Entrepreneurship, Owning a Business, Starting a Business

What Business Planning Is Not

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Carved-in-StoneAfter reading an avalanche of articles on what a business plan should be, I’ve decided it might be helpful to write one about what a business plan should not be. The topic of business planning is sure to incite a lot of rhetoric and passion, whether or not you believe it to be a useful endeavor.

Even with all the hype there are misconceptions about what a business plan should or shouldn’t be. The poor old business plan is expected to do a lot for business owners. It’s little wonder that some people doubt the validity of the exercise. Here is what a business plan is not:

1. A Business Plan is Not a Tome. I’ve seen business plans ranging from a couple pages to over 200. Rarely should a business plan be more than 20 pages plus attachments; shorter is even better. If lifting the printed version of your business plan leads to a herniated disc in your lower lumbar region, or if it takes any more than 4 guys to carry it into your banker’s office, you’re probably overachieving. Wordy tomes are never read. The people who have to read the plans and make decisions are usually very busy. They will appreciate your efforts to keep the plan clear, simple and succinct.

2. A Business Plan is Not a Business. Delusional folks tend to believe that writing a big fat business plan will get them customers and sell products. Only the greenest of newbies could think the work is done once the plan is written and printed. That’s when the real work begins.

3.  A Business Plan is Not a Guarantee of Success. A beautifully fashioned business plan is no assurance of business success whatsoever. No matter how cleverly crafted the narrative is, or how gorgeous the graphs are, or how dazzling the charts; nor does it make a difference how mouth-watering the financial projections are.

4. A Business Plan is Not a Substitute for a Bad Business Model. If you’re business model can’t deliver the goods to customers in a cost-effective, timely way, the business can’t succeed. No amount of business planning will compensate for a faulty business model.

5. A Business Plan is Not a Substitute for Street Smarts. Great business owners think on their feet. A business plan is a plan, not to be confused with the actions that fill a business owner’s day. Planning done right should result in setting strategy and avoiding some of the obvious traps along the way, but it won’t protect idiots from the impact of bad decisions in day to day operations. Your business plan will not protect you from bad business practices or pathetic personal conduct.

6. A Business Plan is Not a Complex, Time Sucking Activity. If you can’t blaze your way through a business plan in 2 to 4 weeks, you’re probably drilling too deep. In fact, many business plans can be blasted together much more quickly. Of course, the amount of time needed will vary according to the size and scope of the business, the type of business, the owner’s availability to work on the plan, how long it takes to build and test a prototype, and a whole lot of other factors. If your business plan eats up more than a couple months of your life, you’re probably getting way too deep, worrying too much, and procrastinating. Get it done and get yourself in front of customers.

7. A Business Plan is Not a Fix for Abysmal Personal Conduct. Planning won’t compensate for bad judgment. Forecasting is a powerful planning tool that can reveal whether or not your business has a chance of surviving or being profitable. No forecast can counteract the devastation that occurs when the owner continually removes too much money.

8. A Business Plan is Not Just for Owners Who Need Money.

A business plan can open the door to a loan or help attract an investor, but by far the biggest benefit of business planning is the knowledge an owner will gain from the researching and planning. The least understood benefit of business planning is the liberating and illuminating effects of writing about your business. You can’t help but strengthen your understanding and resolve when you dispel your assumptions; write your business description; write your vision, strategy, and goals; and remove the mystique from your revenues and expenses. The power of writing has more to offer the business owner than simply attracting a loan or investor.

9. A Business Plan is Not Etched in Stone. You’ll base your plan on a number of assumptions and you’ll build in buffers and safety factors. Your business plan will help you set parameters, but it won’t enable you to pin-point a precise path to success. In fact, many elements of your business plan will change the second you step into business. A business plan is a roadmap to your envisioned success. A map will not get you to a target; it’s the actions you take and the adjustments you make along the way that get you from your starting point to your cherished destination.

A business plan is just a plan. It’s not to be feared or revered. It certainly shouldn’t be put on a pedestal or parked on a shelf and ignored. A business plan is a living document that should be reviewed and revised as the business weaves and bobs its way through the marketplace. A business plan, providing you do it yourself, is the least expensive, most powerful tool available for taking control of your business and your financial future.

 

Small Business Funding, Starting a Business

Are You Ready to enter the Dragon’s Den?

