I say this because I’m a successful businessperson and I’ve never written a business plan. (I have put one off. I’ll get to it someday, when business slows down.) I also know plenty of other successful businesspeople who never wrote a business plan either. So these business consultants can go back to doing what they do best (nothing), and leave the real-world advice to people actually doing real work.
Your Plan for Business
Starting and running a business is not something that should be taken lightly. So since I’m telling you to skip the business plan, it’s only fair that I help you assess the viability of your business/idea by asking a few questions.
You should be able to answer all of these questions in detail. I’ll explain why each is important.
1. What type of product/service will you provide? Explain in 15 words or less.
If you cannot explain your overall concept or type of business in 15 words or less, it’s likely too complicated for your customers, and you probably don’t have the proper focus. I can say I run a “professional business writing service.” If your answer is, “well, we’re going to make custom embroidered leather dog collars and also open up an art and crafts school for kids and moms every other Saturday and maybe even do some daycare on the side,” you should probably tighten your focus a bit.
2. Exactly who is your market?
You need to know exactly where your customers will be coming from. This sounds basic, but people start businesses all the time without knowing who their clients will be or where they will come from.
3. How will people find out about your business? Be specific.
Do you have any kind of plan to get the word out? You should.
4. Is there a market for your business? Explain how you arrived at your answer.
This is a hard question for many people to answer objectively. One way to see if there is a market is to check on the competition. Competition means there definitely is a market (and that’s good). No competition may not necessarily mean there is no market, but if nobody else in your area is doing what you want to do, there may be a reason for that. For example, opening a skateboard repair service in a senior citizen retirement community might be a bad idea.
5. What will set you apart from your competition?
If you mention “price” in this answer, you may be in for a rough ride. If you say “better service,” is that really true? What makes your service better? You can’t say vague things like, “I’ll do anything to make a customer happy.” You should be able to answer precisely what will make your service better, and understand why your competition doesn’t provide the same level of service.
In all honesty, sometimes it is acceptable to answer that nothing will set you apart. For example, I know just about every town could use another good plumber.
6. What will your overhead costs be? Include everything from materials and the phone bill, to gas for driving to sales calls and electricity for lights.
Please don’t say you’ll have no overhead and can thus pass the savings on to your customers. This is code for “I’ll work long and hard for little pay.” Every business, even my little home office, has significant expenses and overhead. Think long and hard and write down every cost you can think of.
7. How many hours per week are you willing to work? Can your business realistically be run while keeping these hours?
Be realistic about how much you are willing to work. I know at this point in my life (I’m 42), I am generally not willing to work more than 40 hours a week. This doesn’t mean that I won’t pull the occasional long week (I do), and I work plenty of 10- to 12-hour days, but if my business is going to require that I work more than 50 hours a week on a consistent basis, I will close up shop and go get a regular job. I’m lucky, too — many small businesses require a lot more hours. Are you ready for that? Do not start your business thinking you’ll work a 60-hour week to get by unless you really want to work a 60-hour week (and plenty of people do). I’m just telling you to be true to yourself here. Working more than you want to will get tiresome really fast.
8. What are your income expectations/ needs, and can your business meet them, based on your answers to the preceding seven questions?
Owning your own business is a great way to get paid what you are really worth. So, how much is your work worth? And can your income expectations/needs be satisfied by the demand for your business and the hours you are willing to work? You’d be surprised how many people think $30 an hour is a lot until they realize that works out to $1,200 for a 40-hour week. So at that rate, you can’t make $75k a year unless you work well over 40 hours a week. (And that’s assuming you get paid for all the hours you work, which you don’t when you run a business.)
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There are plenty of other things to think about, but these eight basic questions will give you a good, clear idea if your home-based business will be viable.
6
Psst — Your “Big Idea” Is Completely Worthless
When I talk to people about business, sooner or later someone will mention that they have a great business idea that they are working on. Usually they won’t say exactly what it is, for fear of someone stealing it. However, they are confident that the idea will fly — big time. They talk about patents, protecting their idea from imitators, and perhaps even selling their idea to a company.
Yes, they have it all worked out. Fame, fortune, and extreme wealth would be right around the corner, except for one tiny detail: Nobody buys ideas.
Customers don’t buy ideas, and businesses don’t buy ideas. It’s because ideas, in and of themselves, are completely worthless. It’s the end result of the idea that is worth something — either an actual new product, or a working business model.
Let me go over a few truths about ideas.
Somebody Else Has Likely Already Thought of Your Idea
I remember a friend of mine who had an idea for a child safety product. He was guarded about the details of this idea, but talked about it constantly in general terms. I finally pried out of him what it was, and I suggested we take a trip to the hardware store. Bam, there was his “big idea,” right on the shelf, for $4.99.
My point is, no matter what it is you’ve thought of, the chances that someone else thought of the very same thing are extremely good. So before you head to the patent office, make sure your big idea isn’t currently being manufactured by nine-year-olds in China.
Nobody Buys Ideas
I don’t know of any company that buys ideas from people. So this whole dream of you selling this wonderful idea is just that — a dream. Ideas are a dime a dozen — everyone has a clever business idea in them.
What can possibly be sold is the actual fruition of an idea. Or the execution of it. In other words, if you have an idea for a product, well, you’re going to have to make the product. Or, at the very least, come up with the exact technical details involved. Not general concepts like “I have an idea for a new door lock.” You need to draw this lock in precise technical terms (not a notebook scribble), including a