Wealthy & Wise: The Importance of a Business Plan

About the Video

Financial planning is the foundation of any prosperous business. It comes in many shapes and forms, but one of the best ways to implement your financial goals is to use a business plan. While we know it can be daunting, it’s an essential step of driving success in your business.  It ensures you can make decisions with confidence, knowing your numbers and projections.  Every move affects the bottom line, so keep yours in check.  Watch Cort Christie, the founder of NCH, and James Crothers, a financial planning guru, as they discuss the importance of business planning.

Prefer to read? A full transcript is provided below.

CORT:

Hello and welcome to Wealthy and Wise. I’m your host Cort Christie, founder of NCH. Now, today, we’re going to be talking about the benefits of having a business plan, I should say, the need for a business plan for everyone, thinking about starting a business for anyone already in business as a guide for building their future and a way for them to really think about where they’re heading and what they’re trying to do in their business. And we’re very fortunate to have an expert in business plans, a friend of mine and an individual that I’ve worked with for over 20 years. James Crothers. So, James, welcome.

JAMES:

Thank you.

CORT:

Wealthy & Wise, it’s just a great program for individuals that are clients of NCAA and people just wondering more about NCH and about some of the services that we offer and how they can benefit them.

So, James, you’ve been working with clients and protecting assets and helping them launch businesses for over 20 years, and your specialty is really business plans is one of the things that you really grown so much with and learn so much about and teach others about. You know, talk about business plans both for the startup and for an existing business owner.

Why should they even be thinking about business plans?

JAMES:

Very good question. So, with business planning well, let me let me take a step back. So, I’ve been advising business owners for many, many years, and the average business owner kind of jumps into a business idea and they just start running for it. You know, I always call them soldiers, right? They come in with a soldier mentality and they’re just going to go out there and win. And many of them fail to actually plan up to that. So, when a new client comes into to my life and we’re talking about their business and how to develop it, I always try to get a warrior mentality with that client explaining that there’s different levels to setting up a business, there’s different levels to running a business, to building clients. So, you know, when you think about, you know, from a military perspective, right? Wars aren’t won in the battlefield. They’re won in the war room, right? How strategic is that individual going to be or that or that group going to be to that to win that war? And I feel like business owners really lack in that particular area. So what our goal is and this is what I make for anybody that’s thinking of starting a business, is just to take a step back and realize that no matter what direction they want to go, there might be four or five different ways that they could achieve that goal. And often they just kind of run to the first one they see. And they kind of realize at the end that when they when they kind of get it wasn’t the best path for them. Right? Maybe they didn’t have properly thought through budgets or what it was going to take to be able to support that. So the idea of a business plan really from the owners level, it’s build a step back and go, you know, here’s where I’m at. Here’s where I want to go. How many different paths exist that help me get there? What does each path look like? What would be best for me both financially and from a work perspective? Can I get the right people involved for it? So it’s more of an ongoing, you know, thought that owner has. So for example, if they get into a scenario and they realize this isn’t working for me, we want that to be on paper.

Right? And very often in the real world, it’s they’re out there and it’s happening in the real world to them. And then they’re at this position with whatever do they do now. Right. So they either lose their businesses, and that’s why we have such a high failure rate with small business owners, not because they’re not great at what they do or who potentially great business owners or just how do they merge that together and really bring it together as one.

CORT:

Interesting. And you think of all the business owners, you know, they’re trying to raise money for their business idea or they’re using their savings, their retirement money to launch that business. And if you haven’t thought it through and the structure of a business plan forces you to think through, as you mentioned, budgets, marketing plans, the industry, you know, the market that you’re going after, you know, pricing, things like that, that oftentimes passionate entrepreneurs, I’ll call them, you know, have the ready fire aim mentality, right? They just go out there, like you said, without the plan. And by having this plan put together, I mean, you can save somebody all their retirement money or all the savings that they had so that they don’t make the mistakes. And they might even scrap the idea from day one. If they’ve got the right plan in place or at least adjusted. You know, based on that, how often are you running into people where you’re helping them rethink their whole idea because you’ve helped support them and putting a business plan together?

