Devising A Business Plan
Theres a lot of talk these days about the entrepreneurial spirit and those that claim to have it are opening their own businesses and reaching for the brass ring. While having that spirit can be a plus in running your own show, many forget that it takes a team to run a business and the one secret that all successful entrepreneurs use is to surround themselves with good people.
Now how good a person is at coming up with ideas and they may have the drive to take those ideas to a higher level, they are going to need help to turn those ideas into reality through execution. Devising a business plan is a major part of developing a new business, as well as getting funding for its start up but the trouble with many new ventures is that it is planned to death. Agonizing over every little detail of how the business is going to be operated, where the money will come from and how it will be spent is more than one person can handle. Successful people are willing to share that responsibility.
Those opening a new business with the thoughts that they can work their own hours, open a business and sit back and collect a huge income are really fooling themselves. While working your own hours may be possible if you plan on spending more than two thirds of your time in the business. It is going to take a lot of time, especially in the early stages but you can decide which of the 18 hours during the day you will spend working.
You also have to have the personal commitment and the self discipline to own your own business. Whether it is working at home or having an office in the home and work on clients job sites, you have to be disciplined enough to get the job done and plan for the next one. There are going to be things that go wrong and you have to understand that as the business owner, you are the one that will make the decisions on how to make things right.
There are many myths surrounding operations with a new business, such as the boss is always right and telling people they will do it your way because you are the owner. While the business may be in your name and you are taking all the risks in making it successful, the bottom line head of your business is going to be your clients or customers. Without people will to pay for your services or products, you have no business. And while you may be right in your decisions, you can pat yourself on the back for making the right choices all the way to the unemployment office.
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How to Begin A Company Chart Program
Charts are living proof that “a picture is worth a thousand words.” Charts provide management with an easily understood review of a company’s past, present and projected future. When charts are used effectively, profits can be improved. It is necessary to employ a systematic, step-by-step approach to the adoption of a company-wide chart program. You should consider where the program should begin.
Total Company Approach
It is logical to have the first charts prepared for the use of the executive management. A chartist can be hired and a chart room set aside. Someone, preferably a member of the financial organization, should be officially designated in charge of the chart preparation, the chart room, the statistical information required, and the explanatory data which accompanies each chart. A person with accounting or statistical training should prepare the data to be plotted on the charts.
Following the lead of the corporate office, the divisions and subsidiaries can prepare chart rooms and pattern their chart presentations after the executive program. The divisional and subsidiary charts should contain most of the top level information which appears in the executive office chart room; this will be supplemented by a number of detail charts which depict the many control items the operating management uses to direct day-to-day activities.
For example, the top corporate management is mainly interested in sales, profits, assets, inventories, receivables, profit per cent to sales and per cent return on assets. In addition to these, the operating managers must get into cost and expense control item by item, production scheduling by models, product movement through the distributor-dealer pipeline, inventory buildups prior to new model introduction dates, the cost and effect of special promotions, and similar, more fragmentary problems. All of these activities require final decisions after considering alternate courses of action.
A coordinated chart program can be most effective at the time discussion centers on the results of alternate courses of action. The operating executive can be given a voluminous report or a series of statistical schedules detailing all the pros and cons. A superior approach would be a simple set of charts, prepared to illustrate what will happen, for instance, to profits if the company increases expenses to support a higher sales volume and then the business fails to materialize.
If the reader is going to adopt a top company chart program before going to the divisional and product line level, it is suggested that the following program be considered. Begin with total company statistics going back as far as possible or as far as desired. Plot sales, profits, receivables, inventories, assets, fixed assets, net worth, equity and debt relationships, the essential ratios such as profit per cent to sales, per cent return on assets, asset turnover, current asset ratio and so on.
In addition, some companies may have important single items which contribute materially to profit performance, such as engineering and development, raw material purchases, direct labor or traveling expenses. These should also be included in the basic series of charts, in order that all levels of management can review them and become acquainted with the important elements affecting company operations.
These charts should contain space for future years, to minimize the frequency of repeating the entire series. It is recommended that these historical charts not be used to plot short term forecasts or five-year plans. The historical charts should reflect only long term trends, and generally this is confined to total company operations. In some cases these charts are segmented by the years the company was served by different presidents, to compare sales and profit performance during each period.
Once the total company historical charts are completed, it is advisable to consider a series which will look to the future. Again focusing attention on the total company, it is suggested that space be provided for five years of history and a minimum of five years ahead.
Some time spent on the initial setting up of the program will be well worth it in the end.
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Planning to Leave Your Business to the Family
Pancho Duque has built a multi-million dollar sugar and rum empire through his hard work and vision since arriving in the United States from Cuba. However, because of the recurrence of a potentially terminal illness, Pancho must pass on the torch of the family business to one of his children, thus causing rivalries and jealousy to break out among the family.
This is the storyline of CBS’s popular series, Cane. It is also similar to the storyline of family businesses throughout the country.
Whether the Duque’s business succession is successful will be determined over a number of episodes during the next few years. Whether other family businesses will survive and prosper is dependent upon the planning they do long before the need arises.
Too many times business owners fail to address the issue of succession planning until retirement is imminent. The successful business owners start planning their exit strategy from the beginning and they think of the succession of ownership and management as a process rather than an event.
