Video transcript

This session is about how to create a successful business plan.  We’ll talk about the purposes and value of creating a formal plan, and we’ll discuss the important issues and questions about the business to consider in the planning process. A business plan should follow a template, so we’ll describe how the information may be organized into sections. Then we’ll cover some common mistakes in business planning, and finally, we’ll provide a checklist of recommendations.

THE VALUE OF PLANNING

When starting a new business – any business – the first step is to develop a formal business plan. The purpose of this carefully written document is to define the business and describe how its marketing, financial and operating goals will be achieved. Think of the business plan as a road map to business success. For starting a small picture framing business, the plan may be fairly simple, but starting a larger business with greater assets and complexities would need a more comprehensive plan.  

If investment capital or borrowed money will be involved, the business plan is a valuable asset because it provides detailed answers to the questions usually asked by investors or lenders. For example, at what point in time will the business become profitable?  How much money will be needed, not only to start the business, but also to fund it until profit rises to sustain it? What is the plan to pay back borrowed money or provide a return on money invested? Detailed answers to these and other questions provide assurance that the business owner has thought through all aspects of the business. 

In studying the products, services, customer demographics, and resources needed to start the business and keep it going, important questions come up right away. The business plan answers all of them and, as preparation for the start-up progresses, more questions will come up, which were not obvious in the beginning. Creating a good business plan encourages the organizer to think through every detail of starting the business and managing its early growth.  

Budgeting is a major benefit of good business planning. Expenses seem to come from every direction in a business start-up, so be sure to keep track of every line-item expense throughout your planning process.

The business plan also explains and justifies the expectations for performance in revenue, profit, and growth. Many businesses start with a month-by-month plan for the first three years, with quarterly reviews. Then, as the business matures, the plan may be revised to map the business strategy for, say, the next five years with semi-annual performance reviews. This helps to keep the business focused on the essentials and avoids distractions. Ongoing business planning helps to define the future of the business.

FRAMING BUSINESS PLAN 101

Here are some primary questions to be addressed by the business plan for a framing shop, and studying these topics will surely lead to further questions.

Who will be your customers? 

This is among the most fundamental marketing questions, and the answer will affect key decisions throughout the start-up process. Identify your “target customers”, the types of customers you intend to primarily serve, because you'll be directing most of your marketing and advertising toward them. Of course, you probably will get business from other types of customers, as well, but emphasizing your specialties can help to establish identity and build the brand of the business.

How will you attract customers?  

For custom framers a couple of decades ago, the local telephone directory might have been the best advertising method, but not today. These days, social media usually brings the best results, but be sure to focus on the specific forums that attract your target customers, and try to zero-in on the interests of your local target customers. Potential framing customers respond favorably to a strong presence online, and a professionally-created and frequently-updated website may be among your most important marketing & advertising investments.

Where will the business be located? 

Will your business be home-based, or in a retail storefront, or in a commercial business campus, or in an industrial warehouse location?  Real-estate professionals often say the three factors most important for a successful business are location, location, and location. It’s true. Choosing the location most appropriate for your particular business will make it easier, less costly, and more profitable for you to operate from day one and into the future. Keep in mind that the cheapest location usually is not the best one.  Define the attributes of your perfect location in your business plan, and seek the best match.

How much space will be required?

In order to answer this question, you need to plan how many frames you intend to build per day or per month in the beginning and well into the future.  If your business will be small and home-based, you may need a space only 3 or 4 meters square for the customer showroom, plus a small production area about 5 or 6 meters square. 

If you are planning a retail storefront, or a commercial or industrial space, a lease agreement of several years may be required, so be sure to start out with enough space to accommodate your expected growth in that location. Every business is unique, but the typical area for a retail framing business may be around 1000 to 2000 square meters. More space is generally better, but only if your budget allows that expense. On the other hand, a cramped space can hinder production efficiency, profitability, and growth.

Earlier I said that your business plan would bring up questions that were not obvious in the beginning.  Here are two of them: how fast will your framing business grow, and how will growth affect your need for space? Consider these questions carefully in the selection of your business location.

What will be necessary to prepare the space?

Preparation of the business space is called build-out. In the best case scenario, this might involve only painting walls, cleaning carpet, and perhaps minor changes to the lighting.  Or, an extensive build-out could involve major renovations, such as removing or adding walls, plumbing changes, upgrading the electrical system, new ceiling, new flooring, and new lighting. 

The customer showroom will need to be presentable, because it is the face of your business and first impressions are important.  The showroom requires at least good lighting, an attractive design table, display provisions for samples of mouldings and mats, and framing-design examples.

Build-out requirements may be unknown in the early stages of business planning, but will become clearer as potential locations emerge in the plan.  The cost of build-out can be among the largest expenses of starting a framing business, so carefully consider your budget for build-out.

What tools, equipment, and fixtures will be needed to start?

