A different approach to business plans

I wrote a short note to an old Marine Corps buddy who is launching a new business. This is what I wrote.

Here are a few things for you to think about as you get rolling.

You need to develop a one sentence description of your venture that captures the essence of what you plan to do. If you want to dust off your old field manual and use SMEAC that will work. Just be sure you cover the Who, What, Where, When, Why, and How.

Be sure you have a clear vision of what you are trying to accomplish. In the business planning world, this is called a vision statement. Figure out something that helps share your vision that is memorable and short. KISS is the acronym to remember for this one. “Keep It Short and Simple.”

You also need to have a clear understanding of your mission. One way to do this is to take the time to write out a simple mission statement.

If all of this sounds like the beginning of a formal business plan, that is because it is. Here are the basic components of a plan.

Summary
Overview of the business
Analysis of the market
Description of products
Organization and management
Marketing and sales plan
Financial details

If you have experience with business plans, most of this should be familiar, but what is SMEAC? If you have a military background, then you may recognize SMEAC as a Five Paragraph Order. The Five Paragraph Order, or some variation, is the format for virtually everything the military does. The initials stand for:

Situation
Mission
Execution
Admin and Logistics
Command and Signal

The armed forces are large bureaucratic organizations, and it is easy to poke fun at them. However, two things that the military does better than most are organizing and planning. For example the basic administrative tasks of military units are divided into four parts: 1) Personnel, 2) Intelligence, 3) Training and Operations, and 4) Supply. Those four groupings are clear, concise and complete. One of the ways that the military accomplishes its organization and planning tasks so well is that it has developed consistent methods and proven them over time. The processes are also simple and easy to remember. For example, when troops need to report enemy intelligence, they simply remember the acronym SALUTE which stands for Size (of the enemy force), Activity (of the enemy), Location (of the enemy), Unit, Time, and Equipment (of the enemy). This is simple and easy to remember. It also provides all of the information necessary.

SMEAC is an easy to remember way to organize a plan. It will work with big projects and small projects. It is simple, and it contains all of the elements that would normally be included in a business plan. The following explanation is simplistic, but it will help you to understand the concept.

Situation
This section is exactly what it sounds like. It is the section where you will provide an overview of the relevant facts and provide background information. This is also the place where you would explain the business opportunity.

Mission
This section is where you will explain what you will do. You do not need to explain exactly how you plan to do it. You will explain how in the next section.

Execution
In the previous section, you described what you were planning to do. In this section, you will describe how you will do it.

Admin and Logistics
This section will include the details to support what you say you will do in the Mission section. It will tie to how you plan to do it as described in the Execution section.

Command and Signal
In this section you will describe your organization.

As you can see, the Five Paragraph Order is clear, concise and complete. I’m not suggesting that you use it instead of the business planning formats that you already use for two reasons. The first reason is that if you are already comfortable with a process that works, you should stick with it. (If what you are already doing does not work, that is another matter.) The second reason is that most of the other people that you show your plan will be more familiar with a more traditional format. Even so, it is useful for you to understand this way of organizing your plan. It will help you to write a more complete plan and to write it more quickly. SMEAC is also so simple that you may find that you are able to take the time to plan that you may have done without planning in the past.

Do you need a zero balance account?

A zero balance account is an account that usually has a zero or extremely low balance. Businesses use zero balance accounts to manage cash by moving money into the account only when it is going to be needed for a specific purpose. For example, payroll accounts are often zero balance accounts. Businesses will move the funds necessary to cover payroll into the account right before issuing paychecks, and then as employees cash the checks, the balance will drop back to zero. Zero balance accounts let businesses keep cash invested until it is needed. Zero balance accounts also help reduce exposure to fraud because it limits the number of people who have access to other business accounts.

Zero balance accounts are useful whenever a business makes routine or predictable payments out of an account. The most common example of this is payroll, but other examples could include rent or vendor payments.

So the question is, “Do you need a zero balance account?” The short answer is that you do if a zero balance account will help you put idle cash to work. While it may seem to be a lot of extra effort, many banks that provide cash management services can help you automate the process.

There is another reason to consider a zero balance account, and this reason applies to all businesses. It also applies to people that do not own businesses. The reason is fraud. Do you bank or shop online or use a debit card? Have you set up automatic debit transactions with vendors? A zero balance account can protect you. Consumers have a measure of fraud protection when they use credit cards. Business credit cards may not have the same protections. Debit cards may offer fraud protections, but legal protections may be limited. There are also some issues with automatic debit transactions.

Here is how a zero balance account could work for you. First establish a new checking account. Use a checking account because savings or money market accounts often limit the number of withdrawals that you can make. Keep your existing checking account. You use the same financial institution where you normally bank. That will make it easy for you to make transfers as necessary, and it will limit your additional recordkeeping. Try to use an account that allows a zero or very low minimum balance and either no fees or small fees. Some financial institutions will combine the balances of all of your accounts for the purposes of calculating minimum balances. You should also choose an account that will let you set up automatic transfers.

Once you have the account established, link it to your debit cards and online banking. Use the new account for automated debits and other predictable transactions. If possible, unlink your debit card from your old account. You can set up automatic transactions that will transfer funds from your first account to your new low balance account to cover your routine transactions. When you know that you are going to be using your debit card transfer the funds to cover your anticipated transaction. The idea is to limit your exposure to risk by limiting the amount of money in your account. Another way that it works is that setting up a cash management process that requires regular attention also increases your awareness so that if you are a victim of fraud or theft, then you will be able to respond more quickly.

Does a zero balance account makes sense for you or your business?