized business planning.  The second part will focus on regular financial forecasts and comparing this data to actual performance and then proactively maintaining a roadmap for business success.

There will be an attendance fee of $25. For attendees of this workshop, Business Plan Pro Premier Edition will be available for $100 (50% off the retail price).
Local business owners looking to for that helpful nudge to develop your business plan are encourage to attend. You will get an overview of the nuts and bolts of the Business Plan Pro software in addition to greater fundamental understanding of the benefits of continuous business plan development.

What: Business Plan Pro Workshop
When: December 2, 2009 at 6:30 pm
Where: Oregon Coast Community College, Newport Campus in South Beach
Space is limited. Call 541-867-6200 ext 202 for reservations — $25.00 attendence fee

I have to admit bias squared with this post, because I like Ramon Ray, the author, and he’s congratulating Business Plan Pro, which is my work, on its 15th anniversary. Still, Ramon makes this point very well:

We all know that when applying for a loan and seeking venture capital funds you simply have to have some sort of business plan. But we often forget about one important audience, ourselves. A business plan is not only needed for third parties involved with providing funding to us in one shape or another, a business plan is an important, strategic document to help guide our growth. Like a good road map on a trip, it helps us know where we have been, where we are and where we are going.

That’s from Business Plans Are Not Just for Startups on Ramon’s excellent blog Smallbiztechnology.com. If you don’t follow Ramon there and as ramonray on Twitter, well, you ought to. He’s a true expert in the subject.

(Photo credit: I captured that picture from Ramon’s Twitter profile)

It happens to a lot of businesses that start out self-funded: since nobody is requiring a business plan from them, they don’t think they need one. It’s not long before they realize what they’re missing.

That’s what happened to Monique Riviere, of Springdale, Maryland, when she bought her V2K Window Décor & More franchise two and a half years ago. V2K is an independently owned franchise providing custom window coverings and installation services to residential and commercial clients.

“There didn’t seem to be a need for a formal business plan — I didn’t have a lender that I needed to present my case to. Midway into my first year, I realized I was being pulled in many different directions. I needed to get my goals down on paper so that I didn’t respond to every whim, which could waste both time and money,” Monique remembers.

Like many small-business owners, Monique wasn’t sure she could write a business plan herself, but found the cost of having a professional do it prohibitive. “I felt very intimidated by the process and didn’t know where to start. I got estimates from a few companies starting in the low $1,000s, which was out of my range.”

Before she knew it, she was in her second year of business and still didn’t have a plan. Small business counselors with whom she consulted wanted to see one but, she says, “I had nothing to show.” It was time to get serious about writing a business plan, so she set out to find a computer program to help. Her requirements for the software: user-friendly, low-cost, and updatable.

She discovered that Business Plan Pro met those criteria. “I was immediately comfortable with the step-by-step interview process and impressed by both the interface and the content. My most intimidating areas – financials and market research – were even made simple.”

Being at ease with her business plan allowed Monique to enjoy the aspect of owning a business that excites her most: the freedom. “Charting my own path and determining how successful I want to be. The rewarding feeling at the end of a long, hard project makes it all worth it.”

Besides recommending having a business plan, Monique has some advice to entrepreneurs starting down the same road she did: “If you can partner with someone you know, like, and trust, do it! If not, make sure you have the consistent support of family, friends, and colleagues. You’ll need it to get through the bad days.”

The take away from Monique’s experience? Don’t kid yourself — you do need a business plan.

Jay Snider
Palo Alto Software

At Palo Alto Software, we’re used to talking with entrepreneurs about their businesses. Most are enthusiastic about what they do, but you can hear it in their voices when they truly love it. Carol Graham, a relatively new user of Business Plan Pro, is one of those people. As founder of Bulldog Communications, LLC, in Tallahassee, Florida, Carol has forged a career based on this passion for her work, and we’re happy to spotlight her experiences here.

Give us a quick snapshot of what your business is all about.

Bulldog Communication is a communication consulting firm. Our slogan is “Innovative Solutions to Launching Ideas.” The type of communication services we provide does not focus on mass media or technology. We focus instead on internal and external business and personal communication strategies that are essential to successful and thriving business cultures.

Our corporate culture is simple: Do What You Love. Anything less makes for a “venture” instead of an “adventure.” At Bulldog we are committed to only accepting projects that excite and stimulate our team of experts.

Bulldog Communication was named for the tenacity associated with the logo and is comprised of three major program areas — Judson, Legacy and J.A.N.E.

First is our Judson program. Judson programming is aimed towards assisting businesses in achieving their goals through communication excellence, including full communications audits, communication seminars, part of a full array of services to assist in the launch of a not-for-profit organization or small business.

Next is our Legacy services, which focus on the needs of nonprofit organizations and short term “crisis” projects, to assist organizations who are in immediate danger of losing their status or funding.

And finally we have our J.A.N.E. program, which stands for “Just Actions, New Expectations,” the philanthropic program of Bulldog Communication which provides pro bono assistance.

What are the most important lessons you learned during your business planning process?

Although I began as an experienced grant writer with a PhD in Communication, I found quickly that there was much to the planning process that I had not considered. My writing skills were an asset, but I still greatly benefited from the step-by-step process that Business Plan Pro applied to my planning. I too often jump from point A to point Z without clearly articulating to my audience how I made the leap. Business Plan Pro helped me to bridge that communication gap.

Did you write your business plan for funding or investment purposes?

I did not write my plan for funding, because I already knew how to write grant proposals. I was looking for something different. I wanted to articulate my business dreams and goals so that I could clearly identify the steps needed to achieve my goals. While grant writing is a wonderful skill, it is rare to find a grant that will allow you the academic and ethical freedoms that your own dreams can conjure!