JAMES:

I think we take a very unique approach through NCH, and that is we always do a process called reverse engineering. Right. And very often people try to look forward into their business where they want to go. What we try to do is look backwards. We want to know what is that end goal? Where are we trying to get you to? Because if we know what that is, then we can build it backwards to make sure we hit every milestone. And getting it to the point in my mind of, can the owner handle the workload right that’s always my first question. When we get into budgets, right? There’s different types of budgeting that has to be done. And we want to know upfront where is that client? Do they have the budgeting in place to handle that project? And if not, then if there’s a plan in place, we can look for ways to supplement that, right? We can help them acquire the type of resources they need so that before they walk out their door, they now know that they’re prepared as opposed to having just what they have to work with. And that’s it. Right. And what they don’t realize is they go out and they spend everything they have. It’s really hard to recoup. It’s hard to get other people to invest in you because you now don’t have those resources to bring to say, hey, I can help with this. But if you kind of come in and say, look, here’s what I need for my business, and we build that and we leave you intact, something doesn’t go right. You still have yourself. I can go out there and rebuild. So there’s a lot of aspects, and that’s why reverse engineering is such a critical mark. And I encourage every business owner to start at the end and work to the beginning. And I guarantee if they do that, they’ll start to see where they might be falling short or things that they did even think about.

When we go through just the consultative stage, I mean, we can spend up to 2 hours just talking about where they are and they start to come to me and say, hey, you know, I didn’t really think about that or this was going to happen. And we’ve had a number of scenarios. So I think if we look at it from, right look at businesses that they’ve never planned, right? Because it was well, I never had a business plan, but I’m successful. I always go back to imagine how successful they would have been if they would have layered that out with better perspective on where they ended up. Right. They kind of got lucky where they were, right? They have this idea. And I’ll say, you know, when they get to this point, they go, you know, I got here, I just got here. So imagine if you actually plan that out step by step where you would end up.

CORT:

You know when I was younger. I was a serial entrepreneur, and I got into a lot of different things. And you remember some of the crazy things that I got into. And, you know, if I had actually put it down on paper and organized it the way a business plan is put together, I probably wouldn’t have started half the businesses that I got into where to save me a fortune along the way. I only wish that I had thought about, you know, doing the work, the necessary work to get involved in organizing my thoughts, my ideas on a business plan. It would have been fantastic. Now, when you’re working with these folks, you know, I know that NCH has some areas that real estate investors for instance, we have a lot of real estate investor clients, but you’re also working with many different industries. Are there industries that need a business plan more than others?

JAMES:

I don’t think so. I think all industries should, you know, plant a business is a business, right. So if I’m going to go and open a mechanic shop or a restaurant or become a real estate investor, there’s still going to be steps that I have to put into place. Each have different, you know, financial requirements, different planning that has to it. You know, obviously, employment would be a big deal depending on the type of business that you’re starting. So you would want to know all of that, right? And you’d want to be able to go in and kind of break it down and just make sure that you know what you’re initially thinking. And what really kind of shows up is the same thing, right? The one thing that we know in business is nothing ever goes as planned. Right. You taught me that a long time ago. So when we get into that often people come in and they just they know what they want they’re determined to get there. And I think that, you know, my job as an advisor, just to slow that down. Right. And just make sure that we’re kind of jumping off together and that everybody around them kind of knows what we’re going towards.

Right. So I think when we get into the whole idea of planning, it should be a building block approach, right? It should be a point where when you’re going back, for example, with real estate investing, you know, if we’re looking at it, I’m just going to give a quick example. If we’re looking at wanting to make $150,000 a year as a real estate investor.

Well, we know that in order to figure that goal, we have to first research markets, right? Market research is a daunting task. Takes hundreds of hours to figure out where should I even be in this market. But once you do that, right, if you were willing to take the time to plan the market, then you would know how many deals you would have to complete.

