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I know it’s the usual recomendation before starting a business…..but who here actually did it before hand? I didn’t, and still don’t know if it would tell me this is a good idea at this time! I have a good friend with an MBA, who is well versed in the field of business plans, and I’ve been toying with the idea of having him help me write up something….at this point I just don’t want to get something on paper that says not to even try…..at 2 1/2 yrs. after the fact! Crazy Legs answer to a guy on JLC got me thinking about this again.Who had/did what? Jeff
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Hey Jeff,
Sounds like we got started around the same time. I have an few people close by who could generate the same business profile for me. Been too busy working!
Doesn't discount the need for a well described financial forecast. It will generate goals not just set by a white collar, quite the contrary, goals determined for yourself, within your comfort level & reach.
Hell, I think I've just sold myself!
*Mr. Buck,Not me, workin' on it though. Havin' a hard time with the # of years 'till retirement. Will knockin' on the glass ceiling of profit help? Hope so.The Machine
*I never did a business plan and I'm sure I never will. I don't believe that the activities of a fledgling business can be planned. Part of starting a business is not being able to predict what will happen.However...If I had this to do again, I would have done several things differently. I would have researched my competition, researched going rates, researched the areas demographics, talked to the old guys who already know how to make a living at this, and found out what projects were the most popular and profitable.I wasted way too much time and money learning all those things when I could have done some homework and been ahead.I guess a business plan at least forces you to do some of that.
*Ryan's advice is sound. I didn't make one either. Since a "plan" also states your desires of what you want to do, it's probably a good idea to work for a while to determine just what you like doing and what not. Then you can work on your goals which will include the geographics, size and types of projects you want to do, and the types of people you want to acquire as clients.The most important part of the plan is do make a list of real expenses. I say real, because most of us are no different then other new businesses - the tendency to initially be overly optimistic about sales and costs, so I'd opt to be lean toward the higher side on the expenses. One way to determine a realistic salary to take is to include time spent on sales and estimating. That might be 20-30 hours per week in addition to the 40 +/- spent on production, so the salary should be based on that, say a 60 hour week. you might also want to figure on only working 46 weeks per year maximum. Three weeks vacation, 8-10 holidays, a week for personal time and sick time (combination). I'd add an extra week for lost time - appointments missed by clients, weather down time, water pump goes out, etc. - the misc. stuff that causes us to lose time. That actually leaves you 45 weeks, or, at 40 hours per week, about 1800 annual man hours. Divide that into your annual expenses and you'll have an idea of your average overhead cost per man hour, and if you use the mark up system of 50% to 67%, you'll know how much you have to generate each day just to cover expenses, of which your salary is one of those expense items.I'd say that most contractors go under because they just don't know their numbers - the cost of doing business on a daily basis. You have to know that to survive and flourish.
*I had a business plan in place before I ventured out.Because of it, I found a niche that very few contractors are dealing with. I have built a very large customer base, and I stay busy every day because of it.In addition to the goals you set, and time frames needed/wanted to reach those goals, it also tells you if your business strategy and ideas will pay off, or send you into the poor house. A good, well written business plan will help prevent SOME of those unknowns that Ryan speaks of. It helps you to research these problem areas before you begin. Unless you just dive off the deep end, and start building anything, and everything, then you need a business plan. It helps you to research the market, types of businesses that have been successful (and which failed), and helps you to arrive at a logical course of action in order to get your business off to a good start (both financially, and mentally). If I wanted to do kitchen remodels, but kitchen remodelers in my area keep going bankrupt, my business plan would help me understand that maybe I don't want to get into that niche. I'm tired, and still have a while to go before I get to go to sleep. I hope this made sense.James
*But where does this info come from until you're out there learning what works and what doesn't?And if you've got a great business plan and you try it and find out you were wrong...what did it gain you?
