Editor's Note: This is the third in our Small Business series, ‘So You Want to Be An Entrepreneur’

By Cheryl Antao-Xavier  »   The fun part of creating a business plan is jotting down the concept and projecting big profits at the end. Between the concept and the big profit, however, come the nitty-gritty details of making the idea a reality. Those details constitute the operations plan, which for a budding entrepreneur is generally not the most fun part of the planning process.

It is not enough to have a great business idea, you must follow through and produce and deliver it efficiently and cost-effectively for you to have a viable business, says Haig. Like it or not, your operations function is the real backbone of your business profitability and will determine your eventual success. You need to plan and monitor your operations carefully to stay in the game.

Xenex has been in the business of solving operational problems for its clients since 1983, providing individualized solutions that streamline and optimize efficiency. Haig’s experience in business coaching goes back 36 years, with a strong emphasis on the operations function.

Too often you see new entrepreneurs make the mistake of overlooking details in their processes that seem minor in the planning stage but eventually become major stumbling blocks in the business’ operations, says Haig.

“It is crucial to a business’ survival that the entrepreneur detail the operations plan carefully. Chart the steps of the production process. Know the exact procedures, resources, facilities and capacity required to support and implement that process. Your budgeting and overall planning hinges on your accuracy in operations estimates,” says Haig.

The operations process varies with the industry (service, retail or manufacturing) and the type of business (food, fashion, financial, etc.). But in general, it is inextricably meshed with other crucial functions of the business such as planning, inventory, finance, human and material resource management.

“When problems arise, it is important to be able to go back to your operations plan and see where you need to make changes to set yourself back on track to success,” says Haig.

Tracking success. The operational cycle for a company may start from a position of loss and move at varying degrees upwards to a breakeven position. This is when sales (and consequently revenues) meet up with operating costs. Beyond the breakeven point is the path of rising profits.

When profits flatten or start to decline it usually means your business has reached a state of maturity or its market saturation point. It is time to “rethink your idea, your product offering and your way of doing things,” says Haig. “You do what you have to do to kick-start the profitability growth again.”

That could mean hiring help or outsourcing tasks. “This is particularly necessary if you have been doing the major work yourself and have reached the point of burnout.”

Maybe your business needs a SLAP! If you’ve reached a point in business operations when things are not happening, a stalemate exists, you crave change, feel overwhelmed or uninspired, or all of the above – what your business probably needs is a good SLAP to get things moving in the right direction again.

The Silver Lining Action Plan (SLAP) is an ingeniously simple plan that works. It steers the small business client through a three-step process that:

1. Sets a measurable goal.
2. Defines a clear target market.
3. Creates a one-year plan for executing it. 

The result is “measurable and calculated success”, says Carissa Reiniger, founder and president of Silver Lining. The SLAP process has been developed through hard times lived in first hand experience. Reiniger built Silver Lining from the ground up the hard way and tracks her experience to making her first million in her book Inspiring Entrepreneurs: How to Build Your Business to its First Million.

How is the SLAP administered? A ‘goal’ is set – a grand one-year target. This vision is then divvied up into monthly and quarterly goals.

“The planning process starts by thinking big and visioning what success looks like a year from now and then funneling that vision down to monthly objectives,” says Reiniger. Meeting the monthly goals will take care of the quarterly targets. That in turn will make achieving the final one-year goal a breeze.

“Plan from the top down but execute from the bottom up and you will see success.”

Silver Lining works with its clients on a one-to-one basis as well as in small class sessions and ‘webinars’ to build a plan, set measurable goals and execute them diligently. With that kind of focus, dreams become reality.

If your vision for your business isn’t quite happening, maybe all you need is a good SLAP.

IT for startups. Few businesses in today’s world can get by without a computer to perform vital functions in sales and marketing, finance, and customer service. Depending on the type of business, a start-up company could be spending a sizeable chunk of its investment capital in its computer set up.

The decisions on purchase of appropriate hardware and software are not easy if you are not clear on your specific needs and are not familiar with the mind-boggling options in technology available today. Choice of brands, speed, memory and financing raise question marks and confusion in the minds of business owners.

