Build it and they will come. Maybe. Many an entrepreneur learned the truth of this statement the hard way.
Thousands and perhaps millions of dollars were spent on their business idea and either nobody came or so many showed up that the project collapsed under the weight. The culprit typically was lack of planning.
If you think you have a good business idea, you probably do. So write it down. A business plan is the game strategy for your business. The document can reveal just how good that idea really is or just how weak. The act of writing triggers questions you often don’t think about otherwise. These are points of interest that no doubt will be asked by those who potentially would invest in or make a loan to your enterprise.
The early writing phase of your business is an opportunity to put yourself in the shoes of others – customers, lenders, investors, vendors who will extend credit, and all of whom will be asking the same set of questions: "why should I do business with you? What’s in it for me?"
Often, when entrepreneurs get excited about a business idea they become so preoccupied with it as a great idea they forget that others are in that picture of success or failure and need to catch the wave of enthusiasm you feel and see the same picture you see. The business plan can help you anticipate questions others may ask about your idea. It will also help you prepare the answers not only for potential investors but more importantly at this early stage of planning, for yourself.
You want to tell interested parties who you are as a company, your mission and your financial goals. You want to be clear about what business you are in and how you will make the cash will flow. You want to know the details of your market, your plan for reaching customers and your plan for paying vendors and employees and repaying loans. If your business depends on marketing and advertising, you will need to have detailed plans for those activities.
Many businesses fail not necessarily because they were bad ideas but rather the idea was badly executed. The Pet Rock craze of the 1970s might seem like a ridiculous business idea in the 21st century. But in the 1970s people went out and paid $3.95 and more for a little piece of rock and a story.
Gary Dahl, the creator of what became a financially successful craze for him, was an advertising executive who had a business plan to take a well-packaged gag to market. He did so and it succeeded beyond his expectations.
1) Be Honest With Yourself
An honest, solid business plan will do a lot to help with creating the business. In many instances the plan can be even more important than capital. Do the homework in figuring out how you will use the money. How and when you spend it determines how much you get to grow and ultimately keep.
You can get capital based on a good idea but if you blow it, you’ll still owe it. So develop a financial map.
2) Sweat the Details
Consider the many variables that will impact business, most importantly competition. Competition is good, but knowing the one element in your business that sets you apart from the others can be the difference between moderate success or great success.
Despite the importance of a business plan, many entrepreneurs – both new and those already in business – fail to prepare one. They believe that things will change before the plan is written or they don’t know enough about the future to project cash flow and other excuses. An athlete never steps on the field or into the ring without a game plan.
3) Know Where to Begin
The Small Business Administration (SBA) provides a guide to writing business plans in print and on CD Roms. The SBA recommends that before you begin writing your plan consider four critical questions:
- What service or product does your business provide and what needs does it fill?
- Who are the potential customers and why will they purchase it from you?
- How will you reach your potential customers?
Whether you have pockets deep enough to finance your own business or you are like most people and need a loan to get started, it is important to have a business plan.
© 2008, Young Money Media, LLC. All rights reserved.