*i But where does this info come from until you're out there learning what works and what doesn't? This info comes from research. If I want to start a new business, I MUST do some research to find out several things. One of those things is finding out if the market is aready saturated with companies doing what I want to do. If it is saturated, then I have much less of a chance of making my business work. I must also research to find out if my market can handle the type and costs of what I want to do. Many have found out too late that their respective new business is not wanted in the area, and thus produces no clients. This could very well be the reason why no one else is doing it. Selling expensive jewelry in my region is not a profitable business to go into. The market for the high dollar jewelry is just not here.I chose to concentrate my business on repairs, maintenance, and improvements to existing homes. I found, through research, that the costs associated with this type of business were lower than remodeling, had the potential of attracting more customers than remodeling, and had a future growth level way above remodeling. In good economies or bad, people will always need to repair their homes. It represents the largest investment they have (in most cases)and they will protect that investment before they spend money elsewhere (most cases). When the economy takes a downturn, remodelers will be hurting for business. I won't. I planned for this, and have been building my client base for several years. When the economy takes a downturn, I will be established in my niche, and others will be converting. My business plan helped me prepare for this.i And if you've got a great business plan and you try it and find out you were wrong...what did it gain you? A great business plan leaves room for the changes that are inevitable. It allows your company to plan ahead for changes. As economies change, companies change. Plan for it, and you will find it is much easier to deal with when the time comes. Changes can be planned as gradual, or sudden. Business plans also allow your company a chance to diversify in the future, if necessary. Diversity has kept many, many businesses alive during hard times. A fictitious example would be something like this: In 2002, I would like to enter the roofing portion of remodeling. I will now need to set about goals (both financial and physical) in order to show how I will be able to attain this goal. I will need to show the financial aspects of projected company growth in order to obtain this, and physical growth as well. A lot can happen in 2 years. If my projected growth for my company is wrong, or the economy changes, then I will not be entering the roofing business. I may even need to downsize in order to stay alive. I can look at my business plan and determine what diversification will help me survive. I found what diversification areas would be profitable for my company in my business plan. I researched it before I ever got into business (you can even add it to your plan AFTER you go into business). The great thing about a business plan is it can be changed, added to, or scrapped for a new one at any time during your business life.It is basically a guide to keep you focused on your future.Humbly,James
*It sounds good but where do you get the info? If I want to know if the tire sales market in my area is saturated, how do I find out. I can figure out how many people have cars and what the average life of a tire is and then I know how many tires are needed.That's only half of the story. Now I need to know the sales figures for all the tire dealers in my area. So I'll call my friendly neighborhood garage and ask them how many tires they sold last year...I need the info so I can compete against you.How much remodeling is done in your area? Who really knows? How many guys are doing it? Who knows? What do they charge, How much business did they do? All this info is personal and you can't get it.
*ryan... it's out there.. not all of it really pertains...nor is it to the 2d significant number... hell it ain't hardly to the first significant number...but the process and disicpline of creating the business plan... forces me to think about where i'm trying to go...you go to a lawyer... want a will drawn up.. what does he do ?he hands you a work sheet .. says.. come back with all this info so we can draw up your will...the old .. garbage in =garbage out..if you state your mission.... and your personal goal... list your assets and liabilities...... your income needs, your credit needs... your production plan... your marketing plan.. and put them together... now you can get up tomorrow morning and say.. ok , buddy, you know what you're supposed to be doing.. let's go do it....no plan ?....ah hell, let's go have some coffee .....