As your business continues to grow, do you find yourself going back into the plan to update and adjust?

My business plan is a continual work in progress. The planning software allows me to analyze my progress and current status, and then adjust as needed. My weakest area was cash forecasting and accounting. Left to my own devices, I will market my services and in short time, find myself unable to take on the projects I love because I have become involved in the wrong projects for the sake of profit.

Business Plan Pro helps me to prioritize my projects, recruit the appropriate associates, and decline projects that are not a good fit for Bulldog.

What, in your opinion, is the most exciting part of being an entrepreneur? What are the biggest challenges?

The most exciting part of entrepreneurship for me is simply “doing what I love.” If I don’t love a project, I don’t take it on. Having said that, however, it may be that I have an associate with great passion for that same project, and if that is a good fit, then it is appropriate and exciting for Bulldog to take on the project.

The biggest challenges, ironically enough, are in pacing ourselves. This is a most exciting undertaking. It is not a “get rich quick scheme” (those only make you poorer faster in my humble opinion). Fortunately, Business Plan Pro provided the tools I needed to launch my business in a strategic and well-thought-out manner. I had 4 four projects before I launched a website or produced a brochure. That is heady stuff; it is important to proceed carefully, making absolutely sure that you can deliver a product that greatly benefits your client, and at the same time also leaves you with a great sense of satisfaction and desire to do another just like it!

Any final thoughts? Do you have a piece of advice for someone who might just be starting out in their own business or planning process?

Owning your own business is simply not for everyone. Take a serious personal inventory and make sure this is your passion and pleasure. If you do not love what you are doing, you will not continue to do it, or at least not well. Take the time you need to write a full business plan. It might impress others, but much more importantly it will help you analyze your readiness to take off on this adventure.

—–

Carol Graham is an ordained chaplain, a novice horsewoman, an avid racquetball player and the “Momma Bulldog” CEO of Bulldog Communications, LLC. Carol and the entire Bulldog Communications team are dedicated to the motto of only doing what you love.

1400 Village Square Blvd., Suite 3-121 Tallahassee, FL 32312 TEL: 850.933.4074

If you or your company would like to be considered for a Customer Spotlight by Palo Alto Software, please contact ‘Chelle Parmele at chelleparmele@paloalto.com

I was just browsing the web with my laptop on a Sunday afternoon, half watching football, when I caught a LinkedIn question about business plan software. “Just use Excel and do your own,” the answer says.

“Yeah, right,” as one of my daughters used to say, rolling her eyes, when she was still a teenager, “and oh, brother.”

Use Excel if and only if you know spreadsheets well, and you know finance well, and you want to spend 20, 40 or more hours saving yourself about $100.

You may think of it as just a few simple lists, but you deserve better. Consider what it takes to make the leap between sales projections and expense budget to actually working on cash flow:

• Sales don’t mean you get the money. When you sell to a business you leave an invoice and wait to get paid. How is your Excel model going to deal with the cash implications of waiting for money owed? Are you going to model the flow from sales to accounts receivable to cash? Collection days?
• Costs of sales don’t mean you pay for them right then. You might have paid those costs months ago, as inventory. Are you going to model inventory turnover, and the cash implications of that?
• Expenses don’t necessarily mean you’ve paid those bills. Most businesses wait awhile before paying outstanding invoices. So you have to model payments and payment delays, and the cash implications of that.
• You need to plan for starting costs, which include expenses that go into one place and assets in another. Or if you have an existing business, how do you start the balance?
• Taking out a loan gives you money that doesn’t show up in profit and loss, and repaying it doesn’t show up in profit and loss, but the interest involved does show up in profit and loss. When you get a new loan, you bring in cash but interest expenses increase. You have to model that, too.

I realize that I’m getting dangerously close to a sales pitch for Business Plan Pro here, and I try to avoid sales pitches on this blog. But I feel that it’s unfair to just ignore this problem and pretend that people aren’t giving each other bad advice on this point.

It’s not like Business Plan Pro is just a black box; type assumptions in and projections come out. It’s built around a spreadsheet-like view so you can see what you’re getting, and it’s fully documented so you can see how the assumptions come together and how it works. And it’s productized, so it’s mathematically and financially correct.

Don’t get me wrong: Excel is great as an application language. I’ve been working with it since the first version, Mac only, in the early 1980s. I couldn’t live without it. I couldn’t have developed Business Plan Pro without it.

But you don’t have to do all of that all over again, by yourself. Don’t reinvent the wheel. Work on your plan content instead, the core assumptions and understanding the implications of your assumptions in the financial model. You don’t have to build a car to drive one.

And if that’s a sales pitch, I apologize. If you read this blog regularly you know it’s not my normal topic. I do get frustrated, though, with this kind of misinformation; and if you’re interested in starting and/or growing a business, then this is something you probably want to think about.

The Rice Business Plan Competition is now accepting applications for the 2009 competition, to be held April 16 – 18 in Houston, TX. Only 36 teams will have the opportunity to compete in this prestigious competition, and one lucky team will walk away with more than $675,000 in cash and prizes.

All interested teams must submit an Intent to Compete no later than February 13, 2009 to be eligible for the competition. Palo Alto Software is proud to once again sponsor the competition and provide all teams who submit an Intent to Compete by the February 13th deadline with a free download of Business Plan Pro Premier Academic Edition software.

If you meet the eligibility requirements and are interested in the opportunity, I would highly encourage you to submit an Intent to Compete. I attended the competition in 2007 and can honestly say it was an experience I will never forget. It is by far one of the best business plan competitions out there today.

Kristen Langham
Manager of Business Development
Palo Alto Software, Inc.