Do I Need a Business Plan?

Business Plan

Whenever someone wants to start a business, they ask their friends and professionals what they should do. The standard answer is always, ‘You need a business plan’. Really, do you? If I do, what is it and how do I proceed?

To answer the question of whether you need a plan or not, first you need to understand what a business plan is.

 

Simply stated, it’s a written document defining the ‘who’, ‘what’, ‘where’, ‘when’, and ‘how’ of either starting a business or changing the dynamic of an existing business. Well, that was easy. Or is it that easy? Whether you purchase a template or develop the document from scratch, the plan answers the above:

Who – who are you, what is your background and why are YOU interested in doing this? In principle, the most important aspect of any plan is making the connection between your background and the business proposal. If you want to be a baker, then there should be some form of connecting the dots. You should have an education in the culinary arts or maybe have worked at a bakery for several years. But the key is there has to be some way of validating your credentials to the goal at hand. Without this connection then not only will you have personal difficulty with getting this going, but any outsider, and you will need many folks to help you, will have a lot of trouble believing and supporting you in this endeavor.

What – this is obvious, keep it simple and direct. I want to open a bakery. Now you can throw in some details and answer who is your customer, retail or commercial. Will you be a single line item or some specific area? Like only bread loaves for sandwiches to be sold in grocery stores or a line of pastries etc.
Where – identify the location and remember the basic economic principles involved here. If you are going retail, then obviously your outlet must be in a shopping center area serving what type of clientele. At this point you don’t need to get too deep into the details such as power requirements or access to fuel etc. But focus on the primary attribute, matching your function to the best suited facility to meet that function, i.e. the best location.


When – often times timing is everything. You can’t expect to do this overnight. In our instant satisfaction society, many believe you can do just about anything in a short period of time. This isn’t one of those half hour comedy shows. This is real. You need to be realistic in nature. Look at what needs to get done and draft a timeline going backwards. This will answer the question of how long this will take. Whatever you derive, add several months and you’ll have a more realistic date as to when you may begin operations.
How – this is the more complicated section of the plan. You have to deal with a multitude of issues:

1) Who is going to help me?
2) What type of tooling do I need, where do I buy the tools? How long will this take?
3) Staff: what kind of education or skills are required, about when do I hire them?
4) How do I do this and still maintain my economic status, i.e. how do I continue to earn money?
5)  HOW MUCH MONEY DO I NEED?
6)  WHERE DO I GET THIS MONEY?

Now you understand the basic elements of a business plan. So, do you need one?

Note that I left the money issue for last. This is why you need to address the other sections of the plan first. Without those answers, then the big question of money doesn’t need to be addressed.

So a plan can be drafted on a napkin if need be. Answer the very first question and if you can’t make that connection as described, then you don’t need a plan, because honestly you are not going to get anyone to truly help. This includes the financial element of your operation.

If you make it past the ‘who’ then lets pull out a tablet and document the ‘who’ and proceed to the ‘what’ section. Keep it simple and straight forward.

Jot all this down on a piece of paper or in a tablet. You now have the ‘who’ and ‘what’ of an eventual plan. Go onto the other sections and answer the basic components of each. Oftentimes, the documentation process will define the ability of getting this done. Time tables may not match, there may not be enough qualified staff to support you, or you may not have access to the quality or quantity of supplies.

Notice that we are brainstorming and not jumping into writing a plan. Brainstorming has two positive benefits: First it allows you to free think and create questions, many of which you will not be able to answer. Secondly, it answers the primary question of “Can I do this?”

Now we are down to the money question. This is the number one reason plans are drafted. In 999 out of 1,000 plans, it’s the same old request. I need money to make this happen. So before you answer the question of ‘Do I need a plan’, go out and talk to folks to see if your thoughts are realistic. Again, the jotted down notes are all you need at this stage. Talk with your parents, siblings, friends, colleagues, and even the guy at the bar that you don’t know. The more folks you talk to the more likely you’ll be asked questions that you can’t answer. Don’t overlook the people you don’t know, they are most honest because they have no relationship to you and their truthfulness will answer a lot of questions for you.

Write those questions down. This is the beginning of developing a real plan. The key here is ‘Does this get overwhelming?’ If it seems that way, then you don’t need a plan. But if you still have the desire and you have come this far then a formalized document may be your next step.

At the end of the day, any financial support is going to have to come from folks that will ask these questions and they will want good answers. Not, “I don’t know yet”.

Back to the question at hand, ‘Do I need a business plan?’ Well, right now you have a bunch of organized notes with a lot of questions that need answering first.

My next article articulates how to go about answering those questions then maybe drafting a plan. From there, we’ll look at sources of money.  Act on Knowledge.

Value Investing

Do you want to learn how to get returns like this?

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There are four key principles used with value investing. Each is required. They are:

  1. Risk Reduction – Buy only high quality stocks;
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Value Investment Club

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