*.. took a 3 -day course in writing a business plan a long time ago.... and i wrote one..it sorta got the sh*t kicked out of it... but i became familiar with teh process...this is now my 5th business plan.. or is it my 8th.. i ferget..right now my business plan is a loose leaf binder with lots of clipping posted .. and different spread sheets...but i know the divisions... mission / goal ----me and the guysmarketing--me and the guyssales----------me, referals from customers and othersadmin---me, part-time bookeeper, payroll service, accountant, lawyerdesign /estimating--me, contractor sales & outside sales staff at the lumber yard, subcontractorsproduction------the guys, and my subsand a certain ability to roll with the punches
*Ryan, here's a real live example currently being done. Due to the suggestion of a client, I'm starting a new business providing Preventative Home Maintenance Programs, or PHMP for short. Thru research and my existing business here since '91. I've decided that my best market is those in the upper middle class and higher as far as affluence - homes in value in excess of $250,000. These are people who don't want to mess with typical maintenance repairs. Even those who can perform such tasks tell me "I'm here to relax and golf, not fix my house." During the last year, I've been making a list of additional items other than what we would consider as typical maintenance that clients have told me they would like to have included. Items such as cleaning the tile around tubs and showers and resealing the grout, sealing pavers on drives and walks, changing hoses of washers, flush hot water heaters, even to clean the interiors of toilet tanks to get rid of the discoloration, and other eceteras. Thru this year long research, I've established:1. What will be included in the semi-annual inspections.2. Provide a basic plan, say Plan A, but to also include a Plan B which will include the above mentioned items at a higher cost.3. Established the geographic area within Collier County in the Naples area.4. Created a viable marketing plan that will cost me almost nothing, yet get to the desired audience.5. Established the overhead cost, pricing structure, etc. - the financial end.6. Assembled a list of clients currently totalling about 70 who said to me: "When it's up and running, call me. I want it."7. Accidentally found out that the PHMP has another market which is huge here - builders of new homes. By them recommending my program to their new homeowners, they greatly minimize confusion of these new owners who call these builders thinking a maintenance problem is covered under a guarantee of the builder. So, to those new home owners, the PHMP will become like an extended service policy as are sold for appliances, trucks and cars.8. I've determined via #5, my initial operating working capital needed, anticipated initial number of clients and 1st, 2nd and 3rd year net sales and profits - all projected very conseratively.9. Determined the caliber of employee(s) needed, type of vehicle, inventory & tools needed, number of inspections done per day, by scheduling them in regional sections of the county (will improve as sales increase), etc.10. Insurances needed.So, my business plan should act as a guide, a guide based on realistic stats of "anticipated" operations and financials - no major surprises, and by being generous on the overhead costs, and conservative on the annual sales and profits, the actual venture should pretty well correlate my actual plan.What the plan does is allow me to remain control of the business, as opposed to just starting an ad, buying a magnetic sign for the truck, passing cards around town, and having the "market" pull me this way and that way, forcing me to relinquish control to the "market" instead of me controlling the whats, wheres, whens, whos, and hows. The pulling of me here and there is what happened to me 30 years ago when I first started. I'll not make that mistake again.Basically, we all pretty much knew what we wanted to do when we started our businesses - what, where, how, and to a degree, when, and for how much (without knowing our numbers). A plan provides the information as to whether the above is viable or not, the costs, and the subsequent suggested sales pricing structure needed to succeed.Does it take time? You bet! But I'd rather take that time than lose my rear end on a major project or business, get frustrated due to lack of working capital, or work 70 hours per week. We're supposed to get wiser as we age. Mmmmmm. Sometimes I think I missed the boat a few times.
*Operating without a business plan is very much like trying to fly an airplane from Toronto to Vancouver without a map. Both help you navigate by recording your planned route and by giving something to compare your actual to your planned so you can make critical decisions.In both cases there are certain critical things that must be calculated before you start. These things are available through either quick or extensive research. But they must be done if you are to be deliberately successful. Sure, a person can make the trip by the seat of the pants and rely on luck for success. But life is littered with the remains of those who got lost along the way.Plan, Compare the Plan to Actual, Take Action. Don't get sidetracked by the fakers who say planning is so complicated you have to pay someone to do it for you. If you don't do it you don't own it and it doesn't help you, it burdens you.
*Working as a sub, my only plan was to stay in business. So far, so good.I may, sometime, build a few houses to sell. I will for sure plan ahead for that. When it comes to investing large amounts of money, you better have a plan and stick to it as best you can. Being a sub doesn't take a plan, just lots of drive.Ed. Williams
*EdIf you really believe what you posted that is so sad and makes you look so desparate.
