Tag Archive for 'Palo Alto Software'

A business plan and business planning

A business plan is the result of thinking, researching, strategizing, and reaching conclusions about how to pursue opportunities. It may exist only in the head of the planner, but it’s better when written down.

Whether elaborate or simple, a written business plan is an assembly of facts, ideas, assumptions and projections about the future. Here are three ways to use a written plan:

  1. Document the due diligence on a new business or the future of an existing one.
  2. Evaluate opportunities and challenges, and compare them with your strengths and weaknesses.
  3. Assist when getting a bank loan and essential when courting investors.

So how does a static, written plan work when a business is always in motion? It works when you turn your plan into planning. A plan is like a parked car; planning is taking that car on a trip.

Planning is measuring your business motion against the baseline of assumptions and projections you made in your plan. Planning allows you to see how smart you were when the plan was written, or where your research and assumption skills need work. It also highlights external forces you face.

Written business plans often become collateral damage during challenging economic times. But you can’t allow planning to meet the same fate. Indeed, when things slow down there is even greater need to check your position than when things are rocking and rolling.

Here is a critical two-step planning activity that is the heart of a business plan and the essence of planning. Beginning with these will help you operate more successfully anytime, but especially when things are slow.

  • Build a 12-month cash flow spreadsheet in a program like Excel, so you can project and track the monthly relationship between cash collections and cash disbursements from all sources. This planning tool will provide a rolling picture of cash flow in any given month.
  • Look at the “Ending cash” number at the bottom of each month’s column. A negative number in any month means you’ll need to add cash from sales, reduce expenses, add cash from another source, like a bank loan, or some combination.

A banker once told me that if I could bring him only one financial document with a loan request it should be a 12-month cash flow projection that included both how the borrowed cash would be used and the debt service. I always listen to my banker and you should too.

I talked more about business plans and planning on my radio program, The Small Business Advocate Show. I’ve also talked with Tim Berry, the guru of business planning, founder of Palo Alto Software and author of The Plan As You Go Business Plan, about the difference in business planning and a business plan. Take a few minutes to click on the links below and listen, plus leave your ideas on how planning helps your small business.

Write your business plan, but practice business planning with Jim Blasingame

The difference between business planning and a business plan with Tim Berry

Three myths small business owners tell themselves

Want to be your own boss? Good for you. But that’s the definition of someone who is independently wealthy, not a small business owner. When you own a small business, you’ll have many more bosses than when you were an employee.

Are passion and persistence enough to succeed as a small business owner? Clearly, they’re important, but what about those difficult days – when payables exceed receivables, on payroll Friday, when customers are the most difficult, when an employee becomes part of the problem? You’re going to need more than passion – you’re going to need management fundamentals

Do you think a business plan is passé? Well, if you think a business plan is just something to write down, print out and put on a shelf, don’t waste your time. But if you understand that a business plan you create, organize and use as a critical management tool, then it’s becomes passé on the day that success becomes passé.

Recently, on my radio program, The Small Business Advocate Show, I talked about these three topics, with one of the founding members of my Brain Trust, Tim Berry. Tim is the world’s guru on business planning and the founder of Palo Alto Software, the makers of Business Plan Pro.

Each of these “myths,” as Tim calls them is in its own short podcast, so you can listen to each topic separately. I hope you’ll take a few minutes to listen and learn. And of course, please lever your own comments.

Myth 1: You can be your own boss

Myth 2: Passion and persistence are enough

Myth 3: A business plan is no longer necessary

Angel investors and other small business capital sources

Blasingame’s 3rd Law of Small Business states, “Its redundant to say ‘undercapitalized small business.’”

There are two primary reasons this Law is true:

1. Unlike big businesses, small businesses typically have only three sources of capital: a) retained earnings (profits left in the business); b) direct investment, usually by the founder; and c) debt, usually from a bank.

2. Everyday one or more elements of a small business are screaming for funds to increase the company’s competitive advantage.

Even very successful small businesses are undercapitalized. In fact, ironically, the more successful a small business is, the more undercapitalized it will likely be. If a business is not growing, it needs capital to achieve growth. A growing business needs capital for R&D, upgrading technology, acquiring new product lines, funding accounts receivable and inventory that increase with sales growth – the list is long.

For most small businesses, the lion’s share of capital comes from retained earnings and bank debt. However, other than the founder’s investment, direct equity capital is less likely. But when outside equity is acquired, the next most likely source is from angel investors, which has become an increasing direct investment option over the past few years.

An angel investor is typically an individual who has money to invest and, instead of putting all of it in the stock market, he or she will allocate a portion to invest directly into a business, which could be either a start-up or a going concern. More recently, angel investors have formed regional consortiums to aggregate their investment dollars in order to spread the risk and make sure that they don’t make the mistake of under-funding a venture.

Most people have heard of venture capitalists (VC), the big dogs of entrepreneurial investment. Angels are sort of mini-VCs. The big difference is the level of funding and, in many cases, the closeness of the relationship with management; angels will be more likely to be geographically and emotionally closer to their recipient than a VC. The big similarity is that both anticipate an exit strategy where their capital – and hopefully a profit – are returned. This last point is the primary reason why most small businesses are not candidates for any investor capital, since the typical small business founder expects to run his or her business forever and perhaps hand it off to the next generation.