You would know what kind of pricing you’re looking at on projects, what the long term, what’s happened in that market over the last four years that could potentially either benefit or harm you going forward. Then we can get into things like marketing budgets and capital raises and gap fundings and all the other elements. So even before you’ve even walked out the door, you know exactly where you need to be, where you’re short.

But then we can plan, right? Let people go. Well, why do I need a business plan? You need to know your plan. Better than anybody else. First and foremost, if you don’t have that plan figured out, no one’s going to listen to you. So I always tell the clients, when you first get your business plan, educate yourself know your plan front and back. Imagine you’re sitting in front of a banker or a private lender. Someone’s going to do business with you. They’re going to ask questions. How sharp are you on your plan? Do you know the plan better than anybody? So that’s step one. The nice part is, is if you work with a professional team, they do that heavy lifting and a client can learn a business plan in a couple of hours because it’s already outlined, it’s detailed they’re just learning now the factual basics that we’ve already created, right? So if you go, that’s kind of a first step. And then when you go to someone now, you can put something in their hands and say, look, before we even have a conversation, here’s who we are, what we do, how we do it. Here’s everything you need to know. And what a lot of new business owners don’t realize is having that kind of power in your hands when you sit down to finally have that talk, they’re not asking you a bunch of basic questions how long you’ve been doing this. You know, what’s your experience, things that usually turn into, well, we can’t work with you until you’ve done that. But if you go to them and you show knowledge is power, and I would rather work with someone who’s knowledgeable, that knowledge goes a long way. And that’s what that business plan provides to third parties that might be seriously considering your idea.

CORT:

And I think of all the times that somebody’s pitched me to, you know, to invest in their business and I might get a slide deck with some images of you know, here’s the market, here’s what’s going on, here’s how much we’re going to make and how great our product is. But if you put a business plan in front of somebody and I’ve rarely had a business plan put in front of me and someone’s idea, but now, I mean, the difference from an investor’s standpoint would be absolutely tremendous. It’s not just some slides that look pretty that you’re looking at. You know, when you have a business plan and you’re using it correctly, as you mentioned, you know, knowing your industry, knowing your space, seeing it, really digesting it. But what does it do for the investor or the banker when they see this detail?

JAMES:

What I have seen, especially when we get into things like real estate is, you know, when someone comes in, think of it from a lender’s perspective.

Right. And lenders talking how many people are trying to get into real estate, you know, so they’ve got a pool of people and there’s only so much money going out. So what they have to do, you know, just like I was you would say if my job as an investor is to sell property, their job is to sell money. And they’re looking for, you know, I always tell my clients that, you know, in any industry, lenders don’t fund deals, right? They fund careers. They want to fund people that they believe are not only going to get one deal done, but can help carry them, you know, as much as they want to carry into multiple projects. So you kind of have to look at it from their perspective. And I think it’s important to put yourself in the shoes of those you’re going to. Right? What do they want out of it? You know, what concerns would they have doing business with you. For a lot of business owners is they’re brand new at it, right? So what we need to do in that business plan, we need to show experience and knowledge that you’re just not walking into this and hoping that you’re successful. You’re saying, here’s everything laid out from now until the next three years. Here’s every step we’re going to take. And what that’s going to do is not only build confidence when you’re talking to that potential lender, but imagine how the lender’s feeling when they’re now seeing this and they can pull numbers. And what they’re going to do is they’re going to ask you questions about those numbers in different parts of the plan. And how does it look when you’re answering? It’s sharp and your own point, and you can answer that confidently. They’re going to go, hey, this person brand new, but they know what they’re doing. This is someone I would feel confident enough to put money into their business.

