Don’t think I can’t see what you’re doing right now. You’re making that face you have, and muttering, “Ugh, crap, business plan. Can’t I just stab my eye with a fork and we’ll call it good?”
I am right there with you, my friend. But hear me out.
That long complicated thing the SBA calls a business plan? That’s not a business plan. That’s basically a job application for your bank. You might need that if you want someone to give you money (however, see #3 coming in a day or two), but you don’t need it to run your business.
On the other hand, as Michael Martine tweeted me last week, “The shit, meet wall; wall, meet shit plan only takes you so far.”
The so-simple-it’s-scary business plan:
- Who’s my customer? (”Anyone with a pulse” is not a valid answer.)
- What problem can I solve for them better than anyone else can?
- Where can I go to find this kind of customer? Where do they hang out?
- What products/services do I have today that I can sell them?
- What products/services are they going to buy after they get product #1?
- What additional products am I going to develop over the next six months? (Hint, give some serious thought to how you can create consistent recurring income, like with a membership, a club, or a subscription.)
- How many customers x how much money = about how much I’m going to bring in every month. Take 75% of this number as a “reality check” figure.
- How much will I need to spend every month? (No, you do not need a new Aeron or a new Macbook or a $10,000 Web site to start your business. Keep it to actual necessities, like your phone bill & postage.) Take 125% of this number as a reality check.
- Do I have more cash coming in than going out? Cool, we’re good.
- Do I have more cash going out than coming in? Not so good. Figure out the steps I can take to get the cashflow moving in the right direction, then take those steps.
- Hoping like hell I will get more customers does not count as taking a step.
Now if you’re running a business of any size at all, you know there’s more to it than this. But if you know the answers to these questions and you keep making sure that for the most part, there are more dollars coming in than dollars going out, you’re going to do fine.
The reason most small businesses fail
In the words of a friend in a politically incorrect mood, “most small businesses fail because they’re run by dumbasses.”
It’s not actually about being dumb. It’s about letting yourself get fuzzy on one or several of these points. (Trust me, I know lots of supergeniuses who aren’t too good on those.) Get clear on all of them and your odds suddenly become quite fantastic.
If you want to get very slightly more formal (but still really quick and simple), check out the excellent book The One Page Business Plan
In the next post we’re going to dive into really scary Dumb Thing #3, Getting Upside Down (without a good plan for getting right-side-up again).
7 Dumb Things Small Businesses Do
- #1: Deciding You’re “Just Not Good” at Marketing
- #2: Going Without a Business Plan
- #3: Getting Upside-Down
- #4: Thinking It’s About You
- #5: The Worst Number
- #6: Ingratitude
- #7: Following the Herd
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I found your site on Google and read a few of your other entires. Nice Stuff. I’m looking forward to reading more from you.
I’ll just call myself out. I have a business plan, but it is fuzzy, and it exists only in my head.
I’m all about setting specific goals when it comes to my own projects, but I guess when it came to my business, the words “business plan” made it sound so much less appealing. You’re so right, though — it needs to be put on paper!
I’m loving this series.
Hey, thanks. That’s the best description of a business plan I’ve ever seen. Must do more thinking…
An economist friend once told me that the reason most small businesses fail is that they are “undercapitalized”. that’s economist speak for “more money going out than coming in” (or, more precisely, not having enough money to cover the going out until the coming in catches up).
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