Write Your Own Plan

Write Your Own Plan

September 26, 2004

Ever since I returned to academics, I have gotten frequent calls from people wanted someone to write their business plan. Not help writing it. They just want someone to write it for them.

Those who are looking for a bargain ask if our students would write a plan for a class project of some sort. There was a time several years ago, when we might be able to find a few students with an interest to do such a project. But not any more. Students today want to start their own ventures as soon as they can, and express no interest in doing free consulting for someone else.

 

A few of these callers explore my interest in consulting (which I do very little of any more no matter what the project–too much to do helping our students and alumni). When they ask how much I might charge, I give a really high figure that they'd be nuts to pay me. (No takers so far, but even I can be bought in this situation).

When I'm asked why I won't help or prefer that my students don't either, I offer my advice to all aspiring entrepreneurs about business plans:

1. Business plans should be the last thing you do, not the first. The common wisdom seems to go like this: "I've got a great idea, so I guess I better write a business plan". Wrong.

2. Figure out how much you need to make in income and look at all of the non-financial factors that are important in your life. That becomes the standard you use to evaluate each feasible business that you identify. If it can't meet your needs, go on to the next idea.

3. Research the market to make sure that there is really a market. Try to figure out what a customer might pay for what you want to sell. And look carefully at all of the competition to see if that market is already being nicely taken care of. And by the way, there is always competition, no matter what you try to tell me to the contrary. If the market potential is marginal, go on to your next idea.

4. Examine what it will cost to provide the service or make the product. Compare this cost to what you figured out you think you can charge in the previous step. If there is enough profit, keep going forward. Enough can be a difficult standard to nail down. But I like to see at least a 50% profit margin at this early stage. (Of you can't calculate profit margin, take an accounting class somewhere to learn how–you need to know the "language of business"). If there is not enough margin in your idea, give it up and go on to your next one.

5. Make sure you know what you're getting into. Lifestyle issues matter. Know the hours and the investment a business requires before jumping in. Make sure it is something that builds from your experiences in some way, and is something you can be passionate about. There will be some long days and weeks and even months, so do something that excites you and can carry you through these low points. If your hear can't be in this deal, go on to your next idea.

6. Now it is time to write your plan, but first you need to figure out why you need a plan. A plan you write for yourself is very different from a plan you write for an investor. Know the audience of the plan. You probably will need to write a couple of different versions for different uses: one for you, one for your investors, and one for creditors. If the plan starts to break down financially or in your ability to make it happen, give it up and go on to your next idea.

As you can see, a business plan starts with you and your needs. And equally important, it provides a process that helps you learn about the business. It is a process with many exit points that you need to pay attention to so you don't get in too far too fast.

You'll need to intimately know all the details and nuances that are discovered. And when it comes time to use the plan to raise funding, the banker, creditor or investor will expect you to know the plan inside and out. Only the person who writes it will have that knowledge. And it would not look good for you to drag me or some group of college students along to explain everything for you.
 
 

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