The Power of a Good Business Plan

Not every business can get away with something as simple as the initial business plan for Compaq Computer. It was a sketch of a portable personal computer, scratched on the back of a placemat from House of Pies Restaurant and Bakery in Houston.

This valuable placemat is ensconced in a glass case in Compaq’s headquarters. That placemat was enough to persuade venture capitalist Ben Rosen to invest in the budding business proposed by three engineers, a business that turned into the fastest-growing startup ever founded up to that time.

But that is very much the exception. Don’t count on your back-of-the-envelope jottings to provide sufficient justification to persuade your unfriendly local loan officer to approve that six-figure line of credit for your business. No, you must develop a workable business model for your startup or a plausible plan for the major expansion of your existing business.

Like all business plans, yours needs to answer the key questions about the purpose of your business: What will it do, and how will it earn money doing it, on a sustainable basis? Small businesses in general are more susceptible to business failure caused by inadequate business planning. There is less leeway for financial missteps. A million dollar boondoggle that causes a quarterly profit dip in a large enterprise can cripple a small business

You may not have a choice about whether to develop a business plan. Most businesses are required by their source of financing to create one. Before a bank will advance a loan, it wants to know how the money will be used and how it will be repaid. Before your board of directors or your division chief approves your annual budget, especially with that big new investment you'd like to see them make, they want a convincing rationale explaining how the risk of this investment will generate rewarding profits and when. Financials are an important part of every business plan. But it’s not the only component, nor even the most important. Before you can intelligently talk about finances, you must create a business model, which is the economic rationale for the existence of the business.

Writing your business plan helps refine your thinking, and that may be its greatest value to you. When you first set down your plan, it may look great. But in the cold light of the following day, you may realize it has some holes or requires additional explanation.

Do you need a business plan even if you don’t require financing? A loan officer is like a friend who will lend you an umbrella, as long as it’s not raining. When you have a desperate need for financing, a bank has you over the proverbial barrel. Don’t count on getting a good deal for financing when you desperately need the money.

So the best time to prepare the financial component of a business plan is when you don’t need money.
Say what?
If your plan shows that your financial requirements are modest and could in all probability be self-financed, that just whets a banker’s financial appetite. You’ll look like a good client to sign up for a line of financing because it appears as though your business will have no problems paying back any money borrowed. Bankers like low risk. A well-thought-out business plan lets you show how you will manage risk, which is the thing bankers like second best

Check out Business Plan Pro Software for making your own business plans.

11 Killer Instincts of Entrepreneurship

Here's a quick look at the 11 Killer Instincts of Entrepreneurship:

1. The Solution Instinct: This is about ideas and always seeing them. It's about seeing new opportunities while traveling, shopping, or working. Seeing problems and potential solutions to those problems is at the heart of valuable ideas and business models.

2. The Detective Instinct: This is about fact-finding and due-diligence. It's about letting go of the emotion and excitement of a good idea and taking a venture-capitalist approach. This instinct is something that keeps one constantly assessing how a business model will work, scale, and succeed... without personal bias.

3. The Great Communicator Instinct: This is about connecting and constantly selling. It's a constant awareness that every point of communication matters. Whether communicating with partners, investors, vendors, employees, or competitors; every communication is an opportunity to strengthen your company.

4. The Youthful Genius Instinct: This is about doing what you love. When we were young, we dreamed big dreams and showed glimmers of what we might become. Tapping into the expectation of our youth is central to successful entrepreneurship.

5. The Entrepreneurial Heritage Instinct: This is about how our heritage can reveal some or our natural gifts. What has your family and ancestors been successful at already? Exploring your roots can help one tap into opportunity. There is a reason why many families pass along entrepreneurial success and create "dynasties" of their own.

6. The Risk-Taker Instinct: This is about going out on a ledge. No risk, no reward. It's a fundamental factor of business building or almost any major endeavor. Finding the calculated balance of risk and opportunity is key.

7. The Work-Horse Instinct: This is about paying the price. Doing whatever it takes. Those "overnight successes" usually require at least 5 years of hard work and incredible sacrifice to get there.

8. The Thick-Skinned Instinct: This is about being tough. Resilience, optimism and a positive mindset reside in every great entrepreneur. The fundamental key to success in attaining goals? Never give up.

9. The Flexibility Instinct: This is about being willing to change. Emotion and pride must be removed from the process while building a business and paying attention to the best route to take. The right path naturally eventuates; if you're willing to recognize it and take it.

10. The Human Instinct: This is about people. Attracting the best people is more important than the business model itself. Treating people well, leading well, and serving with care is a fundamental reason why anything worthwhile should be built in the first place.

11. The Knowledge-Quest Instinct: This is about constantly learning. Reading, thinking, listening, observing, absorbing, and applying is a hallmark trait of a great entrepreneur.

These are unique instincts and in my experience, everyone possesses at least a touch of each of them. And it's my observation that every natural instinct can be discovered, uncovered, and developed by anyone interested in doing so.

Do You Have the Right Stuff to Be an Entrepreneur?

What does it take to start a successful business? While there's no such thing as the perfect entrepreneur, even Bill Gates has made mistakes, a number of personal qualities can help you to build a successful business. If you pass muster on most of these traits, you're off and running.

• You can delegate: No matter how smart and energetic you are, it's a mistake to try to attend to every detail yourself. Unless you're a solo act, you're going to have to trust employees to do their jobs so that you can run the business.
• You know how to teach others: In order to delegate successfully, you will need people with appropriate skills, and they may have to learn some of those skills from you.
• You are self-motivated: As a business owner, you won't have a boss to tell you when to get to work. If that's a problem, keep your day job.
• You can work with numbers: You will spend a fair amount of time keeping track of money, expenses, revenue, taxes, and the like. A math phobia won't help.
• You don't mind making mistakes: You will make mistakes; the trick is to learn from them and move on. Not everyone finds that easy to do.
• You like to work: Contrary to myth, you don't need to be a workaholic to start a successful business. Many entrepreneurs find that it makes more sense to establish a reasonable working pace, one that lets them strike a balance between work and their personal lives. That said, don't start a business unless you enjoy work. There's going to be plenty of it.
• You don't mind selling: You'll have to sell products to customers, of course. You may also need to sell lenders or other financial backers on the prospects of your company. And you'll need to convince potential employees to accept jobs with your firm rather than going to work for the competition.
• You don't quit easily: You'll encounter obstacles that might stymie some individuals. You'll have more success if you are the type of person who relishes such challenges. A dash of optimism is essential; it will help you handle the uncertainty that is part of every venture.