“My first question to clients is: what do you need the computer for?” says IT consultant Ovidiu Balanescu. “Their answer will determine what they should buy in terms of hardware and software.”

Several points will decide their choice of computer. In deciding between a desktop or a laptop, Balanescu says, “If you have to be mobile and visit your customers, a laptop should be your choice. But if not, a desktop will last longer and will cost less.”

Should you buy new or refurbished? New computers have the surety of warranty coverage, but the costs are higher. “A refurbished computer might be cheaper, but it could ‘die’ on you anytime.”

“Can you afford the downtime that computer troubles cause?” asks Balanescu. “If not, and you still want to go the route of refurbished, then factor in IT support in your financial calculation. If the difference between new and refurbished-with-support is negligible, I would go with the new.”

Should you buy or lease? “A lease is more expensive, however, if you don’t have the money to purchase, a lease will give you the option to use the computer to generate revenue to pay the monthly leasing costs.”

Software needs can be expensive too. “But there are some areas where you cannot afford to cut back on. Antivirus, antispyware and a firewall software will protect you from online threats.  There are several open source, general public licence or freeware applications, which may, however, not be as efficient as paid subscription applications.”

“Other office software can cost upwards of $200,” says Balanescu. “You have to ask yourself if you can afford the price. If not, there are free options or open source applications like Open Office, which will cover your needs. You can use a free e-mail service to communicate with your customers. The downside of free email is that it may not project the right image of your company to your prospective customers.”

Some free email options like Thunderbird offer basic contact management as well.

Website costs can be cut down by designing your site from available templates. “This should do for starters. Keep in mind that you will need to revamp your website as your business grows.”

Data backup is a must, says Balanescu.

“A computer will crash sooner or later. An external USB hard drive will cover your start-up needs. There are also a few free off-site data backup solutions.”

“If you intend to store confidential data like customers’ credit cards and personal ID, you will need to protect this information. True Crypt can help you encrypt your data for free. Just don’t forget your password.”

Balanescu’s company Tacumen provides comprehensive IT information, especially useful for small businesses, on its website, tacumen.com.

Business is a numbers game – play to win!c

‘Project, monitor, and revise,” says Mike Mouradian, when talking about the basics of business financial planning. “Your financial forecasts will lay the groundwork for your company’s financials and will give you a benchmark to keep you on track.”

Mouradian, a veteran business coach and consultant to fledgling entrepreneurs at the Toronto Business Development Centre, recommends the preparation of financial forecasts for sales, income and cash flow based on how a business expects to perform over the next two years.

“Set these forecasts and together they will give you the big financial picture of how your company is progressing against its projections.”

Having a sound financial plan increases a business’ chance of survival beyond the crucial two-year period when a staggering 46% of new small businesses collapse and cease operations. “More often than not, the reason for business failure is linked to poor financial planning at the start-up stage,” says Mouradian.

An important step is to “monitor actual results of the business closely and compare these real-time figures against the forecasts, being quick to recognize when the financials are going off course.”

Your financial forecasts will help you work out your breakeven point – the point at which you are earning as much as you are spending on your business.

An experienced entrepreneur, Mouradian helped manage his family-owned retail business for many years and is well aware of the common start-up gaffes owners unwittingly make in the area of financing.

“It is important to determine and confirm sources of financing to cover start-up costs,” he says.

“Businesses often make the mistake of beginning and operating under-financed.” This can stunt the growth of the company and force it to operate below expectations.

At the other extreme, entrepreneurs can avoid wasteful spending by “projecting start-up costs conservatively and by keeping separate calculations for one-time start-up costs and recurring costs. Owners should keep expenses as low as is feasible, without compromising on operational necessities, and buy on an as-needed basis. Don’t forget to factor in non-cash expenses such as depreciation costs.”

In the first flush of start-up, the entrepreneur is likely to be over-enthusiastic in setting sales forecasts and projecting large profit margins, only to become disillusioned when the sales don’t materialize or take longer than expected to happen in the first few months after opening.

