Telling entrepreneurs that a formal, written Business Plan is €fluff or hype€ is like telling your teenage daughter that she doesn't need to do her homework or your 5 year old son he doesn't need to eat his vegetables. It's pandering, plain and simple. Makes for a great headline to sell a new book, but its awful advice for someone seriously considering starting a new business.
I haven't read Mr. Ryan Blair's new book yet, €Nothing to Lose, Everything to Gain€. His life's story about going from gang member to prison to entrepreneur of the year sounds interesting. However, I have recently stopped reading other business books while writing and now editing my own book, €New Business Landmines: Avoiding Heartburn, Insomnia and Lawsuits€.
I am however still reading articles and in an article yesterday, Mr. Blair discusses his disdain for Business Plans and notes that €When you've really got the entrepreneurial bug, the last thing you want to do is to write a business plan.' EXACTLY! It is the last thing that any new business owner/manager wants to do, I agree wholeheartedly. Start-up owners are up to their €ass in alligators€ with a million and one things to take care of, so of course they don't want to take the time to sit down and actually put their ideas on paper in a logical and methodical way. Unfortunately, this is what they need to be doing!
Maybe for those lucky enough to have multi-million dollar internet skills and to be able to create the next social networking site, web-based advertising or other internet based business, like Mr. Blair, a business plan isn't really necessary. Maybe in that world his advice is sound. I don't know; I don't get to play there!
However, for the rest of us who work to scrape together $20,000 or more from family and friends to open a hair salon, brew-pub, clothing store, tax accounting service, roofing business, car wash, landscaping business, gift shop, assembly plant or whatever, a formal, written business plan is a critical and necessary step. Why?
€ A new winery gets shut down because they didn't apply for or obtain a liquor license.
€ A bowling alley loses money because it floods and the owner didn't purchase property and casualty insurance.
€ A new restaurant business blows all of its investment capital on just the space renovation, leaving no money for the start-up.
€ A restaurant closes because payroll costs are too high relative to sales.
All of the above are true stories of business failures. Take note that none of the failures has anything to do with the core business. There was nothing wrong in any of these cases with the product or service being offered, and sales were generally on track. No, these businesses all failed because of poor planning. In my opinion, stupid and avoidable mistakes tripped up these entrepreneurs. These are the types of mistakes that would have been caught in preparing a meaningful Business Plan.
Preparing a Business Plan helps entrepreneurs take a breather and forces them to critically evaluate their business idea. Sometimes people think of issues and problems when putting their plans on paper that can be missed in the whirlwind of launching a new business.
Using a checklist and really addressing all of the issues associated with the start-up can also lead to catching silly things, like making sure that the proper business licenses are secured and insurance is in place. I call these €side issues€ €" things that are not part of what is central to starting the new business, and therefore, things that are often overlooked by entrepreneurs.
I do agree with Mr. Blair that the basic business concept or €plan should be simple, something you could scribble on a scratch pad.' In my book I suggest that every formal Business Plan have an €Executive Summary€, which should be on one or two pages and should provide the entrepreneur's vision for his or her new business venture. Mr. Blair seems to imply that this is all that is needed; this is of course where we differ.
I haven't read Mr. Ryan Blair's new book yet, €Nothing to Lose, Everything to Gain€. His life's story about going from gang member to prison to entrepreneur of the year sounds interesting. However, I have recently stopped reading other business books while writing and now editing my own book, €New Business Landmines: Avoiding Heartburn, Insomnia and Lawsuits€.
I am however still reading articles and in an article yesterday, Mr. Blair discusses his disdain for Business Plans and notes that €When you've really got the entrepreneurial bug, the last thing you want to do is to write a business plan.' EXACTLY! It is the last thing that any new business owner/manager wants to do, I agree wholeheartedly. Start-up owners are up to their €ass in alligators€ with a million and one things to take care of, so of course they don't want to take the time to sit down and actually put their ideas on paper in a logical and methodical way. Unfortunately, this is what they need to be doing!
Maybe for those lucky enough to have multi-million dollar internet skills and to be able to create the next social networking site, web-based advertising or other internet based business, like Mr. Blair, a business plan isn't really necessary. Maybe in that world his advice is sound. I don't know; I don't get to play there!
However, for the rest of us who work to scrape together $20,000 or more from family and friends to open a hair salon, brew-pub, clothing store, tax accounting service, roofing business, car wash, landscaping business, gift shop, assembly plant or whatever, a formal, written business plan is a critical and necessary step. Why?
€ A new winery gets shut down because they didn't apply for or obtain a liquor license.
€ A bowling alley loses money because it floods and the owner didn't purchase property and casualty insurance.
€ A new restaurant business blows all of its investment capital on just the space renovation, leaving no money for the start-up.
€ A restaurant closes because payroll costs are too high relative to sales.
All of the above are true stories of business failures. Take note that none of the failures has anything to do with the core business. There was nothing wrong in any of these cases with the product or service being offered, and sales were generally on track. No, these businesses all failed because of poor planning. In my opinion, stupid and avoidable mistakes tripped up these entrepreneurs. These are the types of mistakes that would have been caught in preparing a meaningful Business Plan.
Preparing a Business Plan helps entrepreneurs take a breather and forces them to critically evaluate their business idea. Sometimes people think of issues and problems when putting their plans on paper that can be missed in the whirlwind of launching a new business.
Using a checklist and really addressing all of the issues associated with the start-up can also lead to catching silly things, like making sure that the proper business licenses are secured and insurance is in place. I call these €side issues€ €" things that are not part of what is central to starting the new business, and therefore, things that are often overlooked by entrepreneurs.
I do agree with Mr. Blair that the basic business concept or €plan should be simple, something you could scribble on a scratch pad.' In my book I suggest that every formal Business Plan have an €Executive Summary€, which should be on one or two pages and should provide the entrepreneur's vision for his or her new business venture. Mr. Blair seems to imply that this is all that is needed; this is of course where we differ.
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