According to the Small Business Administration, in 2020 alone the number of small businesses in the US reached 31.7 million, making up nearly all (99.9 percent) US businesses.
This is also representative of sustained growth as it marks a 3.15 percent increase from the previous year and a growth of 7.09 percent over the three-year period from 2017 to 2020.
To me, that just affirms that entrepreneurs and prospective business owners are the epitome of confidence. They believe that no matter what, no matter when, they can start something from scratch and they can succeed even during a pandemic. But I think that so many are not properly prepared.
I’ll give you an example. I recently met with a business owner that does over $1 million in revenue. This person started their business about three years ago and has the ability to grow to $5 or $6 million this year, which is an incredible increase.
When I talked to them about structure, checks and balances, liquidity, and the resources needed to properly grow a business without killing it, they had no clue. They stared back at me like a deer caught in headlights.
Most owners think that because they started a business, they’re unstoppable. The problem is they don’t focus on what it takes to consistently maximize profits and grow their business properly. I find that to be alarming.
Despite wanting to grow sales, they don’t delve into the complexities of accomplishing such a feat. They don’t sit there and calculate how many pennies of every dollar generated in revenue should be profit. This is partially why “successful” businesses fail over time. For instance, the likelihood of a business surviving five years and ten years drops significantly from 50-percent to 33-percent, respectively.
I hate to bring up 2020, but the issues brought on by the pandemic were catastrophic. Yelp reported that over 80,000 businesses shuttered permanently from March to July alone.
Sad to say, but people have short memories. Four or five years from now, owners aren’t going to remember they relied on PPP or EIDL to survive. Or, if they do happen to remember, they’re going to put blame solely on the pandemic, when in reality it was a lack of planning.
People don’t think like that. It’s still fresh in everyone’s mind but as things begin to revert back to “normal,” whatever that looks like, it’ll be a thing of the past.
Every business should possess the key tool to survive anything: a business plan. My piece of advice is to not start a business unless you have one.
Make sure you know your costs and prices and the margins you should demand. As I’ve said before, it doesn’t have to be a hundred-page document. You don’t have to follow in the footsteps of Jeff Immelt, who once mentioned his 5,000-page capital plan for General Electric. I’m willing to bet no one knows what’s on page 11.
I’m a firm believer in the KISS principle, “Keep It Simple Stupid.” It doesn’t matter how big your company is. Keep your plan simple and direct to the point.
There is no minimum or maximum number of pages you need to abide by. Every business is different and every owner possesses different skill sets. The more detailed you can be in your planning and execution of the plan with the timeline, the better. I just think you keep it simple to start with.
If you need help with developing or tweaking your business plan, connect with me on LinkedIn.