Month: March 2018

Don’t Make the Mistake of Beginning Your Start-Up Venture With a Business Plan

In the late eighties I wrote over 100 articles on small business owners that had just begun their endeavors. Today, only one of them still exists. And, I am certain he did not begin with a business plan. He had a very marketable skill (detailing custom cars) and had already begun the business on a part-time basis before he took the business full time.

I was reminded of this recently when I read a letter to J.T. O’Donnell and Dale Dunten written in the Fort Wayne Sunday Journal-Gazette. The writer wanted to use his business degree to begin his own business and wanted to get advice from these two business writers who actually specialize in career building.

When Dale Daunten wrote the following, I wanted to issue a big, “Hurrah!”

He wrote, “Here are some of the things you do NOT need in order to start a business; a business plan, partners (especially if friends), investors, industry knowledge, experience or lots of cash.”

My biggest, ” Hurrah!’ came when he had stated the edict concerning the need for a business plan- but more I liked what he stated after all of this. He told this young man to start out with a hobby or doing something he enjoyed and to stay in his current job while doing so.

All too often today, with all the economic belt-tightening we are being told that entrepreneurship is the answer to America’s ills and I believe that to be true.

But, America won’t get anywhere if they do not enjoy what they do, and bring passion to their endeavors.

In their rush to build businesses, many business incubators and so-called business coaches are telling young people and others who want to begin their own business that they must have a business plan.

Frankly, I think that is just another way for business incubators and business coaches to pad their own pockets and make it appear that they are teaching people how to build a business.

I do not believe that anyone can start a business, but I do believe that three qualities must be in place.

┬áPassion for their product, service, or skill- no one will continue in the rigorous world of entrepreneurship if they don’t have the push to continue on when the going gets tough.

– A place to return home to- all good small business owners must have a reliable source of ‘╦ťother’ income- it can take a long time to build a business and, unfortunately, even entrepreneurs have to eat.

– Have a little bit of rebel in you- be able to say screw you to anyone who doesn’t like your idea, but also be able to say that to your own idea if you are seeing that no profit can be made.

That’s it. Oh, and one other thing. Success may not just come with a profit- it might come as an outgrowth of the original idea that you brought to market. Keep that in mind.

Why Write a Business Plan?

Entrepreneurs who invest time and effort in writing a business plan are six times more likely to succeed, according to the US Small Business Administration (SBA).

“The bottom line is: if you are actively starting a business, do a business plan.” This is the perhaps blindingly obvious conclusion of research by the SBA published in 2008. Every year 7% of the US working population are engaged in some sort of entrepreneurial activity, setting up new business. They might have lots of great ideas and good intentions, but many of these ventures are never realized. The vast majority of those which founder lacked any form of formalized business plan.

Preparing a business plan seems like hard work, and it might feel like a poor investment of time. Many are written begrudgingly for the sole purpose of satisfying a bank or investors, but the process of putting a plan together go far beyond satisfying the demands of those holding the purse-strings.

A good business plan will define the commercial or other objectives of the venture and preparing it should shine a spotlight on the major issues that need to be addressed.

We tend to have a natural inclination to be over-optimistic about the potential of new ideas; it’s easy to imagine lots of satisfied customers and the dollars rolling in. Unfortunately, as experienced entrepreneurs know, over half of all new enterprises fail within their first five years and while the reasons are varied, the process of building a well-considered business plan will have identified and dealt with the most obvious ones.

A good business plan will provide answers to the following questions:

– what is the objective of the venture?

– what is the product being offered?

– how will this product be marketed?

– what are sales expected be in the first month/first year?

– how much does the product cost to make or buy, and what are the other overheads of setting up and running the venture?

– when will the venture start to turn a profit and how much profit will be made?

There are many books and website full of advice on how to prepare a business plan. In the US the SBA provides a wealth of resources, and in the UK the Business Link website is packed with relevant information and guides.

No one, other than the extremely foolhardy, sets out on a journey without having a good idea of where they want to get to. This applies just as much in business as in any other area of life. The process of preparing a business plan helps the entrepreneur to define where they want to go, to turn that ‘good idea’ into a viable commercial opportunity.

Without a good business plan the risk of getting lost along the way are much higher. The plan does not guarantee a successful business, but as the SBA research also discovered, time and energy invested in the plan was never detrimental to the business.