Q: My partner and I are planning to start our own business in a field in which we are very experienced. We don’t need financing, so why should we spend time preparing a business plan? My father didn’t have a business plan when he successfully started and ran his business years ago.
A: Starting your own business can be the most rewarding experience of your life, or it could become your worst nightmare. Though the overall statistics vary, at a minimum, half of small businesses fail within the first two years, and 80 percent fail within the first five years.
Why do so many small businesses fail?
Business is risky, especially starting a new one. You may be risking your own, someone else’s, or borrowed money, but, at the very least, you are risking your own time, energy and self-esteem. Many things have to go right for a business to succeed.
“Every successful business has a business model defined by a good idea and good resources,” says Dick Hall, entrepreneur, author of business planning books and SCORE Houston mentor. “A good idea must be competitive in the marketplace, and good resources are all of the assets required to implement and sustain the good idea.”
Once you’ve defined a business model that demonstrates that you can succeed, then it’s much easier to produce a written business plan.
Hall says, “A well-prepared business plan will explain how you deal with important elements and reduce the risk.”
The disciplined, systematic approach helps you, and your advisers, to think things through, to ensure all relevant facts are known, and to look at your ideas critically.
So taking prudent steps to prepare an appropriate business plan which increases your chances of success would seem to make good sense.
Odds of success
A plan does not guarantee success – you can start up successfully without one, and you can fail with a good one. It simply increases your odds of success.
But don’t write it and throw it in a drawer. Business plans are a work in process. Review it frequently. Make changes as your conditions and assumptions change, and they will.
Attend Hall’s next business plan workshop on Nov. 1 at Lone Star College in Tomball. He will explain the 12 elements of a competitive business model and the process to produce a good business plan. Go to www.scorehouston.org to learn more and register.
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