December
2 - 8, 2002
More help is available for formulating a business plan
Quick! What phrase has become synonymous with “start-up” during the past 5 years? No, it doesn’t rhyme with ‘trouble’. I’m referring to the ubiquitous business plan. No new venture should begin without a written business plan.
Although the form and function of the business plan is well established, it gained pop status during the previous decade because of the prevalence of venture capital. All of that easy money created a rush of new ideas, markets, products and vocabulary that were best communicated via a business plan.
Through the bubble and the bust, the humble business plan retains its relevance in today’s economy. Even established companies rely on updated business plans to direct their current operations. This article addresses one element of planning that poses the greatest challenge to new ventures.
Tough projections
Most of the people involved with start-ups know their business well. They are experts in their fields and great at analyzing markets. However, many of those that I’ve been privileged to work with share a common weakness when constructing a good plan. It has to do with people.
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It’s hard enough for an existing operation to predict future labor costs. However, when there is no operating history to work with, this task takes on the attributes of fortune telling. Until a start-up has initiated daily operations, no one really knows how many people are required to run the business, let alone what types of jobs need done. So we make assumptions by analyzing known factors such as current technology and available talent. These assumptions allow us to create the structure of our workforce and estimate our labor costs for the first three years.
In reality, this part of the plan is often viewed as a necessary evil. Numbers are punched in with little hard data (and even less enthusiasm) just so the pro forma financial statements can be completed. This inevitably leads to extensive re-engineering once the start-up starts, and valuable management time is spent on planning rather than doing. In a worst-case scenario, a start-up can fail due to insufficient financing if the payroll costs are underestimated.
A better source
I’ve recently discovered a valuable source of help. Believe it or not, it comes from the government. When our corporate clients need to know the competitive wages for specific jobs, we turn to the Bureau of Labor Statistics website. This site has evolved into a very useful tool for finding true wage data on every occupation imaginable. |
The site is located at www.bls.gov, and I encourage every single business plan writer out there to log on. The BLS site enables you to view hourly and annual salary data in a specific MSA (metropolitan statistical area). This means that you can find the median hourly wage of an application software engineer in the Lehigh Valley. It’s $31.59 by the way.
The site includes a plethora of employment and workforce information sorted by SOC (Standard Occupational Classifications). However, the real value is in the salary information derived from current census data. By using a link titled, “Wages by Area and Occupation” and finding the Allentown-Bethlehem-Easton, PA MSA section, a company can look up all of the jobs in its operation and compare its payroll costs to the going rate. This tool truly takes the guesswork out of estimating employee wages.
This is a fast, easy-to-navigate site that will provide the entrepreneur with confidence when projecting future workforce needs. It is also helpful when comparing labor costs in different metropolitan areas. I often view the wage data in both the Philadelphia and New York MSA’s to help candidates form realistic salary expectations when moving to the Lehigh Valley.
Formulating a good business plan will always require hard work and hours of research. Some plans take years to develop properly. The BLS website just makes that work a little easier, and that much more fun. Who would have thought that the U.S. Department of Labor could actually help businesses succeed?
By Kevin F. Flemming,
Director of Sales & Marketing
INTEGRITY Personnel, Inc. |