*Hey FredB,You wanna expand on that for us? I'm glad you are "enjoying your fruits" as I am. But I disagree on your - business plan or plan to fail - idea. There are lots of us out here who have built sucessful businesses with nothing more than the desire and trade based skills to do so.What kind of business are you running anyway? Mine is an incorporated residential woodworking sub-contacting company to the trades only. We started 10 years ago with me and two other carpenters working out of our trucks. (I didn't even have a truck, I worked out of an old hatch-back). We now have over 20 full time carpentry employees and a full service cabinet shop. I never "planned" this growth, it just happened. I just kept both eyes and ears open and stayed ahead of the evolution.........one day at a time.What's your story? Tell us how you grew your business with your plan.Ed. Williams
*Mr. B,I began my journey much like Mr. Williams. I'd also like to know how your story goes. I'm listening.The Machine
*Ed,When you added the full time cabinet shop, there is no doubt that you discussed it, thought about it, and planned it out. This may not be part of a "written" business plan, but it is still part of a business plan. It may not have been part of the "beginning ideas" about how you wanted your business to go and grow, but a business plan doesn't necessarily have to be created when you start out. The neat thing about a well written pan is the fact that it can initiated at the beginning, middle, or anywhere else in between. The whole idea is not to set out a written plan (unless you just want to), but to set out to plan your business so that in the future, you have an idea of what to expect. Our repsective trades (those of us here at BT) make it difficult to write pinpoint accurate business plans. We run into way too many variables, and these variables are what makes the same type of business so different in each area of the country. A clearly written, well defined business plan for a framing business in New York probably would not help you much in Dallas. The idea is just to help ya get a clear picture of what you are about to step off into, and what kinda planning in the future you might need to stay afloat. Not everyone who goes into business knows much about the business side of it. These are the ones who fail often, and fail in large numbers. I am glad that you are doing well at your business. You are an example of one who may not need a written plan for the future. There are many more like you. These posts SHOULD have been meant for the ones that need an idea of how to grow their business, and how to do some research to find the feasibilty of a particluar business BEFORE they jump off into it head first.James
*James:You said it as well as I could. I didn't mean to imply that you must have a written plan, just that you must have a deliberate, thought out plan. To do that plan you must look at and make provision for three things.First, the things you know about, The Knowns. This includes the known cost of labor, material, subcontracts, your needed salary and benefits, etc.Second, the things you know that you don't know about, The Unknowns. This might include cost of correcting a poor soils condition because the lot hasn't been drilled yet. Or, perhaps you don't know what the exact sub cost will be. So, since you don't know, but you know that you don't know you can make a reasoned allowance for the contingency.Third, the things you don't know and don't know that you don't know, The Unk-Unks. This is those things that despite all your best efforts you neither know, nor can know, nor can make a specific allowance for. But almost every job has some snake in the grass that rises to bite you on the butt at a most inconvenient time. So, you make an allowance for these things based on your experience and the experience of others. You just hope you are making a big enough allowance to cover you when this happens.As for me, I started out in residential when I was a kid, kept it up for awhile as primary job. Then discovered that I needed to do more than one thing to make the kind of living I wanted and because I easily bore. Picked up a college degree or two along the way and ran a couple businesses. Actually got trapped into teaching this stuff at a college for awhile too. I find it is really easy to earn money if you are willing to do whatever the market is asking for. What is hard is keeping it. Wanted to be ready to retire at 50-ish, was and did. That is my sordid story and I'm sticking with it, for better or worse.
*(Reply to #17)Hey James,You're right. I never planned to have a cabinet shop nor did I want to. A friend of mine was restoring antiques in his garage. I was working out of a mini warehouse. His homeowners insurace company found out he was running a business out of his garage and cut him off. We pooled our resorces and "bingo" we had a shop. Then we moved to a larger space and the next thing you know I'm building cabinets and furniture for my clients. It just sorta happened. That's the variable thing going on. You know.....sieze the day, and all that crap.Had you asked me when I started in business if I wanted to have a cabinet shop, I would have said "No Way". Today I don't know how we could get by without it. I have the oportunity to rent the space next to me (an additional 3500 sqft). I have the client base that will support me as a full time mill.....they told me so. But I have no desire to do it. Without the desire to do something, it's a waste of time. We are now bigger than I ever wanted us to be. So it goes.I realise that some people need more structure than maybe I do. That's fine if that's what they need, and I would encourage them to do everything they need to be sucessful at whatever business venture they choose. For me, any kind of planning would have been a waste. I never planned to end up here. I'll hang on to every turn and twist and ride this dog until the market falls again, then cut back and see what happens. And just like I always do.....keep my eyes and ears open, and know when to shut my mouth.Ed. Williams
*(reply to #18)Hey Fred,Thanks for your write-back.I think you and James are correct when you say a business plan is a good idea. But it doesn't work for everyone. I'm living proof, and no, I don't feel THAT lucky. I have the business bruises to prove it. You know, that bad decisions made in the heat of the moment or that time I spouted off my mouth when I should have said "Let me get back with you on that one". Like you said, even the best of plans can go south.I don't want to discourage anyone from working out a good plan before hand, it was just something that I didn't need to do. What's good for the goose is not always..........Ed. Williams
*My father and I have been in business together for four years now. We started with no plan and it grew into a jump over a cliff. You need to have at least some idea of the cost and the cash needed to survive until you are bring in income. Alot of people do well with rocking along, but at least do it with your eyes open.