A person possessing manual skills suitable for framing can build the work tables and fixtures needed for the framing shop, and at minimal expense.  A small shop may have only one worktable, perhaps 2 square meters on the top, with drawers, shelves, and bins underneath for hand tools and supplies.  A larger shop may need two or more worktables, perhaps 3 square meters on top, and they may be set up for specific tasks, such as mat-cutting, frame-joining, or fitting & finishing. 

In addition to the worktables, storage racks, bins, drawers, and shelves would be needed for the framing materials. Moulding lengths may be stored vertically or horizontally in special racks built to prevent warping or other damage.  Moulding chops may be stored under the worktables, carefully wrapped to prevent damage. Sheet goods, such as mat boards, foam boards, and glass, may come in at single sheets or cartons. These can be stored under the work tables in standard sizes, as dedicated storage racks can be built as needed for oversize sheets.  Other framing materials, such as rolls of paper, mounting supplies, hardware for fitting and hanging, and miscellaneous items may be stored under the tables or on shelves conveniently placed in the shop.

Tools and equipment for a small, fundamental framing shop would have to include at least a manual miter-box and saw, a miter-sander, a couple of miter-vices, manual mat-cutting tools, and a selection of hand tools for glass-cutting, fitting, and finishing.  As a general rule, the most fundamental tools are slower and less precise to use, so extra care and manual skills are required to produce professional results.

For a moderately-well-equipped shop, an electric miter-saw of the type used by construction contractors could cut the frame mouldings faster and more precisely than a manual miter-box, and the miter sander might still be useful. A manual or pneumatic underpinner would join the frame corners with v-nail fasteners driven from the bottom, eliminating nail holes and making stronger joints. Alternatively, a dovetail-routing machine with special inserts could serve the purpose, as well. A professional-quality, table-mounted straight-line mat cutter would enable the cutting of mat windows cleanly and precisely. A wall-mounted or free-standing glass and board cutting machine would enable glass cutting, acrylic, hard-board, foam-board, and paper board cutting precisely and conveniently.  

For the best-equipped framing shop, the tools already mentioned would be included, but perhaps in larger sizes or greater sophistication.  For example, a foot-pedal operated or pneumatic double-miter saw could replace the contractor-type single-miter saw. In addition, a large hot & cold vacuum press for wet-mounting and dry-mounting would improve the shop’s capabilities in framing paper items. If canvas artworks are to be framed often, a canvas-stretching machine may be a wise investment. Also, a computerized mat cutting machine would cut mats most precisely and quickly, especially when multiple mats are needed. Accessories for the CMC would make v-grooves, deboss, and add pen-lines on the mats. 

Some suppliers of framing materials, especially in metropolitan areas, may offer “fulfillment services” for their framing customers, such as cutting and joining frames, mat-cutting, and glass-cutting. If you are able – and willing - to purchase these services from your framing suppliers, then you can avoid the need for most framing tools. However, keep in mind that subcontracting framing work to your suppliers adds significantly to the cost, because the suppliers take profit for their labor as well as for their materials. Also, when others do the work, you have to rely on their quality control.  As a general rule, it’s better and more profitable to have the tools and equipment in your own shop to do the framing work from start to finish.

Starting out with used, professional-grade equipment may save a lot of money, perhaps half the price of new equipment, but buy wisely.  When you can find used framing equipment, make sure is in good condition, or be prepared to refurbish it.  

What other expenses will be involved with the start-up?

Non-framing equipment would include at least one computer with an up-to-date operating system and plenty of RAM and storage capacity.  Software should include a professional accounting program to keep track of financial matters, and point-of-sale software to keep customer data, order histories, to provide excellent reports about the business.  The POS system would also provide the most accurate material costs and prices, plus frequent, convenient updating.

At least one digital printer would be needed to produce work orders, invoices, and all sorts of other documentation associated with the business, and it might also serve as a scanner and FAX machine, as well.

Administrative start-up expenses would include legal registration and licensing of the business, since government tax authorities need to keep track of business activity.  Consultation with a professional accountant may be advised, in order to establish proper bookkeeping and accounting procedures for the business. Also, be prepared to pay deposits when setting up accounts for some utilities and services, such as gas & electric service, internet, telephone, refuse collection, and so on. Your start-up budget needs to include all of these and other miscellaneous expenses, which could quickly add up to a few thousand euros.

STRUCTURE OF A BUSINESS PLAN

Generally, the business plan should be assembled after all of the research and study have been done. The planning is not necessarily a step-by-step process, and the final business plan document is really just a report of the planning work.

A common purpose of the business plan is to attract the attention and cooperation of investors or lenders, which may be obvious in the layout of information. However, even if you, the planner and business owner, are the only person ever to see the business plan, there is still merit to following an established, typical business plan template. Many business plan templates are available online, or you can assemble your own.  

