Chapter 4. Planning to Succeed

So you want to start an online business–any business for that matter. Great! So what’s your plan? Your business plan, that is. One of the prime reasons businesses fail is that they don’t have plan. Some companies, when asked about their business plan, respond with “I plan to be in business.” That’s a recipe for trouble. If you haven’t written a business plan before you open your business then your business is still in the fantasy stage.

It’s not that businesses plan to fail–they fail to plan. No matter what your business, you need to outline your business goals and objectives, costs, revenue assumptions, and marketing plans. In short, a business plan is a practical realistic planning tool for your business that is your roadmap to success and how you’ll measure that success.

Why Plan Your Business?

When you say “business plan” to most people, they think of a dry tome used to raise lots of money that’s packed with market statistics and financial data with mysterious terms such as “balance sheet,” “cash flow,” and “profit and loss statements.” That’s true in most cases. These are necessary parts of most business plans.

But that’s only half the story.

Business plans are not only used to acquire funds from investors or bankers, or even obtain company resources. Yes. If you’re seeking a capital investment for your business, a sound business plan is necessary for approaching funding sources. If you’re in need of company resources for an in-house project then a business plan is necessary for that too.

But a business plan is also a planning tool and a road map to success. It describes your business, acts as your company’s résumé, and sets the goals and objectives of your company. One that can organize your thoughts, formalize your intentions, and help sell your idea.

The real power of a business plan is that it forces you to think about the important aspects of your business, whether it’s an ongoing operation or a start-up. So, whatever your situation or whatever your objective, writing a business plan will go a long way in helping you succeed.

Briefly, the reasons for writing a business plan include

• Defining a new business venture

• Determining whether your business will make a profit

• Providing an estimate of your start-up costs

• Devising an effective marketing strategy

• Helping you compete in the marketplace

• Anticipating potential problems

• Supporting a loan application

• Raising investment funds

• Expanding a current business or product line

• Defining new goals and objectives for an ongoing business

• Measuring your business performance

• Tracking your growth

• Setting a value on a business for sale or for legal purposes

• Identifying cash flow

• Identifying the competition

• Identifying the necessary human resources

• Identifying the necessary management

• Identifying other resources, office space, desks, computer equipment, telephones, and more

As you can see there are many reasons why you should write a business plan. But there are even more important reasons.

American Express identified a number of ways to achieve business success that are directly connected to writing a business plan. A business plan will force you to think in creative ways about a business that you haven’t before. A business plan also forces you to set goals and provides the tools to control the outcome. In short, it can help you translate the raw idea of your company into an actionable plan.

A proper business plan will list your strengths while at the same time prevent you from ignoring your weaknesses. It will make you analyze your competition, build the right team, know your customer, and define your product.

So, why write a business plan? Because a good, well thought out plan reduces the odds of failure and increases the chances of success. Without a business plan, you leave far too many things to chance.

Major Reasons Why Businesses Fail

Writing a solid business plan can help your business idea come into fruition. But it doesn’t guarantee your business will be a success. The following are some of the common mistakes business owners make, and should be avoided AFTER the business plan is written.

• Many companies fail to anticipate the amount of working capital needed to operate a business. Though their financial projections are sound, they run out of money before adequate income from sales hits the bottom line.

• Don’t waste working capital when starting a business on frivolous expenses. All your working capital should go for one thing: making sales!

• Don’t be a target of the IRS. Pay your taxes on time. Pay them first before you pay any other expenses. The last thing you need is a lien against your business revenue. It’s very tempting to save your tax payments and employee withholdings for last. Don’t do it.

• Remember that most businesses are seasonal. So plan for your industry’s highs and lows. Have enough cash on hand for the slow months or diversify your offering to keep your doors open and your business humming along.

If you do run into trouble, here are some tips on how to overcome setbacks in your business.

First, keep the names of a good accountant and attorney handy. And if you do run into problems, seek help and counsel from someone you trust, preferably someone in an industry like yours. They probably have experienced and overcome a problem like that you are now facing at one time or another. Also, don’t hide from the problem. Avoiding meetings or phone calls with vendors or whomever else raises a red flag in their minds, and they may interpret it as a problem even more serious than it is. And always keep an upbeat attitude around your employees, no matter what the problems may be. You don’t want your best employees getting anxious and looking for work elsewhere.

Look at the problem. If it has to do with cash flow, look for ways to reduce everyday expenses. Cut back on entertainment and travel expenses. If your cash flow is seriously affected, consider cutting back on non-essential employees. If faced with this decision, start by cutting administrative personnel. Keep those that generate the income for your company.

Most importantly, do everything you can to pay your bills on time. Your credit rating is the lifeblood of your business. If you can’t make a payment on time, talk to your vendor and work out a plan to deal with the situation. Be proactive and be prepared to offer a payment plan when you call them. Above all, don’t make promises you can’t keep.

Finally, take a breather to relax and unwind. Take a walk or go to a movie. Then come back with a clear head to tackle the problem.

Some Tips Before You Start

Here are few basic tips to keep in mind even before you start thinking of your plan. These tips are especially useful if you’re looking to fund your business plan.

• It pays to take a class or two on running a business while reading up on business plans (try Que’s book Write a Business Plan In No Time). You should have a general knowledge of the different aspects of a business before you sit down to start your plan. There are many fine courses offered by your local community college, seminars by non-profit organizations, and small business programs offered by the government. Take advantage of these and spend a little time learning the ins and outs of running a business.

• Open a separate business checking account with the name of your business on the checks. Ask your bank about getting a credit card merchant account so you can accept credit cards at your new business. You may be required to provide a deposit to get a merchant account. This is normal for a new business without a track record. So make sure you have the cash for this.