*Mark's right. It's rare, not the norm, for someone like Ed who apparently had a natural grasp for basic business finance. Having working capital allows an occasionally screw up as Ed mentioned. Who of us haven't. It's why most of us carry two hammers, and some carry two saws and extra tools, but too few "carry" the extra capital needed for those "whoops!"Based on stats regardless of where they come from, the single most contributing factor to failures of small business people is not knowing the income needed nor the expenses that will surely occur in a new start up and for the first few months. Realism absolutely must replace idealism and pure ignorance of the numbers of a business regardless of type or location. "Winging" it with one's future on the line is close to self destruction, and doing so with his family's future is irresponsible.
*Mr. Lykos,Irresponsible?Ouch. That's one heck of an editorial against a well-intentioned, however misguided, entrepreneurial spirit.Irresponsibly hangin' it out there for the ultimate good of my family, even if it kills me(no martyrs here).The Machine
*Hang in the Machine.....You'll do just fine.Ed.
*It's lateI remember when I was a kid reading that some aronautical (sp) engineers did a study on the bumble bee. The bee's wing area wasn't large enough for its body, so it couldn't fly. The bee didn't know this, so it flew anyway. Point. Good mind, hard work, luck, will get you there. The other stuff helps a lot, could keep someone from disaster, but...
*Machine:Your posts have changed from an inquisitive tone to a combative tone. Since you, like most of us, are anonymous were you really looking for info? Or, did you have an agenda coming in and were just doing this for entertainment?What Mr. Lykos says is in fact the reality. Sure just like someone can play Russian Roulette for a long while and not get caught, some folks can get by in good times without their errors catching up with them, for awhile. But, in the long run they Will get caught by their lack of planning and analysis.When dealing with your and your family's future it is irresponsible to not do everything possible to maximize your income over your lifetime.bobl:You made your point in the last part of the post. Sure hard work, etc are part of the success equation. But, to a large extent you make your own luck. If you don't plan, follow the plan and change the plan when facts dictate then disaster is much more likely to strike than not. Sure, you can win the lottery. But you are much more likely to get struck by lightning than to win the lottery. So it is in business. You might do well without planning but you are much more likely to go bust. So, why be dumb? Learn by others' experience and not suffer the pain of learning it the hard way!
*I got $50 that says FredB never drives over the speed limit because that's the rules and by God he's gonna stick by it and play it safe. Any takers?I would imagine that some people have the rest of thier lives planned out. How boring. I'm a risk taker. I guess you could say I run an "extreme" business. I never was much for following the crowd. The meek may scoff, but I sure am having fun.Ed. Williams
*The world changes, new opportunities come up that you never expected. I had a plan in my head. I could have written it on paper. And I wouldn't have followed it through the first week.I'm not doing what I expected in the way I expected. I could rewrite my plan today and not follow it tomorrow but I don't see much point in that.Think I'll just keep being as unpredictable as life is and maybe I'll be able to keep up.
