Three Basic Small Business Plan Secrets from an Accountant

Do you need to exercise smarter business planning in the tough new economy that is 2010? You'll create a more solid and successful small business plan by following three, easy-to-understand guidelines:

Verify Profitability

A first simple-sounding idea: You want to verify the profitability of the business--and also of individual customers, products, services and so forth.

This verify-profitability angle sounds so obvious at first blush. But legions of small business entrepreneurs attempt to start ventures without even the potential of profitability. So you want to verify that somewhere, someone else is making good coin doing, basically, what you're planning to do.

And the verify-profitability angle goes beyond the profitability of the business or the business concept. As you add customers, products and services to your business, try to create miniature profit-and-loss statements to verify that individual elements of the business--specific customers, products and services--are profitable, too.

Not every customer, product or service is always profitable, of course. But in any case where you've got an unprofitable customer, product or service burning up your time and money, you better have a darn good reason.

Tip: A good small business accounting system--something like QuickBooks--will let you easily generate miniature profit-and-loss statements that let you calculate profitability on an item by item basis.

Scenario Plan Wherever You Can

You want to know another possible reason for the financial and economic crisis we're now in? Bad scenario planning on the part of the banks. But let me explain...

To perform good business planning, you want to think about what the small business plan looks like if weird stuff happens. For instance what happens if some new law makes your primary product or service illegal... Or what happens if your key employee gets in a serious automobile accident... Or--and this is the $64-question--what happens if your business is lending to homebuyers and house values (unthinkably) fall?

Tip: In this environment, scenario planning may seem like something you should mostly use to small business plan for disaster-type events. But that's really only half of the picture. You should also plan for shockingly-improbable windfall events.

In summary, then, scenario planning lets you build in cushions and allowances that may mean you're prepared or at least partially prepared for both unusually good and unusually bad events.

Plan for Someday Stopping Business

One final point about building a smart small business plan: Develop some concrete ideas about how, when and why you'll someday stop your business.

Planning for the end of your next business venture may seem too negative. And contemplating a business closure may seem like bad small business plan karma. But planning for the end should deliver at least a couple of big benefits to you, the small business owner.

First of all, planning with the end in mind should make it easier and more automatic to build up wealth independent of your business. For example, if you're thinking about the fact that someday you'll be doing something else, you'll probably be more likely to setup a solid small business pension plan option.

Tip: Building up wealth in a pension is also a wonderful asset protection technique for a small business owner.

A second advantage of planning for a business's final days is that the process will ultimately go smoothly and more profitably (or less costly) with prior planning. No kidding, you will do a better job at managing a business through its final months or year if you've thought about the process ahead of time. You'll also do a better job of picking the best time to wrap up affairs or exit through a sale.

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