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by J. Dorothy MacKenzie
November, '96
It's hard to imagine a more diverse economy than Fairfield's--from the big, multinational companies such as USA Global Link and Telegroup, to Stephen Whittle's finely crafted miniature etchings. Big and small, they both thrive and show the entrepreneurial spirit. And big and small, the successful enterprises often have something in common: a business plan. If you're in business for yourself, you may think that you're too small to have a formal business plan. But think again. Many small entrepreneurs do just that and find that it brings even greater success.
After doing his first business plan, Fairfield artist and entrepreneur Stephen Whittle highly recommends making one. He had his own business in England, but he didn't make a plan until he decided to come to live in the U.S. "I had to do a plan in order to get my visa," Stephen says, "And now, I continue to do small plans regularly. Setting goals is important."
Planning enables Stephen to do the thing he loves doing--creating beautiful things--and also to make a living selling graphics and etchings to an international market. "People tell me how much they enjoy my art and how much it adds to the beauty of their homes," Stephen says. "I enjoy making beautiful things and I enjoy the challenge of business side, too."
But perhaps you don't have a business yet and would like to start one; or maybe you'd like to be your own boss and make a living selling something you do well. Maybe you have a talent for gardening, for example, or writing, housecleaning, or accounting; or you might be a doctor or a lawyer who wants to start your own practice. Whatever you want to do, it's a good idea to do a business plan. As businessman Marshall Gavre points out, "Not having a good business plan is like attempting to sail from New York to London without a map or radio."
The business plan helps you to see if there is a market for your product or service. Stephen's success is an example of how a plan can help to do this. "I plan what I can create that will sell," he says, "and I also plan what to create that I know won't sell, just because I like to create beautiful things." This is a reason to make a business plan: a good one should show if there is demand for what you want to sell, and it should show you how to go about financing and marketing it.
Here's an example of how effective a good business plan can be. After Fred Smith returned home from Vietnam where he had served as a pilot, he enrolled in the undergraduate business program at Yale University. He was taking a course on entrepreneurship and the class project was to write a business plan. Fred had a great idea--how to start an overnight courier service. Fred's professor, however, wasn't so enthusiastic about the idea. "The concept is interesting and well-formed," he commented, "but in order to earn better than a C, the idea must be feasible." But Fred had grown very enthusiastic about his plan, so he dropped out to put it into action. His company? The wildly successful Federal Express.
Another reason for doing a business plan is constant uncertainty in the field of business. For example, you may be doing well in your business, but what if you are suddenly faced with some new invention that makes your product or service obsolete? One dramatic instance of this was the effect that the computer had on the typewriter industry. Or what if a change in government policy affects your business, such as the policy that reorganized the airline industry and put small airline companies out of business? Or what about a shift in the marketplace whereby your product can be produced more cheaply elsewhere? A business plan can help you prepare for such sudden changes.
Because of constant changes in the business world, some organizations even require business plans from the distributors who sell their products--they want to see how they plan to deal with unexpected change. For example, the companies from which Kambiz Naficy bought his computer products required that he do a regular business plan. They were particularly interested in seeing how Kambiz planned to deal with competition, which is fierce in the computer industry. "I used to grumble about having to do a plan," he says, "but once I had it done, I could see the value of it." Kambiz owned a company in the eastern U.S. that resold computer hardware, software, and consulting services.
What a business plan does is help you see how you're doing now and look ahead to see what might happen over a five-year period. It's a way of getting the big picture of how you and your resources stand up against the rest of the world. It helps you analyze the marketplace so that you can make an educated guess at how to deal with competition and change. It should give you some insights on where you should be going--or not going. As Marshall points out, "In an increasingly volatile world, a powerful business concept, a creative management team, and a well-thought-out business plan are critical for a venture's success."
Of course, many successful small businesses don't have a written business plan. However, if they want to expand their business, they will eventually need to make a business plan to show to investors--especially if they want to borrow a few hundred thousand dollars or so.
Some people don't do enough planning, as any course on entrepreneurship will tell you. Such courses give accounts of creative people who try to market great ideas, but creative ideas are not enough-- they don't ensure that the ideas will sell products or services. You have to have some plan on how to get your ideas into action--for example, how you are going to manufacture your product, who your customers might be, how you're going to market your product or service, and how you are going to finance it.
A business plan means organizing your ideas and reviewing your resources, future resources, and goals, etc. There are many opportunities out there--it's just a matter of finding them and making a strategic plan of attack. What you can do is to see if you have a product or service people might need, then make a business plan to see how you can fulfill that need; then you let people know how they can benefit from buying your product or service. You may have the greatest ideas in the world, but if no one wants to buy your product or service, or if you don't plan how to successfully market it, you're not in business.
You can find a business plan outline in any entrepreneurship textbook. Look for a style suited to your needs. The first part of your business plan usually is a brief statement of purpose, or mission statement on what you want to accomplish. For example, Linda Heaton makes beautiful patchwork quilts. "Quilt-making is a tradition that is dying out," she says, "because people buy the cheap ones sold at discount stores which don't last for long; they fall to pieces quickly." Suppose that someone wants to start a business selling quilts; her mission statement might begin: "My purpose is to make a profit by selling high-quality quilts and to enliven the art of quilt making."
Although profit is supposed to be the main purpose for a business, it really comes second to doing business transactions that are ethical and legal. It's a good idea to check to see if the business is evolutionary for yourself and everyone else.
Next, you might give a brief description of your proposed business--how it would be structured, who would be working for it, and so forth.
The next step might be a description of the product, such as the need the product would fulfill, who will make it, and any legal considerations concerning it.
Then you might want to do an analysis of the market, which would include who and where your customers are, what income bracket they belong to and how old they are, how big the market is, and who your competitors are. This section is very important--give it close attention, because if there aren't customers, you won't sell your product or service.
Also, it's very advisable to include a section on competition--it can be a skirmish in the field of business, and as wild as a football game. Brenda Narducci, who is one of the partners of Chappell Studio, has a very practical view of competition: she claims that it makes them look for ways to improve their product and service and that the business actually benefits from having competitors. However, she says, "We don't try to compete with others. Rather, we put our attention on improving our performance and on analyzing the market so that we keep up with present trends and needs of the time." Chappell Studio probably is the biggest marathon and graduation photography company in the world, she claims--and they plan to expand internationally.
Sales and marketing is another very valuable section to include because you'll need a marketing strategy. This could cover how to price your product or service, how you are going to advertise, and how you are going to distribute and, if applicable, service the product. You'll want a section on operations which covers how and where you might manufacture or supply your product or service, and how you are going to distribute to the customer.
Finally, you need to have a financial section, which includes such things as an income statement, balance sheet, cash flow forecast, and break-even analysis. Although you might decide to use the services of an accountant, it is better to gain a working knowledge of accounting and consider computerizing your business--check out a suitable accounting software program. Kambiz found that some businesspeople who had previously "kept their business in their head" before getting accounting software "found" money they didn't know they had. One man had completely forgotten he had a sum of money totaling $35,000!
And if you are thinking big, a business plan serves as a statement of intent and direction for interested third parties--like investors, lenders, potential management, and strategic partners. Says Marshall, "A good business plan should serve as a reality check, a living guide to the business."
J. Dorothy McKenzie is a graduate of the M.B.A. program at Maharishi University of Management.