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Money-Dragon The Dragons are coming to Prince George, BC on January 25th. Are you ready to make your pitch? The following are tips I’ve gleaned from watching the Dragon’s Den and Shark Tank programs. Each time the Dragons come to town a lot of entrepreneurs dream of running the gauntlet. Here are a few things to take in consideration before sauntering in to pitch the Dragons.

  1. You’d better have a product or service to sell. Take a page from the Kevin O’Leary School of Business – 1) Get a patent 2) Sell the patent 3) Collect royalties for the remainder of all time. If you’re selling unpatented widgets that can be copied and replaced at one tenth the cost, you’re going to agitate Mr. Wonderful and bring down thunder and abuse. Not what anyone hopes for when tiptoeing into the Den.
  2. Do a realistic valuation of your business. Pie-in-the-sky valuations will only bring disappointment and get you laughed out of the Den. The Dragons have seen a lot of pitches. You’re not going to fool them, so don’t even try. Here’s how the valuation relates to your ask. If you are looking for $250 000 for 50% of your company, you are essentially setting the value of your business at $500,000. Wild-eyed valuations foreshadow what it would be like to work with you. While you don’t want to sell yourself short, an inflated valuation will turn off investors.
  3. Don’t enter the Den without a dollop of sales under your belt. Prove sales before going under the microscope. From all I have seen, you will not get a deal unless you have some sales under your belt. Profitable sales are even far more enticing. And those sales had best be to real customers (no, not your Mom), as in people who don’t eat Christmas dinner with you.
  4. When the Dragons are talking, shut up and listen! Many times we’ve seen Dragons backing away from a deal because the entrepreneur is talking instead of listening. Why is this important? Well, the Dragons are aware that getting into a partnership with you means they’ll be faced with communicating with you on an ongoing basis. If you can’t listen, you’re probably not going to be a lot of fun to partner with. Besides, the Dragons have a lot of wisdom to share and you’ll miss if you’re trying to do all the talking.
  5. Answer the questions they ask. There are times to be evasive. There are times to hedge your bets and dodge around the answer like when your Mother and Wife are both staring at you from across the dining room table, wanting to know who’s pie you prefer.  There’s no room for evasiveness in the Dragon’s Den. Answer all questions, clearly, directly and concisely.
  6. Be available and plan to do the work. The Dragons have spent a lot of time acquiring wisdom, filling their coffers, and building powerful networks. The lesson? While it’s noble and courageous to work at a full-time job and build your business on the side, the Dragons aren’t looking for jobs, they’re seeking investments that make money. Make sure your plan includes payment for you to jump in and manage the business. The Dragons are selling the knowledge and funds and connections to make things happen fast. They’re not going to build a business for you; that’s your job.
  7. If you’re headed into the Dragon’s Den to sell a mere idea, you’re headed for disappointment and a bit of a thrashing. Ideas are two bucks a ton. Don’t consider yourself ready to meet the Dragons until you’ve at least got a working prototype.
  8. Know what you want from the Dragon’s going in. If you really just need the cash, a bank loan might be what you need. If you’re looking for the expertise the Dragon’s bring, think about who you want to work with. Do you need franchising help? Marketing help? Distribution? Know which Dragon’s you want to work with. Be courteous when turning down offers. Don’t be rude, even to Kevin. It will reduce the other Dragon’s desire to work with you.
  9. Choose the right business model. You’re going to hit a brick wall if you wander into the Den thinking you’re going to build a franchise business when all you really need is to connect with the right distributor. This comes back to knowing your product, your customer, the industry and your competitors. Dare I suggest that you need to do some business planning?

The Dragon’s Den is pure entertainment, usually fun, sometimes painful, always a learning experience. I admire those who have the courage to step into the ring. I’m always rooting for the applicant and I wish success and prosperity to all who take the risk.

Starting a Business, Writing a Business Plan

Shades of Grey in Business Planning

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business-shades-of-greyThe world of business planning is haunted by shades of grey.

The benefits of business planning far outweigh the downsides. It is a healthy process for start-ups. Aside from accessing much needed financing, people gain knowledge and confidence as they research and write their own business plans.

Yet, most business start-ups won’t opt to write a business plan until they’re drop-kicked by someone or something. For a young person, it might be an insistent parent; for others, a banker, investor or gatekeeper. Some need to lose assets or go broke before they get the message. Start-ups are inclined to avoid anything that seems like “extra” work, and there’s no question that business planning entails a bit of work. It’s easy to see how a person might cheerfully bypass the opportunity.

Some of the resistance to business planning is due to the shades of grey.

