Starting a business without a plan is like trying to repair a flat tire with your teeth. It may be possible, but you sure make it hard on yourself.
Make your business start-up easier by formulating a plan. While some people will tell you a business plan is necessary only if you need cash for your launch, most small-business experts believe every entrepreneur can benefit from writing and using a plan. A plan requires you to evaluate every aspect of your business. In writing it, you'll refine your goals, identify potential risks, organize your thinking, and set priorities.
Business plans are flexible documents. The best of them offer information in a form that is easy for readers to grasp. Business plans should not be so long and cumbersome that they will turn readers off, according to Ron Christy, associate director at the Center for Entrepreneurship at Wichita State University.
"As a consultant, I've done between 300 and 400 business plans," Christy says. "When I first started, they weighed maybe four, five, ten pounds each. I was so proud of myself. But no one could get through them."
Christy suggests that the body of the plan run 20 to 30 pages, including summary financial statements. Additional material--such as extensive financial projections, resumes, and market research documentation--belongs in the appendix. "It should take less than an hour to read your plan," he adds, "and in that time, readers should be able to understand the entire concept--where you're going, and how you're going to get there."
The idea of preparing a business plan can be overwhelming, and while it is possible to hire help, be cautious. Like a student who has someone else do their homework, you may get an "A" on your paper; but if the teacher asks you a question about "your" work, you're in trouble. "Too many people who outsource their business plans don't really understand the plan. The businessperson needs to be able to explain every aspect of the plan and answer sometimes complex questions posed by bankers and investors. If they've not put it together themselves, that can be difficult," says Cheryl Faria, assistant director of the Rhode Island Small Business Development Center (SBDC) in Smithfield.
On the other hand, if you've got the knowledge and understanding, but not the time, help is available. Look in the Yellow Pages under "Business Consultants," contact your local SBDC, or try the Small Business Advancement National Center (501-450-5300), a clearinghouse for colleges that offer help with all kinds of business issues. Through the Center, you might find a college where an MBA class would be assigned to create your business plan.
Business plans require research and thought. If you've never written a business plan, start by finding some samples to study. You can call your local Small Business Administration (SBA), SBDC, chamber of commerce, college business school, or local library and ask if there are plans available for review.
Aside from studying plans, you can get help from the groups named above or from your banker. Don't forget to check out the business sections of online services like CompuServe and America Online, in addition to books and software programs. (See the resource box below.)
Steve Sibulsky, whose Coeur d'Alene, Idaho company, Steve Sibulsky Productions, produces message-on-hold phone announcements, used Business Plan Master, a shareware program that offered suggested text and spreadsheets. ("Shareware" is free software you can obtain on a trial basis from online services, user groups and computer bulletin boards. To continue using the programs after a trial period, you must pay a fee; however, this works on the "honor system.") Sibulsky modified the templates to create a business plan that won him a $15,000 loan.
Sibulsky had difficulty with two aspects of his plan. "I found the financial forecasting hard," he says, "but spreadsheets were invaluable. I could plug in different numbers and see the results instantly. Also, I'm a conservative person, so it was hard to talk about myself in the glowing terms a business plan requires."
Once you've studied a few plans and done some reading, you'll probably have to spend time researching and gathering information. You might need to conduct some market research or scrutinize industry financial data.