CORT:

You know, and it’s a way for the entrepreneur to get their thoughts their ideas on paper and then have them be vetted on top of that. You know, it’s got to make sense when you read it, right? It’s not just the ideas. And then when you’re sitting with a bank or an investor, might be a family member that has some money that you want to attract to your idea of your real estate that you have, you know, saying it’s one thing right presenting it and laying it out for them to look at with financial data in there. You’ve thought through this, it’s just not, hey, this is my weekly idea. Uncle Joe, you know, and I’d like you to invest in my great new concept. It brings it to a whole new level when it comes to that. Now, investors, bankers, anyone that might want to put money into your deal would want to see a business plan. And you’re going to be a lot more successful getting access to funding with that business plan. Who else might you share your business plan with? Where else might it come in handy?

JAMES:

I think, you know, what we think of it from the structure of a business, right? So we have funding, which is always the most important because that’s kind of the launching stone of the business. But then you have vendors, people that, you know, depending on your industry, you might need vendor relationships in there. And these vendors might be willing to put up a lot of money, but they might come in, you might fall short because of lack of experience where you can start to build that up. I also believe that, you know, in a partnership, when you talk about family members more and more on the private lending side, you know, you want everybody to kind of feel like they’re a partner in the business.

And to do that, that means they have to get inside your head. They have to know what you’re thinking and that’s why one of the benefits of working with a professional that, you know, like a business plan advisor is they do thousands of these literally every year. So when you bring the ideas before you go to Uncle Joe or you’re having them vet it, these guys are going to tell you upfront, does this make sense or not? Here’s why it doesn’t make sense. Here’s alternatives you should consider. So there’s just a whole other backing there that’s going to, again, reinforce you because something that you might have thought, but after you see it laid out, after you’ve talked to people that have dealt with that, maybe with ten or twenty other clients are going to go look, here’s what their experience was. Is that what you’re looking for? And you might go, no, I want to stay away from that. Right? So I would say that that it’s, you know, it allows you to kind of be able to go to all aspects, from funding to partnerships to vendors, even employees. Right, a lot of businesses today do a lot of 1099. So contracted employees and I know that they want to make them feel like they’re partners in the business. And part of that plan could really articulate what each role in your company needs to be, what the expectations are you know, if we got into the whole pretense of hiring people, right? You know, relationships gone bad, partnerships gone bad. When we look and figure out why that’s happened, it’s usually lack of communication, right? They both came in and they were just on different pages. And then when it kind of came to term, you know, that’s where the fight comes in. It was like, you know, you were going to do this and they go, Oh, that’s not what I saw. It was that. So the business plan, you have the ability to say, look, in this role, I need you to do X, Y, and Z. This is what has to be done by the end of the year. And when you give it to them now, there’s no blocking communication. And it also, you know, I’ve seen us on a lot of our clients helps them get better people in place. Right? Like if you are using the real estate analogy, right. If you need a realtor, you don’t want the realtor that just got their license. You want the guy that’s on the billboard. Right. But if you ask a new investor, they go, well, why would this person on the billboard even work with me? Right. But if you go into that plan and you’ve laid out, here’s what I’m going to give you, here’s what you’re going to get for doing this work, and here’s where we’re going together as a team, all of a sudden, this person sees you differently, right?

They see a career option, not a job. Right. And those are the types of things that the business plan can produce. And very often in that little piece of paper, you know, it’s only a 40-page document, right? Could have such a crucial bearing on where you’re going to be in your first year of business.

CORT:

And that 40-page document. Right. Gives you such credibility, integrity, like you’ve done the work behind it. Now, as the listeners to wealthy and wise today are wondering, like, how much do I do and how much does NCH do you know. What? How much work is this for the listener?

JAMES:

