In most cases over the years, I find that many of the articles I have written revolved around a topic or issue that a prospect or client was having, which inspired me to write an article. My thought was that if one business owner had the issue, then others did as well, and an article would help the masses.
This time isn’t any different but was not an issue a client had, but a misunderstanding of expectations that lead me to believe that many more new entrepreneurs may have the same misunderstanding. Before a business owner engages a professional to develop a business plan, they should understand what a business plan is and is not. It is also important that one understands what the requirements are of the business owner versus the consultant.
The Case Study
We were contacted by an immigration consultant who was looking to have a Business Plan developed for their client who was looking to move to Canada under one of the current immigration programs. In Ontario, there is a OINP (Ontario Immigrant Nominee Program), which allows foreign workers with the right skills to apply for nomination for permanent residence in Canada. One of the streams under this program allows Entrepreneurs to open a business in Ontario, which will generate jobs for Canadian residents and citizens as long as they meet a certain criterion. Depending on where they plan to open a business in Ontario will determine how much money they must bring into the country and invest in the business.
We develop business plans for financing regularly, which are similar to the requirements by the government with a few subtle differences, so we decided to move forward.
We prepared basic questions about the business as well as those required by the government about the business. The client wanted to start a trucking business in Ontario but had not investigated the industry, did not have an understanding of the costs of vehicles, and couldn’t even tell us what type of trucking business they wanted to run. This situation is a very common scenario we find with many who want to open their own business and gain financing through a bank.
The immigration consultant was frustrated as he thought we would develop the actual business for them and supply the answers to the questions from the government, which pertained to knowledge of the industry, the number of employees, asset spending, and even the background of the applicant. I am not sure if they expected us to create a fictitious business that we would open or not.
A business plan is not a writing exercise, and it is one where you ask the owner the questions about their particular business that will give you the information to put together to apply for a loan. A bank nor the government is going to grant you money or entry if you do not know your business. It is not the job of a consultant to develop your business for you. Otherwise, the consultant would be the one granted the money or entry. A business plan documents the implementation plan for your business strategy, and if do not have a business strategy or a basic understanding of the business you plan to run, it is very difficult for someone to write a plan.
A business plan focuses on being able to achieve the projected 5-year financial statements outlined in the financial section. The rest of the plan supports those financials. The market analysis has to support there is a market large enough, and there is enough room for an additional entrant in the market to make money. If there is a limited market – that is a large risk and a lender or the government questions whether you can deliver the financials. The potential business owner’s background and experience plays a role as well. Just because you love food, may not mean you can succeed with running a restaurant. One has to be able to show how sales are made and do you have a marketing plan that supports that level of revenue. It would be best if you had the right staffing in place and operations to support the business. The bank or government is taking the risk in you, not the company that developed your plan; otherwise the consultant would start the business.
If you are going to start a business, you need to spend the time and effort to investigate what it takes to run the type of business you want to start. It is up to you to do the research or pay for research is out there about your industry. You do not wait until you need to have a business plan developed for this. It is up to you to know the costs you are going to incur in opening the business and have a general understanding of the inner workings. If you cannot tell someone how you are going to generate revenue for the business, how can you expect a lender to give you the money or the government to let you in the country?
Develop your business strategy before you think about having a business plan written, especially for financing. If you are not sure how to start, there are consultants, coaches, and agencies out there that can help you do just that, but do not expect it to be priced into a business plan engagement. We provide that service to clients, but not at the same price as development of a business plan.
Developing a business strategy is not something you do in a couple of days. It is a process that you go through to set goals and objectives for your business and determine how you will meet the goals and objective. Your business plan is the implementation plan of how you are going to do just that. This exercise should be done by every potential business owner every 3-5 years. If you are a start-up, then you have to have one before you start your business. Existing businesses may not have full-blown strategy, but they do have a history and a background. They also have revenue and some level of experience, and they can answer questions about their business.
For start-up businesses, there are plenty of services out there available to help you until you can afford the external services of a consultant or coach. In Ontario, there are the Small Business Enterprise Centres that have courses, mentoring and programs to help you get started. Some will be for free, and others are offered at a reduced rate.
Once you have an understanding of the business, you are going to open, and you can then engage help for developing a business plan if you require financing, or a grant, or even entry into an Entrepreneur Immigration Program.
RK Fischer & Associates