Angela had heard it so often that it sounded like a mantra: Write your business plan!
The business itself was not an issue. It was going to be a business featuring her handmade butterfly inspired caftans. Her creativity was inspired by the spectacular Monarch butterflies that settled in her home town every year. She had the colors and designs ready. Now she needed to open her business.
That was the first thing that stopped her. What kind of planning did she need to do before opening her business? What licenses did she need? What taxes would she have to pay? Who were her clients going to be? What kind of profit could she make? Where could she go to get information? She got dizzy thinking about it. She was an artist, not an entrepreneur!
SCRIBBLES AND NOTES
So she sat down to write her business plan. She figured costs and taxes and leases and employees and advertising, working through a series of worksheets, step by step. She busted a few pencils, but never got near a computer. She even went to her local banks and met with two different bankers. And when she finished, she had an amazing discovery: she didn’t even want a real store to start out. She wanted to start out on the internet. She figured that the international potential of millions of customers, plus the low overhead of an internet business, made it a better option than opening her own brick and mortar store.
So that is exactly what she did. That was nearly two years ago, and she has done very nicely.
THE FORMAL PLAN
But now she is writing a second plan for her business. Now she needs to expand and hire seamstresses, probably contract workers. And so many people have asked if they could come by her store that she now needs a store/workshop. She is really looking forward to the store as a way of working directly with some of her clients.
But now she needs financing, so she is writing a new plan for her business.
Rightfully, Angela knew that the plan that she created for herself just will not do for bankers. The one she wrote for herself was very analytical, with lots of options explored and lots of worksheets. Now that her direction is in place, and a successful track record backs her up, the business plan she is writing is of a very different sort. This one is a sales presentation for the banker. She is even putting lots of photos of her designs.
Angela instinctively knows what many entrepreneurs struggle with: The business plan that you do for yourself is NOT the business plan that you can use for funding.
APPLES AND ORANGES ARE BOTH ROUND, AREN’T THEY?
This sounds so very basic, but many entrepreneurs simply miss the mark. For example, in the business plan you do for yourself, you want to list out all the competitors that you might have, and compare your own business to theirs. Some of them, truthfully, might even be better than your company. But in a business plan for financing, the object is different. Here you acknowledge that there is competition, but the focus is on your business with your clientele base.
Or in your own business plan you may list that you have money in a credit card that you can pull if necessary. But bankers don’t want to hear about that: it is poor business to use your credit card to finance your business.
The two types of business plans are a different mind set, a totally different approach. One you pick right off the tree, and the other you wrap into a fresh hot tart.
WHY, O WHY, O WHY O?
So your first job is to answer the question: Why am I writing this business plan? Am I investigating a business, and looking for the best options? Or am I writing this for a banker/investor?
Once you’ve got the answer to that question, the rest falls into place.
… PUTTING ON THE RITZ
Once you have your scribbles and notes, getting everything together for the formal plan is much easier. You know where to look, what information is valid and what is not, and you probably have a track record behind you that you can flaunt a bit.
VARIATIONS ON A THEME
Sometimes entrepreneurs will look for microloans, or approach Aunt Lizzie for a loan, or do any number of other things that need a more refined business plan. That is great. Just target the business plan to the intended audience, and you will hit all the right notes.