So business plan creation, it’s a daunting task, right? That’s why a lot of people don’t do it. They sit down, especially if they’ve never done one all the time. They’re seeing these seven sections and all these different elements that they don’t really even know what they’re looking at. Right? So from the NCH perspective, the way that we do it, there’s a few people involved. You have a corporate strategy, right? You have somebody kind of high level that you’ve already kind of went back and forth with. So we can form kind of what we call, you know, kind of a global plan. Then you come in and, you know, when you work with a business plan advisor, we don’t need a lot of information from the client other than facts right. A few. For example, how much money do you want to make your first year in business? Right. If it’s real estate, what markets are you going to be in? If it’s other businesses, how much do you know most of the time when the business plan advisor comes in, they’re not trying to figure out what they’re doing. They just want to figure out what do you know? What do you not know about your business? You’ll be surprised. We had a client come in that want to open a restaurant, had no idea they didn’t know what a lease would cost. They didn’t know how many tables to have in there, you know. But our team did because we do literally thousands of these. And they said, well, look, let’s talk through that and go through it. So it becomes a big education to that individual coming into us. And also there’s a trust that gets built there. You know, we’re going to always do what’s best for that client. Right? And that client knows, you know, we’re not Uncle Joe or Uncle or Angela. We are there to make sure that they succeed. So when they come to us and we know that, you know, everybody has their ideas, we’re not there to force them to change it. But we’ll say, look, here’s where you are. Here’s what’s happening in the world that you’re trying to get into. And we try to find that happy medium. And just imagine how much better they sound when they do go to the people that they want to involve in their business, because there’s always going to be someone they want to bring in. And when they go to that person, all of a sudden they’re talking intelligently. They have someone to fall back on because we have that person ask them another question, right? That could be a pinnacle where they move forward. Well, they’ve got a whole advisory team, then go do that. How do I deal with this? Right? And then all that gets articulated. If the plan doesn’t start out as 40 pages, by the way, it’s probably more around a hundred pages. But what that final document is, it streamlines everything that shouldn’t be there won’t be there at the end of the day. Right. But it’s important that it’s a unified effort between the client and their business plan advisor and their strategy coach to go, look, should this be here? Should it not be here? Right. So we always refer to that as fluff. Fluff is what people think they need to have in their plan because they think it’ll sell their business. Nobody reads it, right, when we talk about our plan design. If I can go into to that for a second. Sure. There’s a reason it’s 40 pages. When we originally started, for example, when we got here, I think it’s been ten years now. Our first real estate business plan would just be 300 pages. Like it was daunting, it was happening, and no one read that, right. So we had two issues. One, the client got it and didn’t know what they were looking at. Then they would give it to a lender and the lenders like, what do all these numbers mean? So no one understood it. And so this is, you know, just as an organization, we constantly grow and develop, and we started to figure out that when you hand the business plan to someone within 10 minutes that person has already decided that they’re going to do business with you. Within 5 minutes, that’s even if you get in the door. Right? So what we did is every single paragraph, every subheading, every title was developed through client participation, right? Because our clients don’t have a problem saying, I did this and here’s where we’re having an issue. We don’t have a problem changing that when fifty clients are telling us the same thing. So what our clients today get is as a streamlined, refined document, that we know works right and I think that’s the other element is if you go out there and do it on your own, you pull the template down that template, maybe it works, maybe don’t. How would you know? Right. If you haven’t touched a thousand other plans to know what it should or should look like, then you could be spending all this time developing something that doesn’t work. So working with a strategic team, we know it works. We know it works is we have 40,000 clients. We know it works as our clients do planning because that’s what makes them successful.

CORT:

And so interesting. You know, you can go online and get a template for a business plan. Somebody can do it themselves. The support that NCH has in helping them go through the process, write it, lay it out, organize the thoughts, put it together is absolutely invaluable. And the price on this is incredibly reasonable for anybody that is launching a business or trying to attract investors to real estate. I just think of, you know, the DIY buyer, the person that’s going to do it themselves is they’re not gaining the strength of this collective knowledge of people that have written thousands of plans. You know, they know what the investor wants and know what the person who might partner with you is looking for so that they can do this cursory review and really understand what it is that they’re getting that, you know, in your business idea. And the benefit is they can take it home with them. They can go sit down with it and digest it, maybe not over coffee where you started, but they can start thinking about the investment and the opportunity that they have with you. The other thing I think that’s so important with business plans and planning in general in business is this isn’t one and done right? That when the business plan is written, you know, you can go back to it a year later, two years later, three years later, this stays with you for the lifetime of your business.

JAMES:

Yes. I want to go back.