The first glimmer of grey is found in the term “business plan.” An Internet search reveals that the term is used to describe a bewildering embarrassment of products and processes, from your monthly mobile bundle to grandiose marketing schemes, to diagrams etched into squares of high-grade toilet paper and glossy 100-page tomes. How are start-ups to know which system to choose? Those who seek financing will indiscriminately follow whatever path the lender tells them to. Those not seeking money have a challenge in front of them. It’s complicated… and grey.

The next shade of grey is “who to believe.” Google dumps a daily torrent of business planning articles and opinions into my inbox. There’s no shortage of claims that business planning is a waste of time and energy, apparently a fruitless pastime that entrepreneurs should shun. Many of the articles endeavor to pose alternatives to business planning, though I’ve not been able to see how the alternatives are better or different than business planning. They are only business plans with different logos.

Another shade of grey arises from the silly expectation that business planning will guarantee business success. There are no guarantees of business success. While a business plan will arm a start-up with more accurate knowledge and eliminate false assumptions, it can never make up for one’s inability to sell, a chronic propensity to procrastinate, or a knack for peeing in customer’s corn flakes. Anyone who confuses business planning with conducting commerce is doomed to a wild face-plant once in business.

Adding to the shades of grey is the difficulty in quantifying the benefits of having a business plan. From start-up onward, business owners are engulfed in risk. There are many factors that can take a business down, but absent are the charts and graphs that show definitively that a business plan helps keep a business alive.

The ultimate shade of grey is heaped onto business planning by the televised Dragon processes, where entrepreneurs get 7 minutes in the national limelight to pitch their business cases and field a few targeted questions from seasoned angel investors. Those who walk away with offers make it look quick and easy, right? It takes only a few minutes; why would anyone need a business plan? Lost in the floodlights and glamour is the fact that the entrepreneurs who get offered deals have done their homework, probably in the form of a business plan.

All but the tiniest of businesses are stronger with a business plan. When it comes to flushing out risks and mitigating liabilities, even mired in its shades of grey, I haven’t found anything as effective as a business plan.

Entrepreneurship, Owning a Business, Pricing

Ways to Put the Spurs To Your One-Legged Pony

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Businesses with just one revenue stream, sometimes called one-legged ponies, tend to drop off the radar when the single revenue source dries up.

The one-legged pony business killer seems like a kind stranger when starting out. For example, after you’ve driven Uncle Joe’s truck for a couple years, he offers you a contract and helps get you set up to buy your own equipment. Who in their right mind would turn down a lucrative, long-term bread and butter contract offered by a friend or family member? These special deals sometimes work very well, but the dependence on a lone client can become more of a problem than an asset.

The time to deal with the one-legged pony issue is long before it becomes a problem, as early as the first business plan. Here are a few actions to help diversify your business to avoid falling prey to the one-legged pony.

  1. If A Good Deal Falls On Your Desk, Take It. By all means, take advantage of the amazing evergreen contract when the opportunity comes along. A bread-and-butter contract gives any business a solid base from which to build a great business. Plan from the start to use the stability as a benchmark from which to diversify and build a broader base.
  2. Develop Efficiencies. Get the business running and become proficient at providing top-notch service for your customer. Fine-tune the business to ensure you can provide a high level of service with every engagement. More importantly, become competitive.
  3. Research Similar Businesses. Learn about other businesses similar to yours, how they are surviving, what additional services they provide, and what other clients they attract in order to broaden their base.
  4. Add Revenue Streams. After an appropriate amount of research and comparison of different opportunities, make a plan to diversify your business and increase your sources of revenue. Here are a few examples:
  • A log hauling trucking business could buy a gravel box and start competing for gravel-hauling contracts to fill in the cracks whenever logging gets slow.
  • A service station selling only gas could add a mechanic, incorporate a car wash, or begin selling high-margin trinkets to entice its customers to spend more while on-site.
  • A web designer who builds websites for small businesses could partner with a search engine optimization specialist to sell a broader range of services to its customers.

5. Keep An Eye On your Financials. Your financial reports will tell you if you’re adequately diversified. A one-legged pony’s cash flow rises or falls each time the lone customer hiccups, whereas a suitably diversified offering brings financial stability to the business.

As you work to diversify your business, make sure you look after Uncle Joe. Assuming it was your Uncle Joe that helped you get into business, it’s important to keep him happy as you seek opportunities to branch out. Keep your original customer happy. The one thing less enviable than a pony with one leg is one with no legs.

 

Your Business. Your Plan. Your Way.