“That is when the owner needs to work closely with a business advisor or mentor to quickly find solutions to red flags in the company’s financials,” says Mouradian. “Obtaining a different perspective on solutions to financial concerns is key to turning things around and staying on track for a healthy financial future.”

Keeping it simple. Small business entrepreneurs very often become overwhelmed with problems of bookkeeping and accounting that become a nightmare at tax time.

“Keep it simple,” says Amin Giga of Bansal & Giga, Chartered Accountants. “If you do basic bookkeeping, set up at the beginning and make your entries regularly as they occur, it’s easier to stay on top of things.”

“Your ultimate business objectives are to earn a profit and stay solvent,” he says. The accounting process helps you to do this by organizing a tracking and measuring system.”

Where problems arise is when the accounting process becomes complicated, and the business owner gets stressed and discouraged with the piles of paperwork.

Should that happen, or should the business expand to the point of requiring a more sophisticated (and consequently more complex) accounting system, it is better to hire a professional accountant to handle this.

So what does ‘keeping it simple’ involve? “A basic Excel spreadsheet to keep track of income and expenses,” says Giga. An entrepreneur might find it worth the expense to get professional guidance for the initial set up. From then on, maintaining the books should be much easier.

Even if you don’t have a formalized bookkeeping system it is important that you keep your business receipts organized, says Giga. Sloppy record keeping can and will become tiresome and costly at tax time.

For new entrepreneurs who require detailed up-to-date financial information, accounting packages like Simply Accounting, QuickBooks, etc. are helpful. These programs are easier to handle if you have some background in bookkeeping.  

Other important record keeping tips are: always create a paper trail; issue invoices for all sales and services provided; and keep all bank statements and cancelled cheques. Reconcile your bank statement monthly. Also keep track of out of pocket expenses relating to the business. Doing this religiously will make compiling the year-end financial summaries less of an ordeal.

“A once-a-year income statement showing income and expenditures is really all that most sole proprietors will need. This usually matches the information that is required for tax preparation by the Canada Revenue Agency (CRA) – Statement of Business Activities Form T2124,” says Giga.

Come tax-time, it pays to be accurate and on time, says Giga. If your tax papers are late, missing information, or filed incorrectly, you increase your chances of further review by Canada Revenue. Hang on to your receipts, as you may need them to back up your claims.

If you do decide to go with professional help, a better option is a chartered accountant experienced in dealing with small business.

“You must be comfortable with that person and they should give you the time and respect you deserve as a client,” says Giga. “Keeping your financial affairs in order is one of the most important functions of your business.”

Protecting yourself. A serious blunder that many small business owners make is to muddle their company’s finances along with their personal finances. They further compound the error by giving priority to the former and putting personal financial planning on a back burner for a time when the company is ‘on its feet’ and there is spare cash to stash away in savings.

“That is not a wise course of action,” says Uday Mohaya, Financial Advisor at MaxPride Financials Inc.

“The mixing of personal finances with business finances will make bookkeeping difficult and it will not give you a clear financial picture of your business’ performance. The chief danger lies in the fact that should your business run into financial or legal difficulties, your personal finances could be jeopardized.”

“Entrepreneurs must look into protecting themselves and their businesses,” says Mohaya.

“Find out whether you need to incorporate your business, and seriously consider personal as well as business insurance. If you need it, get it. Without coverage a business setback would hurt your business and personal finances.”

Financial planning is important not only for the business but for the entrepreneur’s personal financial health as well.

As a part-time professor of Finance at Sheridan and Humber Colleges, Mohaya impresses upon his students the importance of competent personal financial planning.

“In personal financial planning we take care of our future and that of our families. Our instinct as entrepreneurs is to invest all our residual income back in the business. But it is important that after paying all our debts we pay ourselves – which means paying into our child’s education plan, or into a registered retirement savings plan. Saving for our future should be an ‘automatic’ transaction where we pay ourselves first.”

If you need assistance in developing a plan, it is better to seek the help of a certified financial planner, says Mohaya.

