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A Written Business Plan Will Help Boost Flower Shop's Growth

BUSINESS-MAKE-OVER / Southern California Companies
Learning How to Succeed

February 19, 2001|CYNDIA ZWAHLEN | SPECIAL TO THE TIMES

A cash squeeze is putting the pinch on growth at Tulips Floral Studio, a small flower shop in uptown Whittier.

Despite her green thumb, owner Denise Portillo-Lopez has been unable to boost sales fast enough to generate a steady crop of healthy profit.

The resulting cash crunch has made it difficult for her to expand the business, which she founded four years ago with her mother. Her mother has since bowed out.

"I am the owner, employee, accountant, driver and cleanup crew," said Portillo-Lopez. At times, she has had to close her Bright Avenue shop briefly to make her own deliveries.

Many entrepreneurs are familiar with the headaches that a constant lack of cash can bring, as well as the lost opportunities it means for marketing and growth. First-time business owners are especially vulnerable because they often fail to calculate their cash needs accurately, business consultant Cope Norcross said.

"She drastically underestimated the amount of money it was going to take," said Norcross, director of the Eastern Los Angeles County Small Business Development Center.

But Norcross credits Portillo-Lopez with doing a number of key things right. She chose a small, manageable shop just a block off a popular Whittier street. She has built strong relationships with customers. And she "has excellent technical skills," he said. In other words, she's a good floral designer.

"It's one of her major strengths," Norcross said.

He also gives Portillo-Lopez points for having built a business that is growing, albeit slowly, and that operates in the black.

Her major weakness, the consultant said, is that "she went into this without really having a business plan."

Like so many new entrepreneurs, Portillo-Lopez lacks a fully developed, written business plan that would serve as her road map for growth, he said. A business plan also would show her how much capital she needs, he said.

Besides writing a business plan, he recommended that the owner take several interrelated steps to help sales and profits bloom.

Portillo-Lopez needs to develop a bookkeeping system to keep track of her costs and time. She can use that information to price her products and services better, he said. Effective pricing means higher profit. And more profit could generate the cash flow that Portillo-Lopez needs to hire help and develop her target market, the consultant said.

"This really does work," Norcross said. "It's not just textbook stuff."

Armed with a budget, Portillo-Lopez will have taken a big step toward creating the business plan she'll need to raise additional capital.

To start, Norcross suggested that she get a spiral notebook and write down her expenses and time spent on each job. Accounting software, which she already has, can be so intimidating that an entrepreneur often ends up with no accounting system at all, he said.

"Instead of immediately trying to make the leap to Peachtree or Quicken, [I suggested] a very simple way to keep track of her time and money," the consultant said.

Once she begins to get a clearer picture of her costs, Portillo-Lopez can reexamine her prices, he said. In addition, she needs to find out what competitors are charging for their products and services, Norcross said. That will enable her to do a better job of pricing.

Even a small price change can make a big difference in profit, he said. Once costs are covered, any increase in the price of a product is all profit, the consultant said.

"Price administration is the single most important item a small-business person needs to focus on," he said.

With cost information and updated prices, Portillo-Lopez will have some of the tools she needs to create a budget. That will consist of her educated guess as to how much business she'll do each month for a year, how much it will cost to handle the business and what, if anything, she'll have left over. Cash gaps, particularly seasonal crunches, will become much clearer once the budget is put in writing.

The budget also is a key part of the overall business plan the flower shop needs, Norcross said.

He knows that most entrepreneurs feel they don't have the time, talent or inclination to stop and write a plan. In that case, they might benefit from the free or low-cost help offered by many small-business development centers in Southern California. These can be found in a telephone directory.

With a business plan in hand, including a three-year financial projection, Portillo-Lopez can turn to raising capital, the consultant said.

He estimated she would need less than $25,000. The best sources for a small operation like this one for such a relatively small sum are friends and family or a micro-loan, Norcross said.

"Friends and family are the largest source of equity for start-up businesses," he said.

Even family and friends are more likely to invest in an endeavor if the business owner has a solid plan with a realistic financial projection showing how much money the business needs and how it will be paid back, he said.

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