*Machine. I feel stong about any issue I've encountered. As to the "irresponsibility" comment I made, here's the reason. Back in 1981 I went broke. You may be to young to remember, but interest rates went up to 21%, and we went into a recession. My going broke was due to ignorance of good business financials, not keeping track of the economy as close as I should have, and not having even a basic plan of where I wanted to go, what we did that was the most profitable, etc.So, my wife suffered, my 4 kids suffered, my 13 employees who got laid off suffered, suppliers suffered, and I did. Seven years of many 12 hour days and 6 day weeks before I finally paid off the pipers, all the while still havng my family's life style not as before. The word "humiliation" isn't bad enough.Irresponsibe? You bet I was. See, I too was well intentioned, honest as they come, hard working, full of the entreprenurial spirit, great motivator, great organizer, great salesman, but in the end, it was still not enough, and "I", for all of that, was not good enough. I still have the above attributes, but now I'm a lot more cautious and smarter at business. I lousy way to learn, but better it happened at 39 than 58. It's also why I've suggested to my peers to include "reserves" in their overhead - the same reserves as do Fortune 500 companies, and to plan. When one assumes the role of a highly responsibile position such as a business owner, many people depend upon the person holding that position. Consequently, he'd better know what the heck he's doing, knows the demands of his position and well versed of all aspects of business, and economic conditions, (current and anticapted future), and in short, earns the term, "business" person. See, just being in "business" does not make a person a "business" person.As I stated, I was irresponsibile, because my actions, inaction, and ignorance of the knowledge needed to be a "business" person was, at the least, lacking. Hope none here ever has to look in the mirror and say to himself: "You stupid, lousy, $#@%*& assh**e." It is after all, where the buck stops. .
*Ed, I'v been a risk taker all my life. Have your entire life dumped into a garbage can due to your risks and see if you still cavalierly take many risks. If not, at least one has become not only wiser, but also a responbsible person. If so, he's a fool. Stings of a catastrophic failure should make for a change in attitude, at least for a sane person. I'll never, ever, accept certain responibilities again without the confidence of knowing I've learned enough, and then some, to justify having others place that responsibility on my shoulders, and accepting it. Otherwise, I'm not just being a risk taker, I'm also arrogance defined.By the way, I usually do 5 MPH over the speed limit, but have been known to go faster is certain situations. But you Fred does too, so I'll not take your bet.
*Fred, You said what I was trying to say. .
*I had a business plan; the original direction I took in that plan is long gone, and now I'm into something that I wouldn't recommend to anyone that didn't have 100-200K more than I did when I started, which wasn't that long ago. My entire area of the industry has changed more in five years than I could ever have imagined, and it will continue to change faster than I can imagine.Which is to say: I had a plan, I changed it to reflect events. I need to do a new one, and keep evaluating my goals in relation to my results. There is a lot of value in a reality check. I also need to do a marketing plan; not to end up with a fancy marketing plan, but because the process forces you to ask yourself tough questions and helps clarify the situation, same as with a business plan. It's like guys building without a plan; I've known lots of guys who just winged it, prided themselves on doing all the calcs in their head, and built themselves into a corner. It's a personal thing, but I can't work that way.
*Sorry Gents,I'm not really trying to be the smart*ss guy here. I've just seen too many people make too much out of nothing. Life is not as complicated as some people make it out to be, and too many people just worry themselves to death. Maybe it's just my way, but it ain't that big a deal to me. Perhaps that's why it works for me.....I don't think it's that complicated so therfore it's not.Muddling along in my own igrorant bliss,Ed. Williams
*Mr. Sonny,I hear ya. I have a very good friend who's walked the same path you've described, sounds to be about your age as well. He tells me, "don't sell yourself short, take the risks now, while the gettin's good, this is your chance to make your name, stake your claim, and cover your a$$, 'cause it ain't gonna last!". His experiences, your experiences, this forum, all the people I work w/ everyday help me to learn and overcome. Sure, I'll screw up, might fail completely, but I might be a great success too! That's life. If it was all good and played by the rules, we'd all be much less appreciative of goodness. Can't have light without dark. Just can't be done.Thank you sir.The Machine
*Mr. Williams,Thanks for the encouragement. Good, simple words.Also muddling my way through, mechanically of course.The Machine