Pick an advisor whom you trust and are comfortable with. “Financial planning is a continuous relationship building exercise. A good advisor will show you how to integrate short term financial goals with long term financial objectives,” says Mohaya.

Protecting your business also means looking into your insurance needs. “Particularly if you are a sole proprietor and the main contributor to your family’s income, you need to look into critical insurance and life insurance. This will cover you and your family’s income if required,” says Mohaya.

“Insurance issues are not pleasant things to think about and it is often dismissed as an unnecessary expense. But insurance is a way of protecting your business, your family and yourself.”

Taking care of financial security, gives you the peace of mind to go about your business without the worry of ‘what if’ hanging over your head.

“There is a popular quote in the financial planning world,” says Mohaya, “that if you have financial independence, you add life to your years instead of years to your life.”

CASE STUDY: Supple business plan keeps yoga instructor on track

What sets Margaret Guzowski’s Gosia Yoga on a higher plane than most yoga programs is a determination to go beyond the usual exercises and poses and teach people the therapeutic value and philosophy behind yoga.

‘Live Life with Yoga’ is the slogan for her company Gosia Yoga and according to Guzowski, it has become her life’s mission “to teach people how life-changing it can be to incorporate yogic philosophies into their daily lives.”

Gosia (Guzowski’s Polish name) Yoga was started in April 2008 and offers programs for children and adults, including specialized classes for seniors and individuals with special needs. As a certified yoga instructor with a background in psychotherapy, Guzowski is able to offer therapeutic yoga and meditation with programs designed to relieve stress and depression.

Guzowski’s original business plan has undergone significant change in the months since opening. “And that’s really the way it should be,” she says. “I believe a business plan should be fluid and alter course if experience in real world situations proves that that is what is necessary.”

Her operations plan has altered course to reflect her clients’ requests for specific yoga programs. She used her art therapy background to create specialized programs for children in schools and nurseries, for kids with special needs and in particular those with autism and physical disabilities. She gave yoga training to school staff so they could continue kids yoga education.

“Having to split my working time between planning programs, the actual classes and marketing efforts is the biggest challenge right now,” says Guzowski. “This first year is going to be very much a matter of building business for Gosia Yoga, and keeping up the enrolment in classes.”

“My more immediate goal is expanding my client base, acquiring corporate clients, and promoting staff yoga training programs in children centres,” says Guzowski. “Keeping other business expenses low is essential. For example, I have found networking and word-of-mouth recommendations a better marketing tool than costly promotional materials or cold calls.”

When she started her company in April 2008, she had predicted a confident sales forecast that because of low overhead expenses would see her company breakeven in September of the same year.

“That target will be pushed back to the end of this year,” says Guzowski. “I should make my sales forecasts and breakeven by the New Year.”

But in terms of job satisfaction, Gosia Yoga is right on target. “I am happy making a living by teaching yoga. Yoga is my life.”

CASE STUDY: A picture-perfect idea

When Eslet Salazar’s Daydream Studios is signed on for wedding photography, chances are his wife Carol Smith’s company, The Busy Bees, is also hired in a package deal. While Salazar takes the wedding photographs, Smith keeps the littlest guests occupied so their parents can enjoy the evening.

“Her business is working out to be a perfect complement to my business,” says Salazar. “Clients love the option of a childcare service and we love working together at events.”

Smith’s novel idea of providing childcare at weddings and parties didn’t actually start out as part of a business plan.

“It all began when I hired a colleague to look after a child at a wedding that she was also attending and at which Salazar was the photographer,” says Smith. People were intrigued by the idea and the requests began coming in. Until one day she decided to turn childcare at special events into a business.
Smith plans activities for each event according to age groups, and number of kids. The activities are fun projects such as decorating objects, jewellery making, treasure hunts, etc. Depending on the activity planned, she orders supplies and hires help if necessary.

When quoting her charges for childcare events, Smith includes costs of supplies, travel and additional help, before working in her time and profit margin. The service is reliable and affordable. The ‘peace’ of mind for clients and other guests – priceless.