Business Plans — Every Agency Needs One (Part 1)

by Bert Holtje

A business plan is many things. It’s a map, it’s a compass, it’s guidelines, and you might even think of it as your own personal business philosophy. It’s critical for your own use, and if you have others involved with your business it will be important for them. But, we’ll get into these details later in this report.

The Business Plan Reinvented

An agent told us recently, “I have no need for a business plan. As far as I can see the only reason to have one is to get a loan from a bank. And who lends money to agents? They don’t have bankable assets, so bankers don’t lend the money.” It’s true that anyone who lends money to small businesses will want to see a business plan, but there are far more good and real reasons to have a business plan than just to borrow money. Perhaps the best reason is just to give you, the agency owner, a sense of the total picture. You know what it’s like running a small business. There are a million details. Today you’re doing your taxes. Later, you’re making customer calls, and even later, probably after supper, you’re trying to keep up with your paperwork. Running a sales agency is a mass of big and little details. A business plan won’t make them go away, but a good one will put all the details in relative perspective, and give you a timetable that makes all your work go a lot more smoothly. And, if you have really done your homework, your business plan will give you a series of checkpoints you can review from time to time to make sure you’re heading in the right direction.

There are several reasons why every agency should have a business plan. The first, of course, is to help you with a startup. A good business plan will not only keep you on track, it will help you to spot problems before they hit you. Another reason to have one in place long after you have gotten your business off the ground is to help you in a turnaround situation. Lose a good line and you’ll wish that you had a business plan to help you work your way back to the top of the pile. Also, a good business plan is a strong selling point for current and prospective principals. They like graphic evidence of a well-managed, forward-thinking company that’s in it for the long term.

Perhaps the most important reason to keep your business plan in place and to continue to modify it even after you have been successful is to help you expand. Without the rigor that a business plan can provide, your growth plans will probably be all over the lot. A business plan not only gives you the structure you need for an expansion of any magnitude, but can provide the insight you will need to make smart decisions. And you will have to make plenty of them in any expansion move.

One agent we talked with when we researched this report told us that as far as he was concerned his business plan had been essential at every step of the way from, “a raw idea to the final sale of my business many years later.” This agent had built a very successful agency, starting as a solo and building to a three-person agency with an excellent reputation. When he began to think of retiring, he talked with several other people who owned smaller agencies, thinking that one of them might want to throw in with him and eventually take over his business. “I talked with several younger agents and quickly discovered than only one of them had a business plan in place. I was able to look at it and I shared my plan with him. It seemed as though we had both been thinking along the same lines, and we liked each other, so we joined forces. I’m slowly phasing out of the combined business according to the joint business plan we both wrote after the merger.”

A business plan is critical for a sales agency, regardless of the form under which it operates. However, an agent we talked with told us that because so many agents operate as sole proprietorships that a business plan is especially important. He explained, “When you form a corporation, you must do a lot of things that provide some of the structure that a good business plan requires. However, when you are just a sole proprietor, these structures aren’t there. You just open the door and do whatever the local regs require. Therefore, I think it’s especially important for the sole proprietor of a sales agency to have a good business plan in place.”

Next month, we’ll present an 11-point business planning checklist.

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