*Mr. B,I just got to your post #26. I'll try really hard to keep my combative nature in check. My only agenda, sir, is to provide for my family the best I can with the tools I've got. Would a hard working man with only a hammer be doing his family a dis-service by nailing up his own shingle and putting his hammer to work while saving for a nail gun?I'm at the start of my journey. I don't know it all, and won't know it all, ever. I've no right to behave combatively here, and won't. But, I'll speak, and inquire, sometimes firmly, other times not.A business plan sounds like a great idea. Period.Quite respectfully,The Machine
*In the economy we have enjoyed over the last few years it is fairly easy for even the mediocre to feel like a genius.---Look how often my phone rings,look how busy we are,look what fine work I do,Look how many employees I have,etc.but when the downturn comes(and I believe it is slowly starting already)It will all play out like the story of the grasshopper and the ant.the grashoppers operating without a plan,priding themselves on their macho risk taking spirit,will likely find themselves trying to sell some equipment and real estate.They may even find themselves willing to sell themselves for a steady paycheck. Of course the well planned ants will be buying up discounted property and cherry-picking the employee rosters of the grasshoppers.The business cycle is not dead,and historry has a funny way of repeating it self. good luck All,Stephen
*Well Adrian you seem to have the idea of what a Plan is all about. It Is Not something that is done once, followed rigidly and never changed. It Is something that is periodically revised to reflect today's reality. In addition to the things I have mentioned in previous posts it serves the valuable function of being a Framework for Thinking. Plans that are useful are almost living things.In making the Plan a person is forced to consider all the factors affecting their business and by inflection their life. By considering them and explicitly making provision for all the factors a person can't help but make better decisions than if they just winged it.My experience is that people who refuse to plan, or worse actively oppose planning, are either mentally lazy or irresponsible. Now there may be an exception to that. But I haven't met one yet.
*"Plans that are useful are almost living things. " Fred hit the nail on the head. Every plan should be reviewed quarterly in the current volatile economy. It only takes an hour or two to read it again, note adjustments to be made based on your company's current status (it changes almost weekly), and proceed again with the new, intelligently revised plan. I have read of a few company's without a plan that were currently doing in the tens of millions of sales. But, like Ed, they are certainly the exception and not the norm. There is a reason why lenders, consultants, even SCORE representatives and our own associations suggest a plan. DUH, they're not dopes, just conservative business people, who know the foundation of business births and growth.It still boils down to taking advantage of everything available to each of us to assist us in assuring that our business will not only survive, but blossom as well. Hell, who wants to just survive? Between a plan, one's one existing knowledge and forums such as this one, one would be nuts not to utilize all of the help available. After the fact, saying "I should of..........", "I could have.............." and "Why didn't I........." , are moot. Giving yourself and your family a nice life stye without busting your rear end requires only one thing from you - preperation, and that is what seperates the men from the boys. Don't leave home without it!
*There's a big difference between refusing to plan and writing a "business plan".If your idea of a business plan is reading everyting about the trade and business you can find, trying to anticipate changes in the local economy, trying to identify new markets, keeping accurate records and printing those neat computer reports once in a while so I can see if I've made any money, and finally trying to pull it all together and make decisions that will keep me afloat in the future. Then I've kept a business plan.If your idea of a business plan is following the proper format in the Harvard School of Business Business Plan Manual, then forget it.
*Ryan, you've kind of got the idea. Continued education is part of a business plan, as is tracking the economy. Computer financials is both part of a BP, to see if expectations are in line with projections, but it's also a P&L statement, which is still part of a BP.What it is not, is to just see if you've made money, which goes along with your other statement about making decisions that will keep you afloat. Gee, if we all went in to business just to see if we made money or stayed afloat, we've got bigger problems than not having a BP. I surely hope I'll make money, in fact, a lot of money, and will certainly do much better than just staying afloat.That's the purpose of a BP, a "guide" to follow and modify when needed to be successfull, and being successful is way ahead of staying afloat. I can make money by standing at a busy corner and holding out a can - a lot of men do just that. I can make money as a business man doing handyman work at $35 per hour, and a lot of men do that also. I can stay afloat in a row boat, but I'd rather stay afloat in the manner of a 40 yacht. Intelligently doing all of those things mandated by a good BP, and some common sense and intellegently applied knowledge. I know one man whose a millionare. Owns a junk yard, junk yard dog and all. Followed a BP. There is an old saying you've probably heard or read: "Work your plan, or plan to work." Again, BPs are for the majority of us, not the one of 50 like