WORKOUT !MIND / BODY WORKOUT !
SHALL WE CALL THIS
“BUSINESS PLAN THINKING ?”
Or should we think of the "DILIGENCE" one needs
before endeavoring to write a ...
BUSINESS PLAN (an operations plan) .... which will get the "money"
.......
and provide for business SUCCESS ?
The intent here is for YOU to do some deep … T H I N K I N G ! ...
Let’s apply what I’ve come to call = “Street Smarts” or boot-strap thinking.
You might unknowingly be setting yourself up to fail if you put together a “fancy”
BUSINESS PLAN for the bank or for investors, and if you do this before
you make one for yourself.
In effect, practice first ... "do it for and by yourself" so it'll represent YOU.
When you do prepare the plan, keep it simple.
Question: What do people think it takes to start a business ?
Most say it is ...... 
Money !
Are they right ? -- Maybe … that is to say, it is so to some extent, but read on ....
REALITY: You do need money.
Even if you "have the money" yourself to get started,
you will sooner or later,
have to go elsewhere for "more" funding.
Yes, money is needed to get a business up and running.
Money isn't the first thing you need, and you'd make a bad mistake
if you focus on raising it before you're ready to "spend it wisely”..
Unfortunately, that's a big mistake too many people are making.
Recently a client of mine, presented me with an elaborate, multi-page business plan
(and in color, too), printed on high-quality paper, with special photographs, tables,
graphs, pie charts, flow
charts, and a "collection of figures" ...
Oh yes, and it had all kinds of numbers. What can I say ?
These plans are “beautiful and really great-looking”.
B u t ...... Usually “problems” are embedded in them:
Because the
numbers don't make sense.
The realities of doing business say differently.
I’ve not found things to be this way in over
sixty years of
business experience.
It's questionable if a business operating in the "real world" can
produce them.
Permit me now to quote from something I saw that may give more credence
to the message I am trying to give you:
“…..the example of a particularly professional-looking plan I
received from
a husband and wife who were trying to raise $50,000 to start a cookie business.
According to the plan, they were going to use that money to take the
company's
annual sales from zero to $2.9 million in just two years.
It's very difficult to achieve such a rate of growth in any business.
Imagine doing it in something like the cookie business
with only $50,000 in outside capital !
You'd run out of cash long before you hit your sales target.
And yet the numbers were all right there in black and white,
and they added up perfectly,
which aroused my suspicions. I felt that the plan may have been written by the husband,
(with little business experience), using a sophisticated business-plan software package.
A closer look at the numbers revealed how he had come up with such an outlandish projection.
For one thing, he'd plugged in a ridiculously short collection period
for his accounts receivable,
about 20 days, while figuring he could get away with stretching his vendor payments to 60
days.
He'd also underestimated the amount of equipment he needed and assumed he'd be
able to
lease whatever he wanted on his own signature -- without putting up additional security.
None of those assumptions were plausible.
If you replaced them with more realistic ones, you'd find that the couple needed
at least another $200,000 in outside capital to have a
prayer of getting the
company's sales to $2.9 million in the second year.
I'm not suggesting that he was intentionally deceiving anybody.
Frankly, I doubt he even realized what he'd done.
Like most people with an idea and a burning desire to be in business for themselves,
he was thinking only about the amount of money he needed to drop
everything else and get started. “ ----- (End of quote)
Now, hopefully, you should begin to understand.
So how do you raise money?
With a business plan, right?
Every financier, bank, investor and / or venture capital outfit
wants to see yours.
You have no chance without one !
He purchased the software.
It had walked him step-by-step
through the plan-writing process.
Then he had tweaked the numbers until he came up with a plan that showed the
business achieving its goals after two years with just the amount of capital
he thought he could raise.
I’ve been in business for nearly 60 years, and I had
not seen a
plan like the “cookie” one,
--- and I have never put one together like it, either !
Please ... remember this:
What it contained was not a recipe for successful cookie making and business success.
It was a recipe for disaster.
Have you been “LISTENING AND THINKING”?
The very first Business Plan you write should not be for
someone ….
It has to be for yourself.
You don't want to use “special software” to put a good one together.
You should answer the following questions and do it honestly:
(1) What is the concept?
(2) How are you going to market it?
(3) What’s your estimated cost to produce and deliver what you are selling?
( 4) What will happen when you go out and start making
sales ?
The whole idea is to make it clear:
How do you think the business is going to work?
What are you going to sell
?
How much will you charge for your products and / or services?
Who, in your opinion, will be your customers?
How will you reach them?
How long it will take to close a sale, (and so on).
No sale = no profit !
Be very candid with yourself. Don't let your own economic circumstances …
(and we all have “circumstances”) …. cloud your thinking.
For now, do not concern yourself about earning a living or raising
start-up capital.
You can deal with those issues when the time comes.
What is important now is that you need to get your major assumptions
down on paper
and review, and review, and edit, and modify, until you “feel good” about them.
You may ask …. W H Y ? Well, it's BECAUSE ---
You must test your assumptions … and you need to do this ...
“before you go out to raise money, not afterward”.
You have to identify (and fix) as many mistakes as you can
while you still have
a
chance to correct them. Before they create problems for you.
Take my word for it … you will make mistakes.
It will not matter how smart or how careful you are.
There will be a lot of “flaws” in your first business plan.
My point is that you need to give yourself time to discover those mistakes.
Not that you'll catch all of them in advance, but you can reduce them to a minimum.
How ... you ask ?
By doing research. By finding out how long companies in the industry typically take
to
pay their suppliers, and how long it takes them to collect their own accounts receivable.
By trying to make a few sales.
By looking for cheap office space and furnishings.
By visiting a leasing company to see what terms you can get.
By doing everything you can think of to get as prepared as you can be.
Then, you may bring out the bells and whistles and start looking for money.
You will find in your business "life" that in the long run,
doing the research may be the best business investment
you've ever made.
If you’ve done your homework,
you'll be much more likely to raise the start-up capital you're looking for.
More important, you'll be able to make better decisions about how to spend it.
And you will improve the odds of making it last until you no longer need it -
and that’s when the business can support itself on its own cash flow.
Which, after all, is the whole idea.
Print PageGOOD LUCK ….. (you will need some of that too !)
amicos@aol.com
authored = Feb 1998)
(up-dated April '99 and again in November, 2001 for web-site presentation)
and again at October 1, 2002. Amazingly, not much
changed. You have here
the basics of what it will take and how to prepare and present your plan for
a business you wish to own and which will generate PROFITS.
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