Choosing a Business Identity

A rose by any other name may still be a rose, but what you name your business will affect how the market perceives you. A business name that may seem catchy or cute can often translate into something misleading or ineffective. Because the name of your business is the first interaction a prospective customer has with your business, if they don’t understand what you sell, it could lead to lost income.

Here are some ideas to keep in mind to help you avoid that first misleading or even unpleasant impression.

• Don’t just make up a name. Creativity in business names is a good thing if not taken too far. Don’t butcher the English language to the point where your business name has little or no reflection of what your business does. Sure, companies such as Cingular or Amazon have names that don’t match their product or service. But they have the marketing clout to create name recognition. As a small company, unless you are related to Bill Gates in some way, your marketing budget for unique brand recognition will most certainly come up short. Don’t make potential customers see your name and ask, “What in the world does that mean?”

• Don’t get cute. Avoid puns or phrases for your business name. This is especially important to avoid if you want to project a highly professional image. “The Shady Lady” may work for a lampshade company but it would definitely draw concern if you were a financial advisor. Also, consider the spelling of your name. Is it easy to spell? Why? It helps when someone is trying to search for your company on the Internet or in the yellow pages. Tricky spellings are hard to look up online or in the phone book. This goes especially for those companies that are looking for top placement in directories. Never put “AAA” or any kind of “A” in your name. We’ve all seen this at the very front of the phone book. Companies naming themselves “AAA Taxis” is good for top listing, but terrible for customers to remember. One last thing: Keep it short.

• Name yourself for growth. That unique selling position that you have honed down to a very specific market and product may not make a very good business name. For example, the name “Joe’s Music Store” would limit your business. Someday, you might want to add videos and ebooks to your product line. “Joe’s Entertainment Outlet” might be a better name to start with. So make sure that your business’s name is sufficiently broad enough to encompass whatever direction your business may take. Also, stay away from trendy names. Though tie-dye T-shirts may be making a comeback, it would be better to name your T-shirt store “Al’s T-Shirts” than “Al’s Groovy Sixties T-shirts.”

• Make sure your name is available. The best place to find out is at your State Corporation Commission. Find the department or agency that handles trade names and do a search on the business name you want to see whether it’s available. Also, check the Internet. Do a search on Yahoo.com using the name you chose and see what search results come up.

Establishing Your Online Domain

If you’re serious about doing business on the Net you need to register a domain name. A domain name represents your company and is your URL. The letters URL stand for Uniform Resource Locator. For example, Amazon’s domain name is amazon.com and Wal-Mart’s domain name is wal-mart.com. The URL is the site address that appears in the address window of your browser such as www.MyEcommerceSuccess.com. It’s the way you find websites on the Net.

A domain name is included with every Yahoo! Merchant Solutions package. Yahoo! will register and renew your domain name for free. If you already have a domain name, you can re–delegate your existing domain and use it with your Merchant Solutions account. Note: This is not a registrar transfer. You will need to continue paying renewal fees with your current registrar. If you do not already have a domain name, you can register for one when you sign–up for a Merchant Solutions account.

When the brick and mortar company Barnes & Noble went online they acquired a domain name. At first they used the long domain name barnesandnoble.com, then shortened it to bn.com and finally obtained books.com. That, by the way, was some coup. The books.com domain name was the property of another online bookstore. Barnes & Noble wanted it, so they bought the bookstore!

This raises a problem for you. Many of the most popular .com domain names have been taken. You will probably find that someone has already registered your business name or business type. Creating a unique domain name could be quite a challenge. That is, unless you have the deep pockets of a Barnes & Noble to buy an already assigned domain name. The fact is that grabbing a great domain name that reflects your business type or even your business name is getting harder to do. You can also bypass the .com extension and register .net, .org, .us, .info, .name, .biz, .de, .tv, .co.uk, .cc, and .bz, but they are not as popular with users and may cause confusion when they enter your domain name with a .com rather than another extension.

Finally, when choosing a domain name, keep it short and memorable. A long domain name with too many letters or with hyphens is hard to remember. Also, make it easy to spell. Lastly, try to choose a name that relates to your core business or business name.

Where to Start

First, find out whether that nifty domain name you thought up is available. To do that, head over to Yahoo! Small Business at smallbusiness.yahoo.com/merchant/ (see Figure 4.1).

Figure 4.1. Yahoo! Small Business will walk you through the process of choosing and registering a domain name for your business. It will also suggest other names if the one you want is already taken.

When you arrive at Yahoo! Small Business site, you see a “Find a domain” search box. Type in the domain you would like to use and see whether the name is available.

After a quick search, Yahoo! Small Business will tell you whether that domain name is taken or not. Be prepared to try several variations on your domain name until you find one that has not been registered. If the domain name is taken, a list of suggested domain names will be displayed along with the other domain name extensions such as .net, .org, .biz, .info, and .us. Because you are setting up a business on the Net, the extension you will likely use is the .com one. The .org extension is for organizations such as the United Way, and .net is for networks on the Internet. You can search as many names as you like—it’s free. After you find the domain name you want and it’s available, you can proceed to register the domain name.

Here’s the Process to Follow

1. Once you find an available domain name, click the Continue with This Domain button.
2. A page will come up asking which Merchant Solutions plan you would like to choose. Once you select the plan, click the Choose button.
3. Sign in with your Yahoo! ID. If you do not have one, you can create one by clicking the Create One Now link.
4. Yahoo! will then take you through a series of forms asking for your personal, company, and payment information. You can also register for additional domain names and point them to your store. All of your domains can be easily managed in the Domain Control Panel with just one Yahoo! ID. To register for additional domain names, go to smallbusiness.yahoo.com or you can do it in the Domain Control Panel.

Now that you know the reasons to plan your business, have chosen a unique name, and have established a legal identity, it’s time to look at the necessary elements of your business plan.