Perfect Business Plans

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?

Them: $184,256.

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?
So, what do you think? Want help with a Perfect Business Plan?

5 thoughts on “Perfect Business Plans

  1. Don’t forget that your business plan should incorporate an idea that you are truly passionate about. Doing something you actually enjoy will bring you much more success than doing something just for money and food on the table.

  2. Rick,Yes to all you said, but for startups the big ugly gorilla in the room is competition. If you have something truly unique, great. Build on that in your sales and marketing. But how many startups are truly unique? Very few. Now your task is getting to market, generating revenues, and stopping the deficit bleeding before you run out of cash. Without a solid financial plan that includes building a robust sales and marketing team, you’re dead on arrival. I agree you have to put your customers first, but you also have to be aggressive about sales in the first 12 months – and then it’s time to accelerate past your competitions.

  3. Spot on, John, with a twist.

    Whether the “something” is truly unique is irrelevant because if an entrepreneur can’t differentiate himself in the eyes of the prospect, the prospect will put him in a commodity box. I also agree with your first 12 months comment, but caution the readers to recognize that a solid financial plan is not the same as a business plan. It simply answers the question, “Do I have enough cash?”

  4. A knot in your twist? Being unique ultimately comes down to knowing what the true value you bring to your ideal customer is. That is the secret sauce behind finding (and developing) the right matches.”Be who you are because those who matter don’t mind and those that mind don’t matter.”I was going that put on Dharmesh’s post, but I know that the point will not be lost here. Or maybe I will anyway, with another twist.I still believe every value- add business, like every customer, is unique in some way. Like a diamond in the rough.

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