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AVOIDING THE DARK SIDE OF SELF-EMPLOYMENT. By Dr. Larry B. Swain SD Vocational Rehabilitation Conference October 26-27, 2011 Sioux Falls, South Dakota. WHY DO A BUSINESS PLAN?. IT’S A LOT OF WORK IT TAKES TOO MUCH TIME I DON’T KNOW HOW TO DO IT IT MAKES ME SIT DOWN AND THINK
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AVOIDING THE DARK SIDE OF SELF-EMPLOYMENT By Dr. Larry B. Swain SD Vocational Rehabilitation Conference October 26-27, 2011 Sioux Falls, South Dakota
WHY DO A BUSINESS PLAN? IT’S A LOT OF WORK IT TAKES TOO MUCH TIME I DON’T KNOW HOW TO DO IT IT MAKES ME SIT DOWN AND THINK I DON’T KNOW HOW TO WRITE I DON’T LIKE IT!!
Who needs to write a 50 page plan when you don’t need it.Why do excel spreadsheets when Twitter can launch a website, command a billion dollar from top venture capitalists and figure out how it’s going to make money after it gets funded?
In 2007 Babson College did a survey of its graduates who started a business.They found no statistical difference between those who had a business plan and those who did not.The Babson researchers concluded that the only companies needed a business plan are those seeking to raise external money for start-up.
If you are starting a home based business that requires no employees, no overhead, no inventory, little or no capital outlay, then you might not need to do a business plan.
If you are starting a retail store, restaurant, fashion label, real estate venture or e-commerce that requires people and capital to help you build it, then you need to do a business plan. Even if your financing is within the family.
Misconceptions that Entrepreneurs have about business plans. • Business plans aren’t necessary unless you’re planning to raise capital from banks or VC’s. • You want to be sure you aren’t throwing your money away. • A good business plan helps you figure out how much money you need to launch your business and how much revenue, profit, and cash flow your business is likely to generate.
2. Nobody Reads Business Plans Anymore • An investor interested in your business wants to see that you have done your homework. • They want to see your research, the market, the competition, the manufacturing costs, potential distribution of products or services and a viable strategy that shows your companies profitability potential in three years.
3. Investors don’t take business plans seriously. The know the numbers are garbage. • While a PayPal co-founder or google exec. might be able to raise money with napkin scribbling, a new entrepreneur needs to convince potential investors that the company is worth investment money. They want to know how you will perform better than others in the marketplace. • If you don’t have a track record, you need to tell your story in terms that investors understand—the language of money.
4. Nobody has a crystal ball that predicts the future, you are better off figuring out things as you go. • That may pay off for Twitter and other internet businesses, that is not the case for other types of business. • If you are operating in the world of employees, stores, inventory, and need for working capital, you need a plan. • Entrepreneurs who fail to raise enough working capital to see them to profitability may fail too soon.
5. Business plans are not necessary for a company that is already up and running. They are a distraction to running the business. • Many business owners are too busy putting out fires to plan for the future. Businesses who fail to plan often run into road-bocks when the business outgrows the business’s resources. • The best time to plan is when your business is making money and has money in the bank. When the working capital runs out—its too late. • You don’t have to hire an expensive consultant to put together a good working business plan. You will be glad you did it yourself.
SUMMARY • Business plans are primarily for yourself. • You as business owner need to answer many questions about your business, answers come from a good business plan. • Business plans help you structure your business. • Most businesses fail because of poor planning in the financial area. • You should take the time every year to update your plan in all areas.
WHAT’S YOUR MANAGEMENT STYLE? • AM I A THEORY “X” MANAGER? • DICTATOR TYPE • I’M THE BOSS • YOU DO WHAT I SAY • MOST PEOPLE DON’T LIKE TO WORK • PEOPLE ARE MOSTLY LAZY • PEOPLE WILL GOOF OFF IF YOU DON’T WATCH THEM EVERY MINUTE • MOTIVATE BY THREATS
WHAT’S MY MANAGEMENT STYLE? • AM I A THEORY “Y” MANAGER? • Participative manager • I think people like to work • People have good ideas • Employees probably have the same goals as the owner • Employees are motivated by being asked their opinion • I believe that employees do not like to be threatened • Top down, bottom up manager
WHAT’S MY MANAGEMENT STYLE? • AM I A THEORY “Z” MANAGER? • Japanese style of management • Long cultural background • Operates with teams or “families” of work groups • Team members are responsible for each other • Employees sacrifice at first for the good of the company • Employees get rewards later • Whole team must succeed or no reward
WHAT IS IT THAT I AM GOOD AT? • How do my personal preferences match up with consumer needs and wants? • What resources do I have on my farm to help me be successful in adding value to my products? • How do I feel about marketing products to consumers? • Are there family members or employees who have people and marketing skills?
HOW DO I FIND INFORMATION? • Start using the internet yourself or have someone in your operation that likes working with it. • Get on to listserves such as the “Food Net” - to subscribe, e-mail: subscribe-foodnet@lists.tmn.com • Check with local and state regulations for requirements. • There are lots of new technologies and small scale equipment available today for processing, etc.
BUILDING A BUSINESS/ MARKETING PLAN 1. DESCRIBE WHAT BUSINESS YOU REALLY IN. 2. WHAT GOODS OR SERVICES WILL YOU PROVIDE?
BUILDING A BUSINESS MARKETING PLAN 3. WHERE AND WHO IS MY MARKET? What is the geographic area? 4. WHY WILL CUSTOMERS BUY?
BUILDING A BUSINESS MARKETING PLAN 5. WHAT IS THE MARKET POTENTIAL IN MY TRADE TERRITORY? 6. WHO IS MY COMPETITION? WHAT ARE THEY GOOD AT AND WHAT AM I GOOD AT?
BUILDING A BUSINESS MARKETING PLAN 7. WHAT FORM AND PACKAGING FOR MY PRODUCTS OR SERVICES? 8. MERCHANDISING AND MARKETING PLANS, BROCHURES, PROMOTIONS, ETC.
BUILDING A BUSINESS MARKETING PLAN 9. LONG TERM AND SHORT TERM GOALS FOR THE BUSINESS. 10. FINANCIAL DATA SUCH AS PRO FORMA CASH FLOW, PROFIT/LOSS STATEMENT, AND BALANCE SHEETS
BUILDING A BUSINESS MARKETING PLAN 11. ORGANIZATIONAL CHART (who is going to do what?) 12. EXIT OR HARVEST PLAN FOR THE BUSINESS.
BUILDING A BUSINESS MARKETING PLAN Finally, this plan should be reviewed regularly. It should be a living and breathing part of your business. If this plan is worth doing in the first place, it is worth becoming successful. Change any part of it when you have better information.
REMEMBER THE FOLLOWING STATEMENTS • IF IT AIN’T BROKE --- BREAK IT!! • USE “OLD TIME” IDEAS WITH NEW TECHNOLOGIES. • TRY SOMETHING NEW! • FIND OUT WHAT CUSTOMERS WANT---THEN SELL IT TO THEM!
REMEMBER WHAT HENRY FORD ONCE SAID: “WHETHER YOU THINK YOU CAN, OR WHETHER YOUTHINK YOU CAN’T - - - EITHER WAY,--- YOU ARE RIGHT!!” I HOPE YOU THINK YOU CAN!
