Dharmesh Shah is a pretty sharp guy. Of course, my opinion doesn’t really matter, because a lot of people, way smarter than me pay attention when he speaks. I just read his most recent post in which he suggests that “sometimes business plans are dangerous”. You can read his post here.
A couple of days ago, I wrote “Thoughts on Mom & Pop Shops
“. Now, I’d suggest that Dharmesh and I write for different audiences, but sometimes the reader doesn’t know that they’re in the wrong audience. Let me make three points.
Last night was the drawing for the $640 million Mega Millions jackpot. I believe that I heard that 1.5 billion tickets were sold. That’s a lot of dreamers. That brings me to my first point. People dream. Furthermore, when people intentionally dream, they avoid bad dreams. They use rose-colored glasses and focus on good and happy and successful.
I talked to a founder earlier this week. There are other factors, but I’ll focus on one exchange.
Me: So, big picture, what would make 2012 good?
Them: 10 new locations.
Me: What would that mean?
Me: What’s that?
Them: My net profit.
Me: How much revenue would the 10 offices generate?
Them: I don’t know. That’s their problem.
In case you haven’t figured it out, this founder wants to sell franchises. Now, if they don’t know how much a franchisee is going to sell, how will they convince the franchisee that it’s a good investment? This founder probably has a spreadsheet that shows how much they net with 3 franchisees, 12 franchisees, 50, etc., but no plan to get the first one, or the second one, let alone the 10th one. So, my second suggestion is don’t focus on making you rich. Focus on making your customers happy and don’t be ‘to the penny’ specific. Stuff happens. Revenues and margins get nibbled at and unexpected expenses appear. So, round the good numbers down and the bad numbers up.
Finally, it’s not unusual for entrepreneurs to be money and success driven. They want to be millionaires and eventually wind up on the list with Rockefeller, Getty, Gates, Buffet, etc. If you’ve already got millions of dollars backing you, go for it, but if you don’t, maybe you should make a plan that will allow you to feed your family this year and provide a nest egg to fund growth next year? How much do you need to pay your personal bills this year? Don’t forget your fun money because you’ll be working long hours and will need to ‘chill’ regularly. How much will your fixed and variable expenses be? Do you need a discretionary fund? How much will you need to scale next year? Add it all up. How many customers do you need this year? How many good prospects? How many interested parties? How much attention do you need to attract? Who can help? Who will hold you accountable?