Vancouver’s business community is well known for its entrepreneurial spirit, but experts say many first-time business owners lack direction and that could jeopardize their chance at success.
Barry Sharp makes a living helping entrepreneurs develop business plans and add direction to their venture, but he’ll be the first to tell you he turns away nearly three-quarters of the people who ask him for help.
And he does it for a reason.
“I don’t want to put you down, but I think I’m being paid to disillusion you,” said Sharp, principal of Burnaby-based AMA Management Ltd.
The problem, he said, is that many people fall in love with the idea of going into business for themselves but have no idea how to get started.
Then they seek advice from friends and family, who Sharp said are biased and will often support an idea even if it has no chance of success.
In turn, three-quarters of the people who knock on Sharp’s door have no business plan and no direction.
And then he shuts the door.
The first thing a would-be entrepreneur needs to do, he said, is think of a business plan as a road map that outlines a route to success.
“You might be able to get from here to Halifax without a map, you probably won’t get there the quickest way or the most convenient way but you can probably find Halifax at the end of all this,” he said. “A business plan, like a road map, will tell you what to do and when.”
The plan provides entrepreneurs with goals and milestones, but primarily spells out how they will transform their business seedling into a bountiful venture.
“You don’t have to have a full-blown business plan if you’re a small home-based business … but I think it’s still better to work out a plan than fly by the seat of your pants,” agreed Cerina Wheatland, a business adviser with Small Business BC.
A business plan can help entrepreneurs identify market areas they may not have thought of, she said, and it can also help them articulate what they plan to sell.
“We have a lot of people who put the cart in front of the horse. They come in and usually the question is, ‘How do I register my business?’
“They haven’t even thought about what business structure they should have or who they’re targeting. Some don’t even know exactly what they’re selling.
“If you can’t articulate it how can you get somebody to buy it?”
Still, there’s a segment of the business community that has adopted a “just do it” philosophy, Wheatland said, and isn’t convinced business plans pay off.
In 2007, Babson College in Massachusetts published an entrepreneurship study that examined whether writing a business plan before the launch of a new venture affected its performance.
“There was no difference between the performance of new businesses launched with or without business plans,” the study said, after analyzing data about ventures Babson alums launched between 1985 and 2003. “These findings suggest that unless a would-be entrepreneur needs to raise substantial startup capital there is no compelling reason to write a detailed business plan.”
Wheatland addressed the “don’t have a plan” strategy in a recent blog post, and said even if an entrepreneur chooses not to write a plan he or she still needs to know what the business will sell, to who, how it will operate and how much money is needed to start.
Sharp added that business plans should not be set in stone, and are actually ever- evolving “living documents” that provide a general guideline for the business and its goals.
Said Sharp: “Am I a believer? Yes, absolutely. I have a business plan. I have a marketing plan. Is it perfect? Hell no, I tweak it.”
- An executive summary that explains the business concept.
- An overview that outlines the business’ objectives, missions and goals.
- A product outline that details the products or services to be sold.
- An industry overview that outlines key markets and how the product serves them.
- A marketing strategy that shows how the product differs from its competition or offers a unique selling proposition.
- An operational plan that defines human resource needs, office locations and production plans.
- A financial plan, which includes three years of projected financial statements.
Source: Small Business BC