novice business plans is an underestimation of the time, energy, experience and money necessary to build a winning business.
Each business plan has a price. Most people want successful businesses but are not willing to first invest the time. They want get rich quick schemes and often start businesses without basic skills. Most people do it “their way” instead of investing in the study of their proposed business and the building of a team of competent advisors.
Great business plans come from entrepreneurs willing to delay immediate gratification. They take risks and invest the time and energy necessary to gain relevant experience and education. They are not afraid of making mistakes or failing because mistakes and failure equal experience. They start small and build, recognizing experience leads to greater ability. After paying the price, true entrepreneurs gain the knowledge to build a winning plan and winning business.
Most business plans are written to attract funding to start a business or expand an existing business. Plans are also written to help existing businesses grow, but that aspect of “strategic planning” is different than the focus of this book, which is to provide a framework to convince an investor, and yourself, that your plan possesses the necessary ingredients to become one of the 5% of new businesses that succeed. Savvy investors and lenders know the odds and unless you educate yourself on the realities of winning plans, your plan will likely make its way to the bottom of the waste basket.
Business is a plan, not a product or procedure. Good plans expect the unexpected, but remain intact and in use throughout the trying early years. They just keep getting improved upon as you learn more. Your personal plan can be financial freedom – freedom from the day to day grind of working for money. But your business plan has to answer the following questions for investors and lenders:
1. Can I make money investing in this business (risk vs. reward)?
2. Do I like and understand the business I’m investing in?
3. Do I trust the people I am investing with?
It’s also important to note that winning in business has much more to do with entrepreneurial spirit than it does with age or gender. You’re never too old or too young to be a successful entrepreneur. In Rich Dad’s Guide to Investing, Robert Kiyosaki describes the personal traits of a successful entrepreneur:
1) Vision: Ability to find opportunities others cannot see
2) Courage: Ability to act despite tremendous doubt
3) Creativity: Ability to think outside the box
4) Ability to withstand criticism: There is not one successful person who has not been criticized
5) Ability to delay gratification: It can be very difficult to learn to deny short-term immediate self-gratification in favor of a greater long-term reward
So as you begin to write your plan, ask yourself if you truly have the tenacity to fail and start the challenge again. Nearly all successful entrepreneurs have had many failures. The beautiful thing about business is that you don’t have to be right 51% of the time, you only have to be right once.
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Rich Dad Tips
• As you begin the process of creating a new business surround yourself with successful and like-minded people
• Take the time to really think about what you want in this gift called “your life.” Many new businesses owners have a dream of freedom and end up creating a “job” for themselves.
• Don’t forget to plan your exit at the beginning. Too many people get caught up in starting a business and fail to think about preparing for its end goal.
• There is never a perfect time to start a business. If you want to live your dream, prepare yourself as well as you possibly can and then take action!
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“By failing to prepare, you are preparing to fail.”– Benjamin Franklin
Writing a winning business plan is necessary whether you need outside investors or not. The process of writing a winning plan forces you to invest significant time and energy into thinking about your business and doing your homework. Consider the case of new business owners, one without a plan and one with a plan…
Bud and Leif
Bud and Leif are competitive friends. Their friendship was based on a never ending quest to determine who could do athletic activities, brainteasers or whatever competition came to mind the fastest, the longest or by whatever winning standard they came up with.
Bud and Leif were both single and just about to finish college. The last three summers they had worked together for Max’s Lawns, a local lawn mowing service. They both liked the business and both unconsciously realized that due to their competitive streaks, they couldn’t co-own a lawn service together. This was certified when their girlfriends refused to double date due to their adolescent competitive behavior. In no uncertain terms both women agreed they’d be doomed if they ever went in business together. They both privately knew that their girlfriend’s intuition was spot on.
With college graduation approaching and no real prospects each decided to start their own lawn mowing/snow removal service.
Bud was first out of the starting gate. He had learned enough from Max’s Lawns to get started. You needed a truck, some equipment and plenty of flyers to announce your new introductory discount prices.
Leif was more cautious. He decided to stay on with Max’s for the summer to learn even more about the business. He bought and read books on how to start and operate a lawn care/snow removal business. He spent time analyzing the local market to see where the price points were. He learned that by discounting at the start of operations you may always be seen as a discount provider. He learned that the low end of the market place is not always the best place to be.
Leif went to business classes put on by the local SCORE* group and asked questions about incorporating and workmen’s compensation issues. He sought out the help of his uncle’s friend, who had run his own lawn mowing/snow removal service for nearly thirty years before retiring. He took in all the information he obtained and began to formalize it into a cohesive business plan. (*Service Corp of Retired Executives, a part of the Small Business Administration (www.score.org).
Leif and Bud got together for darts and beer in late July. Bud was crowing about how well his business was going. He had borrowed $20,000 from his father to get it started. He now had twenty new clients on his discount, introductory plan. He and a co-worker were busy. Leif asked him how much his workmen’s compensation costs were running him. Bud drew a blank. Leif explained the need for workmen’s compensation on your employees in case they get injured on the job. Bud said he would look into it. Bud, ever competitive, chided Leif on how long he would stay with Max. Leif replied until he was ready. As Bud left that night he felt the victor in this competition. For his part, Leif sensed the benefit of developing a plan and implementing it when he was ready.
Two months later Leif and Bud ran into each other. Leif asked Bud how
