Trying to find buried treasure without directions is a pretty onerous task. There can be dragons out there, and bends in the road, if there is a road. The same goes for trying to navigate toward business success. The pitfalls
Trying to find buried treasure without directions is a pretty onerous task. There can be dragons out there, and bends in the road, if there is a road. The same goes for trying to navigate toward business success. The pitfalls are many, the environment is always changing, and barriers keep popping up. Hence the need for a device that points the way along the path and that realistically outlines and plans for obstacles that may be in the way. Treasure hunters call this a map; entrepreneurs call this a “business plan.”
Business plans are detailed descriptions business owners put together outlining how to get from startup to point A, B and onward. They are “safe” ways of trying out your business ideas to see if they make sense, safe in the sense that you can try and maybe fail and try again on paper instead of in the real world, which is a much less costly exercise in trial and error.
Many business owners have thought about their concept for such a long time, turning it over and over in their minds that they feel their idea is all fleshed out, that they of course know what they are doing and that all they need to do is to get going. Ever hear of being too close to the forest to see the trees? It’s amazing that when pen gets put to paper and you describe your intentions in concrete and logical terms, issues that were invisible before become visible. “Whoops, never thought about how I’d get the parts I need shipped here on time,” or “oh yeah, there’s not much profit if I do it that way,” or “gee, that’s way too much work for the staff I was thinking of.” All of these are unforeseen issues that will remain unforeseen until you scope them out in detail.
In addition to being a tool for you to focus your thoughts, a business plan is a document for lenders you may need to approach for financing. It gives them a feeling that you have thought through all the variables, that you do know what you are talking about, and that you have concocted a way to succeed and, not incidentally, to pay them back.
A business plan answers a number of questions:
Who are you, what is your product or service, what’s so good about it? What is your value proposition, i.e., why should someone buy from you and not from a competitor?
A business plan will look at your industry, both nationally and here on Hawaii Island. How big is it, is the industry growing or stable? What does your target customer look like? Is it a man or a woman, or does it matter? How much money do they make? What problem are they looking to solve with your product or service?
Who are your competitors and how do they run their businesses? How are you different?
How will you produce whatever it is you are offering? Are there any issues around raw materials, how many staff do you need to produce your particular widget or service?
How will you market your product? Just because you make the best widget in the world, nobody will buy it if they don’t know it’s there, so how will you get the word out to consumers about your widget?
What are your goals with this business? Is this something you are planning to grow to a point where you can sell it, or is this something you want to do indefinitely?
How much will it cost to develop your business, how much will you put in and how much do you need in financing? What will your business bring in month-to-month in cash flow, what is your break-even number, and if you get a loan how will you repay it?
From the sheer number of issues that need to be addressed you can see why there is a temptation to put this off and to just forge ahead. Don’t do it. Take the time to think through where you are going and to make a road map for success.
For those of you feeling competitive, take a look at the business plan competition sponsored by University of Hawaii at Hilo and open to any individual or group (for profit or nonprofit) whose business plan focuses on developing or expanding a business based on Hawaii Island. The grand prize is $25,000. (Hawaii Island Business Plan Competition, http://bbibp.org/ )
To help you get ready for this competition or the competition of business life attend our next seminar, “How to Write a Business Plan,” on Wednesday in Kailua-Kona. Go to www.hisbdc.org for more information and to register.
Boyd is director of the West Hawaii Small Business Development Center.