The importance of early planning cannot be overstated. Only 30 percent of family businesses survive into the second generation and fewer than 15 percent make it to the third. The complexity of business as well as personal and family issues makes this a challenge that must not be left to chance.
Your long term business plan should include provisions outlining how you are going to exit the business. One of the reasons for creating your business should be to build something that you can pass on to family members or sell in the future.
Typically, business succession consists of two elements: the transfer of assets and the transfer of power. Both are important to the success of the process.
You must think of your business as a marketable entity, not just a collection of assets. To truly make it marketable, you must remove “you” from the equation. The business should be structured in such a way that it can run just as smoothly when you are not there. If the success of the business is entirely dependent on your presence, you have created a job for yourself, not a business. And nobody wants to pay good money to acquire a job.
Business succession can take one of two paths. You can sell the business to a third party and eventually pass the wealth received from the sale on to your heirs. Or you can keep both the business and the wealth it creates in the family.
While every situation is different, all exit strategies should have the same four objectives:
1. Determine the successors who will run the business, as well as other key players in its success. Many businesses such as building contractors require either the owner or corporate director to be licensed.
As with the Duque family, success of the transition may be affected by changes in family relationships which could threaten family harmony or disrupt the business planning process.
2. Provide a method of transferring control. This may be an outright purchase or a gradual transfer of ownership. The gradual transfer usually provides a smoother transition as it allows for problems to be addressed and corrected during the process.
3. Ensure the viability of the business by developing management structure and key employees who are willing to participate in the succession plan.
This gets back to removing “you” from the equation. The management structure must enable the business to move through the transition from its operation under you to a set of systems that can operate under the new owner’s concepts and interests.
4. Structure the transaction to meet your financial, tax and estate planning needs. Is the transfer of this business going to propel you into retirement? Or is it the means of starting or acquiring a new business? Do you wish to remain an employee receiving a salary and benefits? How will you structure your receipt of the purchase price?
These issues require counsel from your accountant, estate planning attorney and financial advisor.
Business succession planning is a process that must be started before the need for it arises. How well you accomplish this will determine whether you can enjoy your retirement on a tropical beach sipping Duque Premium Rum.
Dean Hanewinckel is an estate planning attorney practicing in Englewood, Florida. For further information you may contact him at dean@dean-law.com. Visit his website at http://www.dean-law.com to receive a free report – “7 Costly Estate Planning Mistakes and How to Avoid Them.”
How to Choose A Restaurant Location
Wouldn’t it be wonderful if the selection of a site for a restaurant could be determined with a geiger counter or a dip stick? We could walk along proposed sites and nonchalantly wait for the buzzing of the counter or the sharp down pull of the dip stick to tell us that this is it!
Unfortunately, no one has invented the proper device to pinpoint, successfully, the proper location. Our concern with location is realistic because so much of a restaurant’s success may depend on its location. Furthermore, as time passes a location that was regarded as an ideal location can slowly turn sour.
How can a successful location be determined? There is no sure fire formula which will work for all types of operations. All the factors that contribute to proper location must be analyzed individually in terms of the operator’s desires, the type of operation, and the market for the product. It is self-evident that for each type of operation there can be a difference in the menu pattern, menu prices, service of food, need for skilled labor, frequency of food deliveries, and the volume of business necessary to break even.
If you have decided upon the region in which you prefer to establish your home and your business, you have already narrowed down your location choices and can begin to make a more careful inspection of the several communities that you have in mind.
Checks on the Community
The next step is to make a quiet but rather complete analysis of the possible communities. Are they supported by an agriculture or industrial economy? You are trying to determine whether or not there will be a sustained demand for your product and the community’s ability to pay now and in the future. Spend several days in each community. Visit the bankers and business people in the local chambers of commerce. Talk with relatives, friends, and strangers. Get acquainted with the various realtors, brokers, restaurant supply houses.
Check with the local office of unemployment. Be alert to their comments. Are the people friendly or antagonistic? Do they make you feel welcome? Does a large majority of persons consider that the town is barely holding its own? Is there a large supply of labor, food, and equipment available? Can you obtain these at a reasonable cost?
After you have evaluated the answers to these questions and have decided on the community, the next step is to analyze your personal qualifications and the neighborhood in which you intend to establish your operation.
In order to do this, consider your ability, training, experience, personality, financial resources, likes and dislikes. In terms of these considerations you will make or perhaps have made a decision regarding the type of food service operation that you are best qualified to operate. This decision will certainly affect your location.
Checks on Your Operation
Your entire management pattern is distinctly different with a drive-in as compared to a cafeteria or an atmosphere table-service restaurant. Will your operation be a specialty house or will you feature many popular items? What is your basic menu pattern? Do you have a high or low priced menu?
Have you made an analysis of your basic menu pattern and determined your probable average check per person? On the basis of the average check per person and the volume of sales needed to make the desired profit, have you determined the number of customers needed to attain the necessary sales volume?
At the location that you are considering, what is the direction, density, duration, type, sex, age, and income levels of the traffic? How does this analysis of traffic compare with the requirements of your operation? What type of neighborhood is needed for your operation? Is the neighborhood composed mostly of suburban residents? Shoppers, office help, amusement seekers? Is the neighborhood growing? What are the potential sales now and the outlook for the future?
As an intelligent businessman, be sure that the business potentials are thoroughly investigated and a budget made of proposed investment, estimated gross income, general and operating expenses. You can then make an educated guess as to the financial success of your venture.
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