Dear Uncle Frank,
Recently I made the decision to go into the prepared food business. Do you think drafting a business plan is a good idea and why?
John F.
Dear John,
Your question is an excellent one, which I’m asked frequently. Basically, everyone wants to know, why should I invest a lot of time and effort into a plan when I don’t see the need to apply for any loans in the near future? Well, there are many benefits to creating a business plan and they clearly outweigh the costs. Here are three of the top benefits.
One, if you need serious financing and you are still a fairly new business, the bank, and perhaps the SBA, are going to want to understand your view of how things are going to play out in the future, e.g., how they are going to get their loan money back. Two, prospective employees that you want to serve as key players on your team, especially if they are already working in responsible positions, are going to want to see how their opportunity with you will surpass what they currently have. The old, bird in the hand is worth two in the bush syndrome. Finally, and most importantly, a business plan really provides you the reason to think through your business idea thoroughly. I have guided countless people as they developed their plans and a resounding chorus has been “I didn’t even know what I did not know”. In other words, until they had to sketch out the pricing schedule and capture all the product costs and mark-ups; or secure insurance coverage that covered property and bodily injury; or decide whether to be a C-Corp, S-Corp, or LLC to protect their hard-earned assets, they hadn’t even considered the topics. And it becomes obvious to them, very quickly, why so many new businesses without plans fail.
So, should you do a plan? Yes, of course. It doesn’t need to be fancy, just complete. Trust me, once you complete the process of thoroughly thinking through your business, you will be glad you did. Remember, getting into the game is relatively easy, and staying in the game is the difficult part. So, get to work on your plan today.
Good luck!
Uncle Frank