So let me let me talk about so the one thing that we want to be kind of sensitive to is when you get into the DIY that the people that are out there trying to do it themselves, the reason they do that is they don’t feel that they can afford to have a professional team step in. That’s what we find 99% of the time when our clients call, because if you do go out in the world and you are going to hire a professional team and you get into the thousands and thousands of dollars. So the fact that we don’t have to do that with our clients because we offer a wider range of services, the DIY you know, if I was talking to someone who was really in that mindset, I would say explore it, right? Because I know why you’re doing it right. No one wants to write a business plan, by the way.

So they’re doing it because they don’t think they have another option. And what we want them to know is that they do. So when you start again, not just in a collective format, but realize, too, as we said earlier, the only thing that you can count on is nothing’s going to go the way you want. Right? And so even in a business plan, you have it out. But here’s the difference. As things start to go, you’re not going to find out that it didn’t work out after it’s happened. Right. Because, you know, hindsight’s, 20/20. Right. So being able to see it and go, here’s where I’m at, you know, say I’m seven months into my plan and then I’m looking at here’s where my financials should be. Here’s how many people I should have hired and then you’re looking at I only have to have the people I have. Then we actually can get back together and figure out where is that dropout? What caused that? What people have to realize it’s not by accident, right? It could be market changes. It could be how it was executed. It could be delay of execution. So that allows them to have kind of a roadmap or a blueprint to know, am I on track right if their goal is to get to a half a million dollars a year in three years, there’s got to be several milestones because if that gets missed, they could find themselves three years into a business not even close to that arrangement. Right. So that’s why I would say that it’s not just about going back. It’s about literally month by month going, here’s what I said I would do this month. Did it not happen? Go to the advisor. Why didn’t this happen? Right. There’s going to be a reason. And then is that mean we alter the big picture of the plan, or, do we just say, hey, you got to do business a little bit different, right? And now you’ve got your advisor, you got your business plan advisor, your corporate, get everybody kind of looking high level with you. And you can go, oh, you know what? I can take more time out of my day and do these extra things that I wasn’t doing this month. Well, let’s try that next month and let’s see if we have more success. So it’s always a working machine, and that’s why you just want to place yourself with the best people you can find because you’re going to pick up that phone right? If you’re the only one answering your own questions, you could run into a few issues.

CORT:

Absolutely. And you know, as a as a serial entrepreneur over the years, I only wish that early on I had a team like NCH and the team that helps out with those business plans kind of helping you go through it. You mentioned you don’t want to do this stuff on your own. And when somebody’s prompting you, asking you questions, getting clarification, it really helps solidify the idea. And you know, it’s going to save you so much time and money at the end just by putting this on paper, organizing it. And then most importantly, as you mentioned, attracting investors, attracting banks, attracting partners, attracting vendors, whoever might be doing business with you. This is an invaluable document. And we’ve been, you know, supporting thousands and thousands, tens of thousands of entrepreneurs for so long. We can help support tens of thousands of business plans to really help those business owners go towards the right dream with the right vision. And it’s never the one they start with. It gets shaped as their ideas start coming together. And people like you, James, have been so invaluable working with our clients over the years and helping them get to their goal, have success, gain wealth and really get out there in the world. And I know that’s what you enjoy about, you know, working with the clients. I enjoy it. I love work with our clients. These are entrepreneurs, investors, people that are, you know, going after the personal financial freedom. It’s a lot of fun. So thanks for helping us today understand a little bit more about business plans and why you need them and who can use them and what it’s all about. And for those of you that are looking for more information about getting a business plan from NCH and gaining this invaluable insight and really helping you at the end of the day, make sure that the idea that you have is sound. It’s real and it’s realistic and help you save a lot of money and time along the way. Call a representative at NCH we would be glad to talk to you because nothing just to talk to one of our amazing consultants like James Crothers here. And James, thank you for being on Wealthy and Wise today.

JAMES:

It was a pleasure.

Subscribe to our YouTube channel

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.