Don't Write a Business Plan (but still plan)
Me - “Wait, how much is it?!’
Sarah - “It costs what it costs. You can’t put a price on memories.”.
Me - “Well, it sure sounds like Disney is putting a price on it. And it’s not a “Small World” price either.”
We had been to Disney World twice and now we were headed for the big time; a Disney Cruise.
A Disney Cruise is just what it sounds like, but even more expensive.
And they do it up right. No detail is too small and no show is too big. All of the Disney characters are on board and the staff are wearing Stepford wife perma-grins.
I liked the idea of a cruise, because there is no planning involved.
The itinerary is all taken care of and you just show up when and where they tell you.
But that’s not the case if you are Sarah Alexander.
She is the queen of planning.
Before we boarded the massive Disney Fantasy cruise ship, she had thought out every minute of every day, including what excursions we would take, what times and where we would eat, and unfortunately, what costumes we would wear each night. I was Grumpy the night we went as Snow White and Seven Dwarves.
She even had an Excel spreadsheet that was color coded and filled with formulas.
This was her happy place.
It later dawned on me that Sarah had done more planning for a cruise, which in theory needs no planning, than most of the startup wannapreneurs have for their new business.
By the way, do you think Disney became Disney without proper planning?
Yes, she probably overplanned, however, this really means many of you aren’t planning at all.
Thinking non-stop on an endless loop in your mind about quitting your job and being your own boss doesn’t count as planning. That’s daydreaming.
Create a realistic plan and don’t overthink it
You just need a goal to begin with and preferably a measurable goal, like revenue.
Once you have that, you reverse engineer (fancy term for working backwards from the goal) your plan to meet the goal.
Think of your plan like you are building a house.
You wouldn’t just rush off to Home Depot and buy a bunch of lumber and concrete and get started with no plan, would you?
Oh sure you could do that and get very “busy” with your build.
You could work non-stop. hustle, grind, blah, blah, blah, and feel very productive.
But after a few weeks you would probably just have a treehouse and be very discouraged.
In reality, you would find a home design and builder that made sense for you.
Then you would make sure you had the money in place to make it happen. Next would be land, utilities, milestones, and a timeline.
That just seems like common sense when it comes to building a home.
Yet I see people use the no-plan process all of the time.
I also have many clients over the years go to the other end of the spectrum as well.
Don’t wait on the perfect plan to start
“I can’t start until I have my business plan.”
The business plan has been the ultimate excuse in not starting a business for many people.
You don’t need 50 pages of charts and graphs.
You don’t need business planning software. By the way, bankers can spot those a mile away and they’re not fond of them.
You really don’t need to hire a writer to create the perfect business plan. It’s your freaking plan.
What does a plan look like?
If you Google business plan you will get about 3,880,000,000 results in just 0.65 seconds. Yes, I Googled that:).
It’s absolutely overwhelming.
Below is an outline I have used for well over a decade now.
To me, everything falls into the following categories:
Marketing
Management
Financial
Marketing - To me this is the most important section. If you’ve ever taken basic sales training the first thing you will learn is that nothing happens until something is sold.
Product and service offerings - Narrow down to 2-3
Target customers - Who would be your ideal customers?
Customer buying and selection criteria - Why do they buy and what is their pain point you are solving?
Competition - How are you different from the competition?
Marketing strategy - There are forty jillion (a real number I made up) ways to market your business. What are the top 2-3 ways you will get your very specific message to your very specific target market?
Management - Who will do what in your business?
Key activities - What needs to be done daily, weekly, and monthly? How long does it take, who will do it, and where does the activity fall in terms of priority.
Outside advisors - Your accountant, attorney, banker, candlestick maker, and insurance broker. Candlestick maker is optional.
Goals and measurement methods - Have 2-3 goals and how you will measure your progress toward them.
Financial - You got money?
Startup budget - How much money will this business cost to start and how much working capital will you need to survive while it grows?
Monthly cash flow projection - This is where most wannapreneurs quit. Why? It’s hard. But, it’s very eye opening for you too. How many sales do you think you will make each month (basing this off of the Marketing section) and how much will you spend each month to run the business; that’s it.
When you need a professional business plan
You only need a professional business plan when you are applying for a business loan with a bank.
Even then, professional is a relative term. They just want to see that you have thought this through and you have a realistic view of how your business will do. And a business plan by itself will not get a loan. It just opens the door for a chat and your personal financial situation is what secures a loan.
And when you write a business plan for a lender, you will want to include an Executive Summary, which is a 2-3 paragraph cover that pulls the highlights of your plan into a 1 page introduction. Consider it like your movie trailer that motivates the lender to read the rest of your business plan.
I know this sounds so cheesy, but it’s true.
Failing to plan is planning to fail. Ugh,
By the way, the cruise was a huge success!
Sarah’s plan was almost flawless and she has the forty jillion pictures to prove it.
The Importance of Establishing Yourself as an Expert in Your Business Niche
Beat the Odds of Business Failure with Charles Alexander
Hi, I'm the Profit Answer Man Rocky Lalvani!
