How time flies. It’s hard to believe that the first month of 2022 is already behind us. By now, most people have “recovered” from the holidays and have begun to settle into a routine that will carry them through the year. You may be thinking, “What’s this year going to bring?” and “When this year ends, where will my business stand?” Or perhaps you are contemplating starting your own business?
In April, KTM Solutions will celebrate 17 years in business. Starting my own engineering company had been a long-standing dream. In fact, I sketched out the framework for a business almost 12 years before founding KTM. Those initial thoughts were much different from the final idea and concept. In fact, those plans were naive and only half baked.
Over time, the initial dream evolved. In 2004, my wife and I thought we would purchase a manufacturing company and add an engineering component. After much research, we decided that starting an engineering business from scratch would be less risky than purchasing an existing manufacturing business. After all, I had zero experience running a manufacturing business. Once we settled on the business concept, I knew from all of my previous training that we would need a good plan.
I am a firm believer in the old adage, “If you fail to plan then you have planned to fail.” I knew that we needed to develop some kind of plan to get our business started but really didn’t know where to begin. I spent a lot of time researching business plans and seeking wise counsel from others who had started and built successful businesses. The Small Business Development Center (SBDC) at Clemson University was a great resource. Between the SBDC and several books, I drafted KTM Solutions’ first business plan. That was the best investment of time I ever made in our business.
That same business plan continues and lives today, although as of 2021, the format has changed significantly. Based on my experience, I offer the following ideas.
Getting started—Develop an outline for your plan and add content.
Your outline should include the following elements:
- Lay out why your business exists and define your business proposition. Obviously, if you are starting a business, you must believe there is a need that your business can fill. You need to believe that there is something unique in your approach, a niche that you can fill, or an efficiency that you have discovered that will be good for your market. You need to understand why you are in business and why your business should be relevant to the people who will be your customers.
- Provide a simple description of your business. In terms that are easily understood, you should describe your business and what you will offer. This will become a key part of the message you take to your marketplace. In addition, if you are seeking investors to provide funding for your business, you will need to document this description succinctly and efficiently. This step will be valuable to you as you think through your business and bring clarity to your place in the market.
- Define your market and decide how you will approach that market. It is very important to understand clearly who you are for and who is outside your target market. Clearly understanding your prospects and tailoring a message to your customer base will be necessary to get the right people to purchase from you. For instance, if your customer base is manufacturing companies that require high precision machining operations, there is no need to market to retail or professional service providers. Your plan should address the following questions: What can you tell your potential market that will capture their interest in your company? Where should you advertise or network to connect with your potential customers? How will you communicate with potential customers?
- Document your financial projections. This is tricky but very important for your wellbeing and for attracting investors. Consider how you will generate revenue and how you will price your offering—make sure to consider the kinds of costs you will incur in delivering your goods and services. I strongly recommend documenting your assumptions, building a projected profit/loss statement, and finding good counselors to work through and challenge your assumptions. Be prepared to make an investment and build a plan with room for learning. Understand cash flow! Businesses that are otherwise profitable fail due to cash flow issues.
- Define and assess your competition and customer base. You need to know who is competing for the same business. You need to understand their strengths and weaknesses as well as your businesses strengths and weaknesses. You need to clearly understand what your customer needs and wants and what might drive them to your competitors.
- Develop a risk analysis. This needs to be an honest assessment of all that could go wrong and how you will mitigate these risks if they come to pass. Of course, it’s impossible to define and document every risk. However, you should spend some time in deep thought and capture as many risks as you can. One benefit I found in documenting my business plan was the ability to refer to the plan and track progress against it. As new risks are discovered and replace risks that are no longer threats, you will find that you are staying a step ahead of potential issues and that your business runs much better.
- Define your capital spending plan. Make sure you understand the investment required to get started and know how these investments will be funded. Recognize (through your financial projections) how cash flow will impact your investment plan and make spending decisions prudently.
Once you have a satisfactory plan, use it and refer to it often. I documented everything and used it to set up performance hurdles. At the end of the year, I used these hurdles to measure progress. I also used what I learned from each hurdle to inform the next steps in the plan.
Even so, the plan itself isn’t everything. Don’t get me wrong—I think the document is useful. But the most significant benefit you will get from developing it is completing the thought process. Be sure to include others. Proverbs 15:22 says, “Without counsel plans fail, but with many advisers they succeed.” Include your employees and staff. Seek out peers and colleagues. You can’t foresee every difficulty your business will face. But with the help of other, seasoned business owners and a thoughtful business plan, you can face those difficulties well prepared.
Paul V. Kumler, P.E., is president and founder of KTM Solutions, an engineering company that services the aerospace and large-scale manufacturing industries. KTM Solutions designs and builds custom machines and “tooling” (jigs, fixtures, below-the-hook lifting systems) supporting a broad clientele and various industries. (www.ktmsolutions.com) The company is headquartered in Greer, South Carolina, with a remote office in Charleston, South Carolina. Mr. Kumler serves in several volunteer roles including the SC Aerospace Advisory Board. Mr. Kumler, a professional engineer, is licensed in Louisiana, South Carolina, Texas, and Washington. He is married to Ginger A. Kumler. Together, they have two grown children and three grandchildren.