Many people in the world today have an idea for a business. Often you’ve heard a friend or relative explain to you in vague terms about a product or service that they just recently thought of creating. However, more often than not, that person ends up never following through with the idea or they create the business only to watch it rapidly fail. So what sets apart the business winners from the business losers, and what can you do to make sure that you’re not the latter?
Simply put, a business plan is the first tool for any entrepreneur in the quest to build their corporate empire. The purpose for this little understood document is to:
A. give the reader an idea of the direction of your proposed venture;
B. showcase the writer’s professionalism and dedication to the project, and
C. discover any issues that may be a problem in creating your future business before plans are final.
When writing a business plan the person creating the document must realize that the plan isn’t just for prospective lenders and investors but also for themselves. If honestly and thoroughly written, the future entrepreneur should be able to use the plan as a benchmark in their efforts to gauge whether they are focused on the goal at hand or whether they have strayed away from their target.
Even after the business has been established, a good entrepreneur should read and update their business plan every so often in order to make sure that they continue to stay focus and that the direction of their venture is relevant to the current business environment.
As well, business plans could also be used for new employee orientation in order to give your fresh associates more insight into the hows and whys of the business’s operation and purpose. This is an excellent way to instill in your staff that they are not just paid workers hired to perform a task, but that they too have a stake in the company and that a full understanding of the company could open up opportunities for internal growth as your business expands.
It is amazing how many people, when they find out that your expertise is in business, attempt to “hawk” their crazy ideas that probably won’t work. However, with the rapid pace of change in today’s marketplace who’s to know what a crazy business idea is? What could seem like a dumb idea could be worth millions.
A formal business plan could help separate you from the “snake oil salesmen” and show investors and lending institutions that you’re idea is not only brilliant and well thought out, but that you have the dedication to make it work. Anyone with a half a business mind can see that if you are willing to focus the time and energy necessary to create an amazing and well thought out business plan that you are probably someone that they want to work with.
Almost all humans, at one point or another in their lives, have had an idea for a business that they felt would be successful. However, an overwhelming majority of these ideas never come to fruition. So why is this the case? is it because of a fear of failure, lack of start-up capital, loss of interest in the project, or just an all-around bad business idea? All are good reasons why a business never gets off the ground but the most important, if you are going into businees, is a bad idea.
Imagine that you want to start a typewriter manufacturing business. You want it to be a success and after reading this article you decide that a business plan is the right course of action. You start off by researching the typewriter business including any competing techonology (ie. the personal computer) that may exist. You factor in market price and demand for typewriters along with fixed and variable costs.
After completing your research you learn that typewriters are not only obsolete, but profit margins are slim. You decide to abandon the project and move onto your next big idea, the “wireless telegraph”. Because of the research you did prior to going into the project you avoided a potentially disastrous business model and saved your reputation as a cutting edge entrepreneur.
Now lets imagine that you chose not to write a business plan and proceeded with your idea as is. You leverage a large amount of debt from several lenders, and immediately begin renting facilities and gathering your required business licenses. Soon you hire staff and begin setting up your operations. You market your product and succeed at getting several large chain stores to carry your typewriters.
Finally, you produce your first typewriters and ship them out across the country. You have an almost monopoly over the industry and as everyone knows monopolies are great for business owners. It won’t be long before you’re “Bill Gates” rich, right?
Wrong!!! The typewriters hit the shelves where no one buys them and they spend months gathering dust before the chain stores finally decide to ship back your inventory and cancel any future orders. Your creditors begin to get mad and are soon beating on your door demanding either money or blood!!! Realizing that your dead broke and you need your blood you flee from the would-be mob through your bathroom window, and live the rest of your life on the lam. Now don’t you wish you had written a business plan?
So what’s the reason to avoid writing a business plan?
There is no reason that a business plan should ever be avoided. To go without one leaves potential entrepreneurs prey to preventable disasters that if they had done a plan would not have happened. There are too many things that could go wrong in a business not to plan for forseeable disasters and there is no excuse for that kind of personal negligence.
For more information on how to write a business plan or general help on small business issues go to the U.S. Small Business Administrations’s website at www.sba.gov.