When to Write a Business PlanBy
I am a recent Georgetown University graduate thinking about starting a corporate concierge company that would provide personal assistance and legal and business services to companies and individuals. Is it necessary to draft an official business plan for this type of company?
—M.T., Washington, D.C.
You don't absolutely need to write a business plan if you're not planning to borrow money or seek investors, and your business does not require a permit or license. In fact, if you simply want to try out your business idea, you don't have much to lose by not writing a business plan, says Kylon Gustin, president of Leander (Tex.)-based BusinessPlanAdvice.com. "If you can acquire a few customers and determine from that limited experience if this is something that has potential and is something you enjoy, then you can assess the value of taking the business to the next level. If you do, then I would strongly suggest that you write a business plan," he says.
The value of putting together even a simple business plan is that the process forces startup entrepreneurs to confront some basic principles of business that they would likely miss—to potentially bad consequences—otherwise. A business plan can focus you on assessing your competition and puzzling out your unique selling proposition, for instance. The financial section will allow you to set revenue, expense, and profit projections that you can use later to determine whether your business is on track and where it needs adjustment.
"It all seems tedious at first," Gustin says, "but you will be glad that you put in the effort."
Business plans come in all lengths and scopes. Extensive, formal plans may run in excess of 50 pages. But you can write a summary plan that covers the basics in 10 to 15 pages, says Barbara Lewis, president of Centurion Consulting Group, a Los Angeles company that helps its clients develop business plans.
"The exercise of thinking through all the business plan segments and writing down everything is priceless. In fact, it's worth a lot of money, because it ensures that an entrepreneur is on the right track," she says.
As a concierge services company, you'll need particular clarity in developing your mission and goals. "You could get sidetracked doing legal work here, or writing contract seminars and teaching there. It's natural in this kind of service business to get pulled into one thing and another—especially if it pays," says Joe Calhoon, a business strategist, author, and speaker based in Kansas City, Mo. "If you don't draw boundaries, you'll get off the reservation and your dream will be lost."
Along with mission and goals, the most important part of a business plan is the financial section. "Generating revenue is one thing, making a profit and having cash to fund the business is another," says Dave Skibinski, president and chief executive officer of QuantumMethod, an Internet marketing and branding business based in Glendale, Calif.
Make sure you thoroughly define all your expenses, including your one-time startup costs, ongoing operating expenses, and variable costs related to the services you're providing. "Your financial model can help you set sales goals that allow you to measure success. You need to know your price and cost structure well enough to know how many service units you need to sell in order to meet your income and profit goals," Skibinski says.
Start out by winning some "anchor" clients that will contract with you for concierge services for a monthly fee. "Give them discounts for signing annual contracts, and then look to add some more profitable, one-off projects that will pay at a higher rate throughout the year," says Calhoon, whose latest book, The One Hour Plan for Growth, takes readers through a one-hour business planning process.