That “always yes” attitude has come to shade the development and use of business plans as well. It’s gotten to where people think that every business plan has to show exorbitant profits and wild success. And to reach that end, all that they need to do is overestimate the financial tables a bit, or a lot, until the Profit and Loss and Balance Sheet show the desired results. This is a bad and dangerous tack, in my opinion.

For instance, we saw one plan for a tennis club with indoor court rentals. The financial tables looked good until we divided the rate per hour into the sales forecast. Seems those courts were rented continually, 28 hours a day, every day, 365 days a year. Not possible I’m afraid.

Or the mobile auto oil change business in a large mid-western city. Again, closer inspection of the sales forecast showed that the one worker was changing the oil in a car every 45 minutes, with no travel time between jobs, in all weather, every month of the year. Now, I’ve tried to change my oil in Illinois in January, outdoors, lying on my back in the snow and below-freezing temperatures. Let me tell you from experience that 45 minutes is painfully unrealistic.

Final example: there was the apartment rental company with five vice-presidents but no employees in the personnel forecast, and they never showed how or when they paid for the buildings they said they purchased.

These business plans all said YES in the financials — if you didn’t look too closely.

Now, I say that NO is an acceptable result from a business plan. A business plan for a start-up company that shows huge losses, or negative cash flow is an OK result. It tells you that the business as planned will fail. It tells you that some of your basic assumptions are wrong. It tells you that you are missing something immensely important.

And this is better than OK! Rather than starting up with unrealistic expectations and then hitting bottom in an excruciating crash, you can stop right now and reassess, before you make a financial commitment. Don’t ‘embellish’ the financials by boosting the sales forecast. Look at your market, your competition, your expenses, and everything about your plan and be realistic.

Honest reflection may tell you that this isn’t the business to start right now. Or, you might revise the plan and discover if you put some of those vice-presidents out on the production line, it reduces your costs of goods to a point where you really can make a modest profit on steady sales, without hockey-stick growth. After your revisions, you still might not make a profit until year three. But in going through this process, you may become convinced that the business is viable with adequate start-up funding and second-round investment.

NO is an acceptable result for a business plan if the plan exposed the flaws and showed the way to a realistic YES.

Steve Lange
Senior Editor
Palo Alto Software

While this issue seems, on the surface, to be about copyright, fair use, and possibly expansion of new revenue streams, it also deals with attribution and citing of sources. This is not just for journalists. It is just as important to entrepreneurs.

When you write your business plan, especially if you are using the plan to secure funding, you must cite your sources. Your plan will have topics and statistics covering your target market, population demographics, spending habits, market trends, market growth, and the like. The banks or investors or VCs are savvy business people. They know how to double check your assumptions, and will have no qualms about calling your bluff…and quashing your funding if they don’t credit your stats.

If your business is going to provide day care services, you’d better be able to show an increase in young dual-income families in your area. Investors are unlikely to support the construction of high-end mansions in a community that has been losing all of its industry. If you forecast skyrocketing sales, you’d better be able to document how a similar product or service did the same, and why yours will follow suit, and not crash and burn in a saturated market niche.

In other words you can’t pull your projections out of your … that is, out of thin air! Do your research! Develop your forecasts using that information. Document your sources in your plan. Take a look at this blog post by Alan Gleeson, Managing Director of Palo Alto Software Ltd, in the UK. The post quotes several people, businesses and news sources, and includes links and footnotes. Your business plan should do the same, giving the proper attribution to your sources.

As a raconteur I can make it up as I go along. As a business owner you don’t have that luxury.

Steve Lange
Senior Editor
Palo Alto Software

We also have a page full of extremely helpful business calculators.

One of our most popular calculators is the Cash Flow Calculator.

Many startups and small businesses fail despite being nominally profitable. When it is time to pay the bills, cash is king. This handy calculator helps you see the effect of sales, inventory, credit terms, and other variables on your company’s cash flow.

‘Chelle Parmele
Social Media Marketing Manager
Palo Alto Software

When times are good, too many small businesses take a lackadaisical approach. Sloppy practices may not be fatal to a small business when cash is flowing, but when times get tough, those same bad habits could open cracks that threaten the profitability or even the viability of a small company.

You can read the rest of the article by Cyndia Zwahlen on the LA Times website.

‘Chelle Parmele
Palo Alto Software

The young lady was clearly uncomfortable with this
advice. She had her pitch down. She could explain her products in glowing
detail. But she never once asked a
customer for their referral business.  I asked her why this made her uneasy. Her answer: “What if they say no!” Ah yes –
what if they DO say no? And some will -
that is a guarantee. If they say no, it
is a prime opportunity to find out why. This information will be some of the best you can gather on how to improve
upon your product or service, or upon your own personal selling skills. Better
yet, it gives you a chance to address their concerns on the spot, potentially persuading
them to change their mind about what you are selling.  All of these things will help you sell more in
the moment, and in the future. So in the
end, a “no” really can be a “yes”. Always
ask – or you will never know.

Beth Anne Whalen
Director of Business Development