Ed, or others who, although they don't realize it, have their own BP etched in their brain, one they unconsciously refer to on a daily basis. Most of us don't have that natural ability nor the self dicipline. Still, I'll bet even Ed checks his hard copy "stats" frequently. That's his conscious mind working.Finally, all of the above again are moot, unless you have something to compare "it" to. The "it" is your overhead - as planned, the profit margin now - vs what you want to get, the market now - vs what you like to work with, the hours you put in weekly now - vs ................, etc. Remember, none of us would know how a square "relates" to anything else unless we have something to compare it to, such as knowing what a rectangle or triangle is. In psycology it's called "comparison and contrast" - same as the realities of our businesses and the "desires" of our BP. I decided I didn't want to work on jobs any more than 20 hours per week. Not 25 or 22, but 20. The reason is to allow me to go on sales calls and do my estimating, call vendors, subs, etc., during the other 20 to 30 hours per week. So, I revised my BP, and especially my financials and overhead to arrive at a labor rate I'd have to charge to do just that. It worked. Two yers ago when I was working with my sons we were charging using a labor rate of $45 for small jobs and repairs. I now charge between $76 and $125, depending on the project, and still am continually about 2 months in advance with work for my one employee and myself. The change I made, admittedly, made me change my sales "system", both in person and on paper, and required changing my target market and become innovative in "how" I would service them (part of my sales system), so I did. There is nothing you cannot do if you utilize every potential aspect of your brain, dillegence and innovation. A BP helps organize all of those thoughts and ideas.Now the next question for myself is whether or not to hire employee #2. My BP will make that determination for me, on paper, providing stats, pros and cons and more. Finally, when it's revised to accomodate #2, I'll know if it's a go or not.Anyway, you're already on the right track, and for that, good for you!
*Hey Sonny,You've had a lot of good things to say here, and I'm sure we will all benefit from you experiences. I am no financial wiz for sure. My father likes to say "When Edward was a boy, he'd give you his last nickel if he could find it". I learned to save company profits and put them back into the company instead of buying that bigger house or that new boat. It just made sense to do that for some reason. I see so many other business people going out and spending the rewards of their labors only to come up short in a crisis. Not good business. Save now, enjoy later. I guess that's my BP and so far it has served me well.We started our business during a time when the building market was not too pretty good around Dallas. We have since hit a major boom. Right place, right time. Maybe we were lucky, maybe we just worked our cans off and impressed the builders. One thing I know for sure is that the market will cool again. That WILL happen. No doubt about it. When it happens we will probably survive as a smaller company than we are today. There is not much I can do about it with or without a plan. If people stop building, there's nothing that will make them let go of their money. If we down size I won't see it as faliure, just the next step in dealing with what's dealt. I have minimized our debt to a truck payment and rent for shop space.I guess what I'm trying to say here is that I guess I do have a business plan. It just changes everyday.Ed. Williams
*See Ed, you also serve the "purpose" of a BP. Instead of getting sucked into America's preoccupation of instant gratification and pretentious life styles, you put your money back into the business. Smart, responsible, and just plain good business. Since my dad died when I was 10, I was partially rasied by one of my older brothers. This brother used to say: "When you got your sh*t together and like yourself; you don't need stuff". You two must share the same karma. You got my respect.And you never know about when the economy tanks effecting your business. Even when building turns down, it's usually only about by 10%-20 %. That still leaves 80% to 90% still building. And those 80% to 90% know it's still cheaper for them to continue sticking with the best in the industry.
*I believe that you need to take an amount out of the business. Not to spend, but to invest. That way if your business does suffer or go down you will have some assets. Just a little bit each month. Not enough to hurt the business but more than just your salary.
*Scrapr, you're right. Mine goes into a mutual fund and real estate. Covering my rear end two ways, plus building for my too soon retirement, or my wife to enjoy, which ever comes first.
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I know it's the usual recomendation before starting a business.....but who here actually did it before hand? I didn't, and still don't know if it would tell me this is a good idea at this time! I have a good friend with an MBA, who is well versed in the field of business plans, and I've been toying with the idea of having him help me write up something....at this point I just don't want to get something on paper that says not to even try.....at 2 1/2 yrs. after the fact! Crazy Legs answer to a guy on JLC got me thinking about this again.Who had/did what? Jeff