One of my former SCORE colleagues, Tuck Aikin, wrote the following article about the value of the journey of discovery when writing a business plan several decades ago. Some of the data contained in the original article have become stale with time, but the message remains as true today as it was when Tuck penned them. To ensure the message continues to resonate with readers today, I took the liberty to update some of his original data but kept the intended message intact.
Some sage once observed, “If you don’t know where you’re going, any road will take you there.” The problem is, of course, with such an approach, you might wind up somewhere you don’t want to be like, for instance, broke, humiliated, embarrassed, ashamed, disillusioned, demoralized, or angry.
Tragically that’s exactly what happens to approximately more than 1.3 million startup businesses in the first year alone, according to the SBA. Think of it – that’s over 3,500 business deaths a day, including Saturday and Sunday. We’re told too that 50% of new businesses fold in the first five years. With such dismal odds, then, why do hundreds of thousands of Americans nonetheless each year toss their assets, their hopes, and dreams, their sacred honor into the marketplace sea, hoping for a catch big enough to feed their families, nurture their souls, and maybe even provide for a comfortable standard of living for the next generation? Most likely, it’s because they “…know not what they do…”.
We Americans idealize the notion of owning our own business. We associate untold riches, leisure, status, independence, and freedom with business ownership. After all, don’t we all know some business owner who, at least from our outside perspective, “has it all” as a consequence? And then, of course, we compare ourselves to such individuals and reason, “Heck, I’m at least as good as he (she) is. If he can do it, this should be a no-brainer for me!”
We seem to view the ability needed to create and operate a business the same way we view skilled artists. We think it’s easy for artists because they’re talented. But is it really that simple? Over the years, several artist friends have taught me that, like everything else in life, art is just plain hard work. It takes constant practice, mind-numbing repetition, acceptance of constant failure, and a thirst for the knowledge that comes from failure to develop an artistic ability to produce something good, perhaps even good enough for the artist to make a living. Art is much more complicated than we non-practitioners can appreciate. So is business. And that’s the reason the essential advice always given to aspiring entrepreneurs is to first write a business plan.
Yes, we’re told that bankers and prospective investors require a startup business plan, so that’s reason enough for us to create one, but there are at least two much more important reasons. If we don’t want to wind up in no man’s land, we’d better have a map. Even a flawed map is better than none because it at least defines our destination. If we have a fairly good idea of where we want to end up, we can always alter our course along the way. But there’s another, probably more important, reason to create a business plan.
Entrepreneurs will tell you that their initial business plan virtually never works out in practice. Almost always, some critical element proves to be way off base, most likely an over projection of revenues. If that’s true, then other than providing a compass heading, what’s the point of creating a business plan? Here’s the reason: a business plan can be evidence that you’ve put in the practice, that you’ve endured the constant repetition of business plan revision – revision required because the components don’t mesh well enough to produce a realistic and compelling big picture.
A well-prepared business plan, usually 25 to 35 pages in length, including detailed financial projections, gives some assurance to lenders, investors, and yourself (!) that you’ve paid your dues, done the work to develop what talent you may have, and disciplined yourself to submit your likely idealistic business ambition to the harsh realities of the marketplace. An exhaustively prepared business plan is exhausting work, providing further evidence that you may possess two prime “talents” essential to maximizing your chances for entrepreneurial success: self-discipline and determination. It’s a jungle out there, and it’s not for the faint of heart!
What about using one of the several excellent computer business plan preparation programs? It’s true that they create an attractive and impressive-looking end product, but they make it too easy. Just answer the questions, plug in the numbers, and voilà, out comes the business plan.
A recent would-be entrepreneur we counseled was using such a program, and when we asked to see his previously promised financial projections, he just handed us a printout. When we asked him for the basis of his projections, for a description of his assumptions, it was clear he was mystified about the final financial “product.” He had no idea of whether or not it was realistic. That’s an invitation to disaster.
Before using such an electronic aid then, be sure to do the hard work yourself. Be involved, use pencil and paper, know every element of your business plan in detail, and conduct the research yourself. Don’t neglect the most important part of developing a business plan, the process of doing it. That’s probably the only way you will find out for yourself whether or not you might have the talent.
Tuck Aikin was a former SCORE colleague of mine for many years until his retirement. Tuck is a prolific writer and wrote small business-themed articles for the Colorado Springs Gazette for many years. As a co-mentor, Tuck was my inspiration for me starting this blog. The preceding post is reproduced with permission from the author.
