Small Business ShowsThe Small Business ShowCommon Mistakes Made When Launching a Business Plan - Ted Jenkin

Common Mistakes Made When Launching a Business Plan – Ted Jenkin

On this episode of The Atlanta Small Business Show, Ted Jenkin, CEO and founder of oXYGen Financial discusses factors that could easily be forgotten or overlooked when starting your business. Check out the interview above to learn whether or not you are taking all the steps necessary before you move forward with your business launch.

VIDEO TRANSCRIPT: 

JIM: Like to welcome back to our show Ted Jenkin, who is the CEO and Founder of oXYGen Financial. On this, on today’s show, welcome back to the Atlanta Small Business Show, Ted. So glad that you’re here.

TED: Yeah, thanks for having me on today.

JIM: You know, one of the big questions that we get asked a lot through social media and emails and such is when it comes time to put together a business plan for our business, what do we do? I know there’s some businesses out there that are running that maybe have never put a business plan together. There’s some people watching right now that are thinking about going into business. What should be in the business plan? How long does it need to be? What has to be, what’s the next step in putting one together?

JIM: So I know you’re an expert in this area, so talk to us about the importance of a business plan and then how to put it together.

TED: I think the idea of a business plan has really changed. Look, you don’t need Atlas Shrugged. That’s not what you have to write-

JIM: Right-

TED: For a business plan, unless of course you’re gonna go out and raise a lot of money. If you have to raise money from investors or you want to get something from the Small Business Administration-

JIM: Right-

TED: Then you’re gonna need a more serious business plan. For a lot of companies, I’d take that blank page management and get down to one or two page business plan-

JIM: Right-

TED: Goals, roles, strategy-

JIM: Sure-

TED: And lay out the tactics, and it’s just much simpler to be able to execute for most small businesses.

JIM: One or two page, that’s it. [crosstalk 00:01:14]

TED: You really don’t need more than that, unless you’re gonna raise money.

JIM: Well I know for the people that are watching and going, “Oh, one or two pages I can handle. I mean I can sit down on my computer tonight and probably start that process.” Right?

JIM: And it’s so important to do just that.

TED: Yeah, because you’re gonna go to your company and say, “Look, we know the company’s vision and mission.”

JIM: Right.

TED: But what are the goals of the company? What are the roles that people are playing in this small company?

JIM: Sure.

TED: What are our strategies to success, and what are our tactics to execute against that strategy to hit our goals? And so, you really don’t need much more than that, again like I said unless you’ve got to go to other investors or places like that where they want to see-

JIM: Right-

TED: A more serious business plan.

JIM: Sure. And the goals should be both on the sales side as well as the expense side, correct? ‘Cause if I sit down and say, “Well I want to do $10,000 a month in January, and I want to do $50,000 a month in February,” and so on, okay but where are the expenses on that? ‘Cause obviously, your expenses are gonna grow as well, right?

TED: Right. Well I sit down with a lot of business owners, and I’m surprised how many times they don’t have a small dashboard of key performance indicators. And so you have to ask yourself, that if you were at the cockpit and you were trying to figure out which levers to pull, what two or three levers in your business cost wise, are going to drive the biggest result when it comes to sales?

JIM: Right.

TED: And many owners kind of fly by the seat of their pants.

JIM: Oh yeah.

TED: They don’t lay out those metrics-

JIM: That’s right-

TED: And so how you measure the business down the road so I recommend a small KPI dashboard for every business.

JIM: Sure. Some of the notes here, you mentioned up your pro forma by 50%. What, talk to us about that.

TED: Well I can’t tell you, Jim, how many people I’ve seen run out of money. And one of the reasons you run out of money is that pro forma looks beautiful the first time it goes on that Excel spreadsheet-

JIM: Sure-

TED: But once you actually pragmatically get into the business, the problem is, that you have real expenses and often the expenses are 50 or 100% more and the revenue can be 50 or 100% less-

JIM: Right-

TED: So what you think is gonna happen in 12 months, in actuality will take 24 to 36 months. So all I’m saying to you is whenever you run the pro forma, bump the expenses by 50%. You might want to lower the revenue by 25% because I see the other way a lot of times.