I help small business owners simplify their financial reports so that they can make more informed business decisions with fewer hassles. We utilize the Profit First system created by Mike Michalowicz
Effortless Cashflow Course: http://bit.do/effortlesscashflowcourse
Schedule your free, no-obligation intro call: https://bookme.name/rockyl/lite/intro-appointment-15-minutes
More about making profitability simple: http://profitcomesfirst.com/
Questions: questions@profitanswerman.com
Email: rocky@profitcomesfirst.com
Bio: Charles Alexander’s mission in life is to help entrepreneurs get focused and beat the odds of business failure.
Charles is the Director of the Small Business Development Center at Volunteer State College, where he provides one-on-one business coaching and teaches seminars to help entrepreneurs grow their businesses.
Working with over 1,000 entrepreneurs has helped him become a polished storyteller that uses humor and real-world experiences to educate others.
In addition to coaching entrepreneurs, Charles also owns his own business, creating Explainer Videos for busy professionals.
Lastly, and most importantly, he is happily married to his wife Sarah and is the proud father of three lovely children, Ava, Lilly, and Lane.
Links:
http://bizstats.com/
https://www.yourcharlesalexander.com/
Profit Answer Man Facebook group: https://www.facebook.com/groups/profitanswerman/
My podcast about living a richer more meaningful life: http://richersoul.com/
First 2 chapters of Profit First: https://sendfox.com/rocky
This episode is part of the SMB Podcast Network. Find other great interviews from around the internet just like this one at
https://www.SMBPodcastNetwork.com
Music provided by Junan from Junan Podcast
Any financial advice is for educational purposes only and you should consult with an expert for your specific needs.
How to Fund Your Business
The first album I ever bought was Michael Jackson’s Thriller.
I was only seven years old and managed to save up a grand total of $6.
I never even looked at the price, because $6 was the most money in the world to me.
My older sister Barbara was kind enough to stand in line with me at K-Mart, and thank God she did, because the album was actually $7 and some change.
I was panicked as the clerk awkwardly looked down at me with my six crumpled dollar bills.
Luckily, Barbara had a couple of bucks on her and she took pity on me.
And, she claimed 20% ownership of that Thriller album.
Unfortunately, this is also how many folks try to fund their full-time business.
But they're not six years old with a smarter thirteen-year-old waiting in the wings.
After 14 years of coaching small business owners and start-ups, I have found these to be the most common ways to fund that full-time business you are dreaming of.
BEST WAYS
Personal savings/resources
This is the most common and smartest way that people fund their full-time business.
This takes longer and requires the most discipline, however, it is the most secure and successful.
Determine what your start-up costs and working capital needs are now and simply compare it to what you have access to.
Whatever you are short is the amount you have to save.
It’s not rocket science, but you wouldn’t believe the number of people that find that exercise difficult.
And yes, I count a home equity line as part of your savings but be careful because that is also one of your most precious assets.
Bank and/or Small Business Administration (SBA) loan
This one is simple to understand, but not easy to do.
A lending institution wants you to have capital, collateral, and cash flow to loan you money.
For example, if you want to start a landscaping business and your project you need $100,000 for equipment and working capital, the breakdown for qualifying looks like this:
Capital is around 20%-25% of the total cost. In this case you would need $25,000 of cash on your own.
Collateral that can cover the other $75,000. They may be willing to use some of the equipment you are purchasing, but most likely they want a fixed asset that appreciates, i.e. your home.
Then you need cash flow to pay for the new loan. And if this business is less than two years old, the bank won’t count the income from the business. This is one of the reasons I usually advise people to start their business on the side, before launching full-time.
Then there’s the matter of having good credit, showing how you will spend the money, a business plan, etc.
So if you don’t have the full $25,000, don’t have that much collateral, and you are short the monthly income to pay for a new loan, you may need to Plan B in this case. That might look like buying a zero turn mower on your own and start mowing yards during the evenings and weekends first.
An SBA loan is not that much different from a traditional bank loan. The same rules apply with capital, collateral, and cash flow, however, the SBA will potentially guarantee the repayment of up to 85% of the loan to the bank if you are unable to repay the loan.
This doesn’t make the loan necessarily that much easier to obtain, but it incentivizes banks to make those loans.
NOT THE BEST WAYS
Family/friends
This one is not my favorite.
Your family and friends have heard you go on and on about how you are ready to start your own business and some of them are eager to get in on the action.
I’m not saying this can’t work out, but it rarely does.
Those silent partners that want to see you succeed usually become passive aggressive advisors that want their money back sooner rather than later and with plenty of interest.
Assuming you do borrow money from family or friends, make sure you have a written agreement in place for the terms and interest rate.
When MeMaw said, “honey, you just pay it back whenever you can”, she really meant starting next month with a modest 5% interest rate. She just assumed you knew that though.
Credit cards
This one is a straight up no-no.
I don’t want to go all Dave Ramsey on you, but starting a full-time business has enough obstacles.
