Tuesday, January 29, 2008

Mini Business Plans - Part Two

This is a continuation of my previous post.

As I mentioned, creating a Mini Business Plan is a bit of a loop. Last time we started with money. Now we create a "narrative" of the project. Then we'll revisit the numbers in light of the written document.

Convincing Your Mother

Whether it's your mother, your spouse, your business partner, or just a trusted colleague over lunch, you should be able to put together five paragraphs about any business venture you're thinking of going into.

Remember three rules that will lead you astray:

1) Entrepreneurs tend to be very optimistic.

2) Everything looks good from a distance.

3) Everything costs twice what you think it will.

When you look at someone else's business from the outside, it almost always looks hugely profitable. For example, Sony makes music CDs. It probably costs them two cents each to press 100,000 CDs. These same CDs sell for $20 each. The profit is massive.

Except . . . all the details. Artists, song writers, delivery people, lawyers, musicians, unions, graft, theft, equipment.

When you look at the details, you wonder how anybody stays in business.

So reality is somewhere in the middle.

What's in a Mini Business Plan?

The basic elements of a Mini Biz Plan are:

- Overview of the project
- - Including the purpose of the project

- Marketing thoughts

- Income speculation

- Costs of the project

These are literally one or two paragraphs each. They should be written as if you're really going to do this, whether you've made that decision or not. For example:

"We will put on a series of seminars explaining the process of creating a podcast and using podcasts for marketing. We'll start with our existing clients and move to a broader audience. For our own clients, we will not charge for these seminars. After we have some experience, we'll market through the learning exchange and charge for admission."

Once you start to tell yourself the story, the details begin to emerge. So do the questions. Why do this? Is this an elaborate marketing scheme? Is this a new profit center? Is the goal to sell deeper into your existing clients, or to broaden your base and capture new clients?

Remember: Not every venture is a money-making venture. We do plenty of things because they contribute to quality of life, quality of work, marketing plans, our place in the community, etc.

The next paragraph is on marketing. Are you going to start with word of mouth? Will you engage other partners? If you already have a marketing stream (newsletter, regular mailing, column in the local paper), will you add this project to that stream? Will you buy advertising?

Revisit Costs

Last time we penciled out a rough idea of costs. It wasn't a full-blown spreadsheet of the final operation. But it was enough to get the brain ticking. Now we're going to revisit that.

After cogitating on the details, you've probably come up with more expenses than you had at first. One, for sure, is marketing. We somehow never include that in our first go-round.

So revisit the numbers. Include everything you can think of.

If you have some solid thoughts about production details, or schedules/timing, you may want to add a paragraph for each of those. And they, in turn, will help you with more realistic financial estimates.


Slap that excel spreadsheet into the word doc. Add a title at the top. Maybe even a title page.

Now you've got a mini business plan. Not counting the title page, it should be two or three pages, one of which is all numbers.

I always recommend that you go over this with someone. If you need to have them sign a non-disclosure agreement, do so. If it's your spouse, I'd shy away from the NDA.

Don't Forget to Have Fun

You might ask whether I really go through this. Absolutely. At least twice a month I stumble upon an idea or opportunity that grabs my attention.

Almost every idea I have, or am exposed to, is rejected with very little effort. But a handful are interesting enough to be put to the test.

As I mention in seminars, I don't know exactly what my business will be like in five years, but I know it will be different from what it is now. Five years ago I wasn't in the book business, I wasn't selling SBS2003 or Office2007, I had never installed Virtual Server, I only had one employee, my largest client was only $50,000 a year.

Five years from now my business will be very different. I don't know how, exactly, but I know it will be.

So I keep looking at interesting ideas because I intend to build my future and not simply let it happen to me. And, as long as I'm building my future, I want to fill it with projects and people I enjoy.

Once you get in the habit of making mini business plans, you'll become very fast at throwing together a few paragraphs and a spreadsheet. And if you decide to let this become a larger adventure, you'll have the basic outline of your larger business plan!


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