JIM: Sure.

TED: These revenue numbers of $20 million in three years, and that’s, it’s fantasy land most of the time.

JIM: Right, right. So for the people that are watching right now going, “Oh, we were so close. We thought we could start tomorrow.” Just take another look at that, right? Or at least be aware of it.

TED: Yeah. I think so, because people will put in an employee cost of $50,000, but they won’t measure in benefit cost and payroll tax cost, and all of a sudden, 50 grand is 80 grand. And that $30,000 just completely ruins your P&L, or you don’t estimate what legal expenses will be there. Or you get a tax bill from the city. And I can’t tell you how many business owners say, “I just never anticipated that bill to come into my house-”

JIM: Right-

TED: And it does when you’re running your small business.

JIM: Yeah, for sure. So lease versus buy. That’s always a big question for business owners. They might need a copier or maybe they need a phone machine or a phone rather. And what’s your take on that?

TED: Well I think for a lot of people, they’ve been trained that leasing is bad. Sometimes you even hear that when it comes to automobiles, but-

JIM: Yeah, sure-

TED: There’s a point in time that if you have cash in the bank, and you buy a copier for $10,000, that’s a drain on your cash.

JIM: Right.

TED: A lot of banks today will do a three year or five year dollar buyout, which means that you can lease the copier-

JIM: Right-

TED: And then after five years or three years you really own it. It’s often fully depreciated at that point-

JIM: Right-

TED: And so, I would just consider it for certain key office equipment things. It might be a better use of your cash at the get go.

JIM: Yeah for sure. Even as, even right down to setting up your desks and chairs and all of the computers and such, I mean a lot goes into a small business. Not just the copier, right?

TED: Right.

JIM: So as much as you can do on a lease program to reserve those cash, those dollars, very important.

TED: Well even rent is a big one. If you’re gonna rent out space in the beginning, and you’re going to a building or you’re going to a strip mall, you have to ask yourself, A, will they give me three months or six months or nine months of free rent depending upon how long you want to sign that lease-

JIM: Right-

TED: And then how much will they call to be TI dollars? How much tenant improvement dollars will they give you to fix your space so you can minimize your out of pocket costs, but if you can get six months of free rent, that just gives you six months of ramp time to get your business up and going-

JIM: That’s right-

TED: Before that rent line hits your profit and loss statement.

JIM: Yeah, that’s for sure, that’s for sure. And then I know I’ve got a note here, paying yourself. Talk to us about the importance of that.

TED: Almost every P&L that I see, owners forget to pay themselves. They don’t put themselves on there at all, so unless you have a big old cash reserve at home-

JIM: Right-

TED: That you’ve planned for in this business, eventually you’re gonna have to draw income.

JIM: Right.

TED: So you want to factor your salary in the business. And you really want to calculate, what’s my family’s personal burn rate? How much do we spend per month because I’m gonna need to calculate what I have to take from the business-

JIM: Right-

TED: To just get by on my family expenses until I can start making more money, saving again, doing the things that we normally did as a family.

JIM: Yeah, and then it’s important to bring the whole family in the picture of this to say, “Hey, we’re starting a small business right now, and it’s important to kind of keep expenses lower at this point in time then we have maybe in the past.” Right?

TED: I mean that’s totally true. I think people kid themselves, if you’ve got a spouse or a partner, if you have kids tell them, “All hands on deck right now-”

JIM: Right, right-

TED: “Because labor is free until I get the rest of it going.” And then when you get smart down the road, eventually getting your kids or your spouse or partner on payroll, can actually be a pretty effective tax strategy in writing off expenses and taking income out of the business once it gets up and rolling.

JIM: Yeah. Ted Jenkin, that’s why you’re the expert in this area. Thank you so much for joining us on the Atlanta Small Business Show. Hope to have you back again, we’ll talk more about this.

TED: Well thanks.

JIM: Great.

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