Creating a business plan is a thoughtful process, and it may be difficult to figure out where to begin. Professional business planners are available in most markets, and consulting one of them may be worth the cost, especially if the help of an expert gets you started in the right direction, resulting in a better plan and a better business start-up.  

Here is an example to describe the various sections of a typical business plan.

Cover page – This page contains the proposed business name and contact information for the owner and preparer of the plan. If a company logo and tag line have been designed, place them here.

Table of contents – Yes, the business plan should be organized like a book.

Executive summary – This is a brief summary or synopsis of the plan, referring to some key details that it contains. If you are trying to attract an investor or lender, this section amounts to a sales pitch.  

Opportunity – Describe how this business provides an opportunity or fulfills a need in the marketplace, and the value of its products and services for customers.  This section should be about the benefits provided by the business, and not about the revenue, profit, or income potential that it may produce.

Market analysis – Here is where you analyze the market your business will serve, including market trends, demographic information, description of target customers, geographic reach, and assessment of potential competition. Plans for future growth or expansion into related markets should be included here as well. You may have demographic and marketing charts and graphs to include here.

Execution – This section describes how your business will serve the target market, including outlines for your marketing plans, advertising methods, sales plans, location, and technical details about your business. Describe the tools and equipment involved. Also describe the technologies and practices that will set your business apart from others. If the business will specialize in certain products and services, describe them in this section. You may have charts or tables showing forecasts of growth.

Company – Here you will describe the organizational structure, management, and staff of the company, including the names, education, qualifications, work history and accomplishments of the key people.

Finances – All details about the company’s financial plans should be provided here, including projected statements for profit and loss, cash flow, balance sheet, sales & profitability expectations, expenses, budgeting, and break-even forecast. Include charts and graphs of expected sales and profit performance for at least the first three years.

Appendix – This final section describes and explains the informational sources and resources used to compile the plan. Potential investors or lenders need to know that you know what you’re doing, and this section should lend credibility to the plan.

MOST COMMON MISTAKES

Creating a business plan is a project and, like any business project, the results indicate the quality of the business and its people.  It is essential to think through your plan, and cover everything. Here are a few of the common mistakes to avoid in the creation of your business plan:

Incomplete – The business plan should cover every aspect of the business. A complete plan includes descriptions of target customers, products and services, operations, marketing and sales, management and staff, assessment of competitors, discussion of the industry and its trends. Finally, your plan should include detailed financial projections for several years. Leaving out any of these details would result in an incomplete plan.

Too vague – Show all pertinent details in your plan.  Be specific and do not generalize. For example, in the sales forecasting show predictions for custom framing vs. ready-made sales; commercial vs. retail orders; and if multiple regions are involved, separate their numbers. 

Unrealistic or unsubstantiated assumptions – Make sure that all features of your plan are firmly grounded in factual information about the market, demographics, competition, and other pertinent factors. If the plan is based on faulty information or projections, then its credibility could be questioned.

Inadequate research – Learn as much as possible about the industry, your local market, target customers, competitors, and future trends. Thorough research is the key to creating a strong business plan, and it will show up in the Appendix.

Poorly written – The business plan represents you in the eyes of potential investors and lenders. Make sure it is written with proper grammar, spelling, and punctuation. Make sure the layout is consistent, with proper margins and headings. The writing style should be clean and authoritative; not uncertain or overconfident. Remember that the business plan is a reflection of its writer.

BUSINESS PLAN CHECKLIST

Before presenting your business plan to others, review it to be sure all the important information is covered. Here’s a list of things to check:

Think through every aspect of the plan – Does your plan provide all the information necessary for an ordinary reader to understand the business you propose to start? 

Check your research – Sources of information should be checked and verified. Outdated or irrelevant research could lead to incorrect conclusions in the plan. Verify your research with multiple sources wherever possible, and make sure that all of your plan’s information is up-to-date.

Target customers – Make sure that your business targets the right customers, and that your products and services will appeal to them in numbers large enough to sustain and grow your business.

Competitors – Become very familiar with your competition, which includes not only the other framing shops in your market, but also other local businesses that might do framing as a side-line, such as interior decorating companies and craft stores.  Also research the online framing competitors. What are the trends for your future competition?

Suppliers – The framing suppliers in your market may be able to provide useful information about your local market. Get acquainted with them and discuss the selection of their product that you will want to sell.

Get feedback – Trusted friends and family, potential investors and lenders, suppliers, government agencies, and non-profit organizations (such as art museums) can provide valuable insights about your business plan.

Get help – If you lack expertise in any particular area, consult others. For example, bankers and accountants can help to define your financial plan. Advertising and marketing professionals may help with those features of your plan. And a professional business planner can help to keep you focused on the important points of your plan.

Creating a good business plan is essential for the success of every new business, so spend whatever time and energy it takes to do it right. The future of your business depends on how well you plan it.