If you are in such a tight financial spot that you can’t save any cash and the bank says your income doesn’t support a loan, then you might need to take care of those issues first.
Adding a high interest loan (which is what a credit card is) won’t make your financial situation better, but it will definitely make it worse.
VIRTUALLY NON-EXISTENT WAYS
Investors
I blame Shark Tank for the emails I get asking about local investors.
And I do love Shark Tank, but investors like that (venture capitalists or angel investors) are usually looking for something in the tech, medical, or even music industries.
Also, they usually want to invest in someone that has experience in raising capital and this industry.
That leaves out a big majority of traditional businesses.
Investors for the rest of us will usually be someone you know that believes in your business idea.
If you go that route, I’d suggest working with an attorney to create a term sheet, which is a document outlining the business agreement, establishing how the investor will be paid back.
But keep in mind that you are taking on someone that will have ownership and will eventually want some say so in your business too.
Crowdfunding
It’s not fair for me to say crowdfunding is non-existent for small business funding, because the evidence proves otherwise on their platforms.
I just haven’t met anyone that has been successful with it.
Below are some options and there are several more:
Kickstarter
Indiegogo
Fundable
Grants
While there has been a boom of grants, advances, and forgivable loans over the past year geared toward helping people recover from the pandemic, I’ve yet in my 14 year career at the TSBDC to see a legitimate grant for someone starting a small business.
In reality, getting a small business grant to start or expand your business isn't very likely.
As for me, that Thriller album is long gone and I still owe Barbara a couple of bucks.
So, maybe that was like a funding business start-up :).
The Do's and Don'ts for Testing Your Business Idea
My favorite “quit your job” scene from the movies is in Jerry Maguire.
Jerry, a sports agent, has a crisis of conscience and decides that he needs to focus more on individual attention for his clients and less on the bottom line.
“Well, don't worry. Don't worry. I'm not gonna do what you all think I'm gonna do, which is just flip out!”
Jerry then packs his boxes, takes some goldfish, and talks one other employee into following him out.
Look, I get it.
We all have dreams of throwing off the shackles of a 9-5 job. By the way, where did the 9:00 in 9-5 come from? Is that Dolly Parton’s fault? Who has a job where you can walk in at 9am and leave at 5? If you have that job maybe you should keep it.
But don’t pull a Jerry Maguire and storm out of your job with no plan in place.
In fact, I swear people do this and cash in their 401k knowing they will crash and burn, because they are so desperate for a change.
If you have a burning business idea or even a side hustle that needs to grow, check out the Do’s and Don’ts of testing your business idea before launching full time.
Don’t ask friends or family
We all have that one person we know that loves to “tell it like it is”, like they’re a guest on Jerry Springer, but most of our family and friends will tell us what we want to hear.
Asking your Aunt Linda, who’s a payroll clerk near retirement, what she thinks of your idea for becoming a digital marketing consultant isn’t very helpful.
Yeah, she’s on Facebook a lot, but she’s not your target customer.
You might want to ask Aunt Linda to introduce you to the owner of the business though.
Do talk to potential customers (people you don’t know) and get honest feedback
This will be awkward because you will have to step way out of your comfort zone.
But guess what?
This whole thing will eventually be outside of your comfort zone, so this is a great way to tiptoe into it.
If you want to become a digital marketing consultant for service-based businesses, then talk to some affluent business owners you don’t know.
Remember, we’re not asking Aunt Linda directly, but she may be able to introduce us to some people, and so can your family and friends.
This will also work if it’s direct to the consumer.
If you want to start a residential cleaning business for affluent homeowners get some introductions and post on some Facebook groups.
You can even create a brief, 5 question survey and ask the tough questions you are scared to get answers for like pricing.
Don’t overthink it
Perfection is the enemy of progress.
Whatever you start out doing right now will almost certainly change by this time next year.
That’s normal.
Waiting to have the perfect website and getting everything trademarked is silly.
Nobody is going to steal your idea because they are too busy not implementing their own idea.
Do just start selling
Quit waiting on permission to start.
I get inquiries all of the time from people that are scared that someone in a black trench coat with a briefcase from the government will knock on their front door because they made an extra grand this month.
If it does happen you may be the first that I’ve heard of.
You are allowed to make up to $3,000 in a calendar year without any structure in place.
And I’m sure I can get in trouble for saying this, but even if you sneak up to $5k-$10k without all of your I’s dotted and T’s crossed, you will be just fine.
This means you can just start to test out your idea.
Give it away
Not to everyone and not for long, but at least a few people over the first few weeks, so you can test how well your idea works.
You can also charge just enough to cover the cost of the product or service, which also gives some skin in the game for the customer.
But most importantly, you can make the agreement that you will receive a fair testimonial after the transaction takes place.
This is a win-win all the way around.
As for Jerry Maguire, everything worked out in the end. Because it’s a movie.
And sure, you know a Jerry Maguire or two, but they are the exception and not the rule.
Give yourself a real chance and start testing your idea today!