Monday, September 8, 2014

Why waste money on a business plan?

Received from "Fred" (not his real name).

"I guess I need a business plan writer. I am trying to recruit board members for my new nonprofit and all the ones I want on the board want to see a business plan, preferably one done by an outsider. I don't understand why I should do a business plan. I'm going to be a nonprofit, not a business.  Even if it was a business, what's the use of filling out a bunch of phony financial stuff when I have no idea what the numbers really are? And why do they care about my "competitors"?  I think this is just a waste of money, but I would like a quote so I can explain why I can't do this right now."

Have you ever felt like Fred? You're supporting your nonprofit (or your fledgling small business) with your own credit cards, and now someone you apparently respect or at least see value in being associated with, wants you to spend more money on something other than your mission. WHY?

First, Fred doesn't seem to understand the legal responsibilities inherent in serving on a board. To him, these are just names in front of titles. The people he is approaching know that isn't true. Before they commit, they want to know that this has a chance of (a) succeeding) and (b) will not expose them to unnecessary legal complications.

Second, it was fairly obvious that Fred hasn't thought about the financial realities of being in business, even if that "business" is a charity.  Like so many people, he assumes that because the goal is awesome and a lot of people will be helped, the money is just going to flood in to support the mission. That's probably why his potential board members want an outsider to do the plan.

What the business plan will do is give focus and clarity to the process of fulfilling Fred's dream. It will ground him in the day-to-day realities of making that dream a reality.
Might it also force him to see that the way he wants to go about realizing that dream isn't feasible at the beginning? Absolutely.

That's what I think stops a lot of people from writing a business plan. Sometimes it's simply a case of them not knowing what it takes to get to the end goal.  Sometimes it's a case of not wanting to know.

I write business and strategic plans, and the number one frustration for my clients is that the plan doesn't support their idea of how much money they will make or attract on the timeline they envision. In other words, reality doesn't line up with the timeline of the dream. Done properly, business plans will sidestep the pitfalls of unreasonable expectations.

I can tell them what the norms are, what's a reasonable rate of growth, research competition or funding streams and get average cost of doing business figures, but if they need or want a six figure income and I don't see that happening in one year, I can't tell them that it will happen.

You do, or have a business plan done, to prepare you for reality. Then you can show potential associates that you recognize not just the benefits, but also the problems. You can show you have a strategy to deal with the problems so the benefits are realized as quickly and efficiently as possible. You plan to manage challenges, instead of being managed by them. A plan helps you to realize that your dream involves entering a marathon, not a sprint.

I gave Fred his quote and wished him luck. I hope he follows through and his dream comes true. 

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