Biz Plan Insider: Don’t Believe These Myths

"You don't need a business plan" and other commonly held beliefs you need to let go of

Each week, we'll help you move from a good idea to a strong business plan.

Beginning today and every Thursday here on the Small Business channel at BlackEnterprise.com, you’ll find Biz Plan Insider, a weekly series of posts providing information, resources and expert advice specifically aimed at small business owners and aspiring entrepreneurs looking for advice on how to create, write and execute effective business plans. Let’s start by debunking some of the myths about writing a good business plan:

Myth 1: You don’t need a business plan.Whenever I hear this one, I’m reminded of the one person everyone knows who is a lifelong smoker and drinker, follows a steady diet of salt-, sugar- and fat-laden foods, and was partying hard with her 29-year-old boyfriend while celebrating her 65th birthday (for the third straight year) at the club last week. That you may know someone like this does not change the fact that cemeteries are filled with millions of people who tried that lifestyle and did not live to tell the tale.

Similarly, while there are businesses which were launched and are in operation without ever having written or followed a business plan, there are million of other enterprises that never got going or died quick deaths because they did not create and follow a business plan. We can’t name them because they did not last long enough to be remembered. If you don’t want to end up in the latter group, commit to working on your business plan now.

Myth 2: It’s easyall you need is some business plan software. Using business plan software is a relatively low-cost way (usually $200 or less) to put together a professional looking business plan. The best software will walk you step-by-step through the process, while providing you with hundreds of templates to choose from. However, the software won’t actually write the plan for you, and the final result will only be as good as the data, including market research, an operating budget and financial projections, you provide. The software can provide the structure, but you’ll still have to do the planning.

Myth 3: My financials just need to add upnot actually make sense. Over the past decade, as a judge of business plan competitions requiring me to review the financial plans of dozens of entrepreneurs, I am constantly amazed by the number of aspiring moguls, many with excellent ideas, who want to fudge the numbers. Some believe that as long as everything adds up, it’s all good. Others believe that until they are in operation, when they can get actual figures, it’s okay to take their best guesses. And all too often, would-be entrepreneurs have no idea what their financials say, because they’ve abdicated responsibility for understanding them to their accountant or bookkeeper—or worse, a person not remotely qualified for the job.

Understand that your financials have to be rooted in reality, even if your business is not up and running yet. Just because you have not hired a short-order cook for your restaurant, you should give an accurate accounting of what salary that person would command. That number should be in your operating budget even if initially your mother has agreed to fill that position without taking a salary. Everything from your projected cash flow to the cost of equipment to your projected break even point should be based on actual, reality-based research. And while we’re on the subject of financials, hire a real accountant (yes, you need to pay them) with experience working with small businesses to help you put together your projections. Don’t try to do it yourself (unless you have such accounting experience). And please, please, don’t rely on a friend or family member to do it, even if they did get straight As in math in high school. Financial planning for your business is not a job for amateurs.

These are just three of the myths that cause entrepreneurs to do inadequate business planning, or to skip writing a business plan at all. In future installments of Biz Plan Insider, we’ll surely cover and debunk more.

Alfred Edmond Jr. is the editor-in-chief of BlackEnterprise.com

ACROSS THE WEB
  • http://www.feliciajoy.biz Felicia Joy

    I agree that entrepreneurs need a business plan but they need a certain kind.
    The business plan needs to be short and to the point. The bulk of the content should focus on “how” more so than “what.” That is, an entrepreneur should be able to sum up “what” the business does in one paragraph. The remainder should focus on execution, which is the “how.” How much will it cost to get the business off the ground and keep it going while you work to get it to profitability? How will you get customers? How will you source and distribute your product, or create and monetize your service? How are you different from the competition? How will you convincingly communicate that to customers? How many customers will care enough to buy from you? And how do you know? Too many business plans are really brag rags that give the entrepreneur a trumped up sense of confidence in their “idea,” which come a dime a dozen; when the critical focus needs to be execution. Which brings me to my last couple comments: The business model is way more important than the business plan. The business plan should be the means of expressing the business model. By the time you can express a profit model clearly and succinctly in writing it has become clear in your mind, and this is one of the biggest reasons to write a business plan. Last but not least, a business—and the plan for it—is just an idea. An unproven one. The best plan isn’t worth the paper it is printed on if the business isn’t something customers/clients want at a rate and frequency that can sustain the enterprise—if they want it at all. I make this point because “write a business plan” is sometimes an over-touted mantra that gives folks the false idea that writing one is a passport to success. In much the same way that too many folks believe a college degree is a guaranteed meal ticket. You still have to do the work. The degree, like the plan, is just a vetting process and gives you a little bit better idea of which direction to go. But EXECUTION every day, and revisiting metrics every week to make changes where necessary, are the makings of the best plan. (Note: I may be preaching to the choir but in case there are any Easter and Christmas drop-ins I just thought I’d make these points.)

  • http://nighthelperwatches.com LisaLisa

    Many great point Felicia!! Thanks for sharing your comment. I’m in this phase of my business right now and I must say it has been truly hard. I’m still not through with writing my BP.
    It’s so hard out there to get the much needed support we new entrepreneurs are seeking to find. Many say your business plan Is the key to getting your business started and i agree as well but I feel hard work is the Key to being successful too.Felicia I have enjoyed your preaching! Thx.. Lol

    Thanks so much Mr.Edmond for writing this article.

  • http://nighthelperwatches.com LisaLisa

    Many great point Felicia!! Thanks for sharing your comment. I’m in this phase of my business right now and I must say it has been truly hard. I’m still not through with writing my BP.
    It’s so hard out there to get the much needed support for this particular area of your business. Many say your business plan Is the key to getting your business started and i agree but I feel hard work is the Key to being successful too. Felicia I have enjoyed your preaching and Thx.. Lol
    Thanks Mr. Edmond for writing this article!

  • http://blackenterprise.com Alfred Edmond, Jr.

    Felicia, you may be preaching to the choir, but you’re right on point. I look forward to your contributions on the topic of business plan writing, and thank you again for your willingness to offer your expertise to the Black Enterprise audience.

    LisaLisa, I’m glad you enjoyed this post. I’m looking forward to hearing positive news about your progress as an entrepreneur. Thanks for your comments!

  • http://www.bamboo-and-blossoms.com Natacha

    I’ve read these post, came across it by accident however just at the right time. I’ve been researching marketing strategies and different ways to get my business out to the general public and as a new business start up funds are a constant thought. I’ve received so many different advise on how to obtain start up funds. one group (usually entrepreneurs that gave up before they really got started) state that as a black owned business banks do not lend to us so don’t bother with the business plan its a waste of time and effort and from others that a business plan is key to growing your business. All i know is I’m great at my skill and i want to make a lucrative living out of my passion. So i really appreciate any good advise from people who have been there and living their dream of financial security or who are striving for it.

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