The Business Plan
By Timothy Feher
Whether you’re the sole proprietor of a small massage therapy practice, a business partner in a health and wellness clinic,
By Timothy Feher
Whether you’re the sole proprietor of a small massage therapy practice, a business partner in a health and wellness clinic, or an owner-manager of a large spa, retail and multi-service business, the business plan is your road map, and your most important management tool, for the sustainability and growth of your operation. I am frequently called into businesses and organizations, large and small, to assist with development issues. I am continually surprised by how many businesses and organizations are floundering without the strategic focus of a current or comprehensive business plan. If a business plan is dug out of the back of a filing cabinet, it’s often a document that the organization has never used, and often because the contents are not that useful or strategically instructive to begin with.
Without the strategic and financial prescriptions of a well-researched business plan – along with the discipline of following its central planning imperatives – managers of the organization tend to operate independently and sometimes at cross purposes, employing their own untested assumptions and intuitions.
This often makes for an unfocused business: one that gets into trouble, and one that fails to achieve financial sustainability, financial growth or other performance objectives.
I think the analogy of a road map is a good one. Unless you prefer the risk and adventure of flying blind on the open road without directions, a road map is a pretty crucial tool. In fact a road map and a business plan have a lot in common. Most importantly, they both:
- show the full context of the journey, the forks in the road, the obstacles, the challenges, the proposed direction;
- propose and assess strategic options and even alternative routes to reach the destination;
- are scalable so that all elements are measurable, allowing for accurate feasibility assessment and calculated projections.
FIVE CRITICAL ELEMENTS OF A BUSINESS PLAN
Massage therapists today function in a very competitive and challenging economic environment. In order to survive they not only have to provide high quality service, and sustain their customer base, but they must also be creative and innovative entrepreneurs in order to attract new customers. A number of my clients have opted to expand their practice, and increase profitability, through a mixture of retail, additional health and spa services, seminars, workshops, and even food service. Whatever your approach to sustainability, the business plan is your planning tool to ensure profitability and protect your investment. Regardless of the size of your business, the critical elements of an effective business plan are pretty much the same.
Here is an overview of the five most important ones. These elements will ensure that your business plan will serve as an instructive and accurate strategic management tool.
1. The Business Idea, or Mission – Your central business idea is where everything starts. It must be feasible, scalable, and flexible enough to make it unique among competitors in the marketplace. Clarifying your business idea is certainly crucial to your marketing plan or your pitch to investors. But first and foremost, you want to sell yourself and test the “big ideas” offered by your business concept.
Take some time to articulate and reiterate the purpose of your business. What makes it unique in the marketplace? What specific customer needs will your products and services satisfy? Can you measure and project the need in the market that you will serve? How will you meet customer needs differently from your competitors? Do you have a different or new approach? What innovations are offered by your business concept? Test your thinking with some focus groups. Listen to the feedback.
2. The Business Model – Often the weakest part of any business plan, the “business model” describes how the business will make money, how it will be self-sustaining, and how it will grow. It’s primarily a mathematical exercise that helps you to design and evaluate the short- and long-term profitability of your business. Unrealistic, inaccurate or poorly tested calculations in the business model are the cause for many business failures and bankruptcies.
The Basic Business Model Inputs: A number of basic inputs should be used and continually updated in your business model calculations:
- the potential customer base in your market;
- the cost of reaching and converting potential customers (marketing);
- projected number of customers daily/weekly (scalable by increasing marketing or other factors);
- business operating capacity (how many customers can be served?);
- cost of operating capacity/per customer;
- price point of your products and services;
- projected revenue from customers;
- cost of depreciation and investments in capacity growth.
The business model is a scalable device that allows you to evaluate larger or smaller versions of your business. Profitability can be arrived at by different approaches with your inputs. A change in any one input will have an impact on others. Managing a business is a dynamic process of making sure your business model is always pointed at profitability.
3. Capacity-Building Investment –Another area of weakness is the failure to plan for the time and the dollars needed to continually re-tool or expand the business in order to stay relevant and competitive in the marketplace. The old capitalist imperatives like “grow or die” and “innovate or wither” are very instructive for surviving in the marketplace. So the business plan has to anticipate and account for operational capacity building, from the point of start-up to at least five years out. Operational capacity building includes:
- replacing outmoded equipment;
- staff training;
- hiring additional staff or those with higher levels of expertise;
- new program or product design;
- innovation research and development;
- facility capacity and design upgrades;
- enhanced marketing and sales tools.
4. Marketing and Sales – Volumes can be written about this element of the business plan. This section of the plan expends much creative thinking, strategy and accurate market research to answer some crucial questions about acquiring customers:
- Who is the target market? What is their demographic profile? Where are these potential customers and how many are located in proximity to your services? What do you know about the motivations of your target market? How will you position your products and services vis-a-vis their likes and dislikes?
- How will you articulate your brand in words, pictures, partnerships, affiliations, style, values and promise of performance?
- How will you reach, motivate, educate, communicate to and convert customer prospects?
- What are the costs, and what is the investment plan over five years, to acquire the number of customers to make the business model work?
5. Financial Planning Scenarios – Your whole business plan, up to this point, has provided the full strategic background to allow you to now develop a prudent and practical set of financial scenarios under which the business can be operated. Your financial planning will estimate:
- year one to three operating costs and projected revenues;
- start-up capital required;
- annual borrowing costs;
- annual budget and cash flow plan;
- estimated scenario to reach financial sustainability and profitability.
While I can provide only an outline of what is required to create an effective business plan within the confines of this article, my main message is to create a plan and use it regularly just like a road map. It will ensure that your business is on course and on target towards your objectives.
Tim Feher is a senior partner and creative director with Blue Bear Media, www.BlueBearMedia.ca (serving the business development and marketing needs of small and medium-sized businesses in Canada); and Mission to Vision Communications, www.MissionToVision.ca (serving the organizational development and marketing needs of Canada’s non-profit organizations). Feher is also a former part-time professor at Algonquin College where he has lectured on business development and marketing to third-year massage therapy students.