Recently, on my small business radio program, The Small Business Advocate Show, I talked about how angel investors choose investment candidates with Tim Berry. Tim is the world’s leading expert on business planning, founder of Palo Alto Software, an original member of my Brain Trust and my good friend. Tim is not only an angel investor, he is a member of one of those angel consortiums mentioned earlier. Take a few minutes to listen to what Tim told me about his experience and this fascinating process.

Successful small business succession planning

Statistics show that nine out of ten small businesses are family owned and operated; no big surprise there. After all, isn’t a start-up virtually by definition a family business? Indeed, what small business can be founded without some involvement, if not a lot of sacrifice, from the family members?

But when the founders ultimately decide to take their leave, orderly transfer of management and ownership to next generations breaks down significantly. In fact, less than one third of small businesses are transferred to family, and that number includes those that work and those that don’t.

In a past career as a business consultant, often working with families who work together in their businesses, I discovered at least two important small business succession planning truths:

1. The only thing harder than founding and growing a small business successfully is transitioning management and ownership successfully from the founder to the next generation of family.

2. The percentage of succession success increases with any combination of these three elements: higher management sophistication; high degree of respect among the parties; counsel from a family-business transition professional.

One family business transition I’ve observed, merely as an interested party, is the company founded by my friend, Tim Berry, a member of my Brain Trust and founder of Palo Alto Software, the makers of Business Plan Pro. All of his five children have worked in the company to some degree over the years, and earlier this decade he turned over the management reigns (not sure about any ownership transfer) to a middle child, daughter Sabrina.

From what I can tell, this transition is making all parties happy. With regard to my second point above, I’m not sure how much professional assistance they’ve sought, but I do know that Tim and Sabrina clearly fit the other two criteria of sophistication and mutual respect.

Recently, Tim joined me on my small business radio program, The Small Business Advocate Show, as we talked about some of the key elements of succession planning. He’s been the world’s top business planning guru for a long time, but he has become a family business transition expert in the last few years. Take a few minutes to listen to his words of wisdom. And, as always, be sure to leave your thoughts.

Small business plans are only as good as the planning that follows

A business plan is the result of thinking, researching, strategizing, coordinating and reaching conclusions about how to pursue a specifically stated business opportunity. It exists in one or both of two places: on paper (including electronic “paper”) and/or in the head of the planner. Whether elaborate or simple, a business plan is a collection of ideas, facts, assumptions and projections about the future.

Why is a business plan necessary? Here are five good reasons:

1. It’s important to conduct due diligence on your proposed new business or future direction of an existing one.

2. It’s essential to take stock of the potential opportunity and compare that with your ability to pursue it effectively.

3. It’s necessary to evaluate your ability to overcome any obstacles discovered during the plan development.

4. A written business plan can be helpful in getting a loan from a bank and is usually essential when courting investors.

5. Anything in writing is always more valuable than relying on memory.

But a business operates like a movie, not a photo album. And since a business plan is more like a snapshot than a video, how does it help? It’s a good question that’s often asked, and the answer is it establishes a baseline from which you execute the most important management fundamental of all, planning. A plan is static; planning is motion, just like your business. A plan is a parked car; planning is conducting a safe cross-country trip through heavy traffic.

Planning is checking your moving business activity against fixed assumptions and projects you made in your plan and then measuring performance, or lack thereof. Planning allows you to see how smart you were when the plan was written, or where your due diligence and assumption skills need work. It also highlights any external changes that you must deal with.

For existing businesses, written plans often become collateral damage in an economic downturn. But you can’t allow planning to meet the same fate. Indeed, when things slow down there is even more need to check your position than when things are rocking and rolling. In a recession, planning should be conducted daily, not monthly. And if you’ve been a business owner in other recessions, you know that it’s sometimes necessary to do hourly planning.

Recently, on my small business radio program, I discussed this with the world’s business planning expert, Tim Berry. Tim is the founder of Palo Alto Software (www.paloalto.com)and an original member of my Brain Trust. Don’t miss this opportunity to hear from the master about why now, more than ever, planning is one of your keys to survival. And don’t forget to leave a comment or question.

The great expectations of the presidency of Barack Obama

There is much excitement about Barack Obama becoming the 44th President of the United States. It’s a remarkable moment in American history on many levels.

• In America, we select the future leadership of our government with plenty of healthy political passion and debate, but without physical conflict. It’s not unique in the world, but the United States is the world’s template for this kind of transition.

• Barack Obama is the first black American to be elected to the presidency. Enough said.

• Who can remember when any presidency – even John Kennedy’s – began with as much anticipation and hope?

• Who can remember when any presidency began with such great expectations?

It’s that last point that I think is really the most remarkable. As Americans, we have to guard against placing so much expectation on the performance of one person. Clearly there are certain things we expect our President to do, not the least of which is to take the steps to protect us from being attacked by our enemies. And we want our President to lead with a positive and patriotic attitude that sets the tone for the nation.

But as we anticipate the promise of Barack Obama’s tenure as President, Americans should take stock of our own responsibility as participants and producers of our society and marketplace, and as beneficiaries of the bounty of our great land and republic. Let’s spend more time looking inward at our own roles in our future success.

At the core of our national values is the belief in and desire for self-determination. But the wages of self-determination is self-responsibility. Our success as individuals and that of our nation depends more on each of us individually and collectively as a society than on any president. I think Barack Obama knows this. I pray that this will be his requirement of us as he governs.

Tim Berry, President of Palo Alto Software (www.paloalto.com)and long-time Brain Trust member, and I took a few minutes to talk about this on my small business radio program. Listen to our comments and let us know what you think. This one is only about 6 minutes.




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