On the recommendation of a client I am reading “Never Get A Real Job” by Scott Gerber.  Chapter 5 is entitled “Business Plans Suck” and the author starts with an anecdote about how his startup’s initially concise 10 page mission and strategy morphed into a nearly 100 page monstrosity.  Citing advice from banks and consultants purporting the need for a “traditional” business plan, they ended up with “nonsensical financial forecasts, complicated statistics and intricate details about mundane marketing tactics.”

Further (and I am summarizing here):

• Only 10% of the plan was focused on what they currently could do.
• They worried too much about grammar and formatting and not enough about strategy.
• They included suggestions from everyone who read the plan, and a lot of people read it.
• They spent weeks making it look pretty (color, binding, etc.).
• They never tested the market
• The projections were overly optimistic.

OK, so maybe the chapter should have been called “We Suck At Writing Business Plans” instead of Business Plans Suck.

Lets address these one at a time:

• I agree a 10 page focused strategic plan is better than a 100 page bloated plan full of fluff.

• I don’t believe there is such a thing as a “traditional” business plan.  As I have explained in detail in my article Five Considerations Before Writing Your Plan there is no one correct way to write a business plan.

• Focus the plan on what you can achieve.  Looking out 5 or 10 years into the future is foolish and even one to three year is “shaking the magic eight ball.”  That said if your plan is for raising financing include the plans for products and service that the new funding would allow.  I have always been a big fan of thinking of your business in phases.  Phase I might be tackling the local market with one product or service.  Phase II might be expanding geographically or adding new products and services.  But stick to writing for one phase at a time.

• As a side note here – Business Plans Help Raise Capital!  Go to an investor without a plan…they will tell you to come back with a plan.  Ask a bank for a loan…they won’t take your application without a plan.  Does every plan get funded?  Hell NO!  But does most every company funded have a business plan.  Most likely YES!

• Not everyone should read your plan.  People with industry experience, finance experience, investor experience and business mentors are a good place to start.  But follow your gut on whether to include their advice or not.

• It does not need to look pretty!  Should it be easy to read (scanable), understand and tie together nicely with the financial data?  Yes!  But pretty is not going to score you any points.  These days you don’t even have to print or bind it…just email the document after you get an Non-Disclosure Agreement.

• Successful New Businesses always test the market.  Before you invest in even writing an executive summary buy a couple of the product you intend to sell and try to make a profit.  If you have a service (as Guy Kawasaki says) “Just Get Going!”  But remember once you have testing the market you still need a plan.

• The projections were overly optimistic.  That’s because your market research was probably garbage!  Pages of industry data from Hoovers have little relevance to startup financial projections.  Projection can be based on local market data if you have a small business that serves a community or based on a break even point buildup method if you have an entrepreneurial venture that serves people online, an entire country or the world.  Neither of which involves the statement “If I could only get .01% of the people on the internet to give me a dollar I would be rich.”  Silly assumptions equal silly financial projections.

Do Business Plans Suck?  Sometimes, but they don’t always have to.  Our free business plan software has six sections that will amount to 10-15 pages when completed and hardly has an ounce of fat.  If done correctly, you will have a useful tool that isn’t a paperweight that gets stuffed in a drawer.

By the way… I LOVE THIS BOOK.  It’s a fun read full of useful advice.  Following the above mentioned section Mr Gerber gives a ton of great advice on how to write a proper business/strategic plan, one page plan and even a “Pre-Execution One-Paragraph Plan.”  It doesn’t get any easier than a one paragraph plan…and the sentiment is in the right place to get you started, but eventually, the so-called “traditional” plan will rear its ugly head once again.

<< Start-up Sales Projections Part 2 - Coming Soon >>

Now that we have covered the Break Down and Buildup methods of projecting sales I thought it would be worthwhile to demonstrate the financial projection program included in Capital Business Plan Software.  Below is a demonstration video tutorial where I complete a financial projection based on a pizza restaurant I owned with a business partner back in 2007.  While we offer three different pro forma financial projection models – a basic, intermediate and advanced excel workbook, the video below covers the intermediate model.  

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My father has owned a hair salon for over 25 years and probably from the day he started his “shop” things have hardly changed.  Sure there have been some updates to decor and a couple of location changes, hair styles have certainly changed over two and a half decades, and so has the method of accepting payments.  However, only over the last few months has he started asking me how to go about accepting credit cards because of the demands of his new found younger clientele, which are being brought in by a templated website I built him in my spare time one weekend.

Finding the right credit card processing solution for your business can be a daunting task.  From newfangled card readers that connect to your smart phone to good old fashioned counter top Verifone VX510 how do you know what is right for you?  Here are some considerations:

• The up front cost - Sometimes the machines are free (typically on overpriced merchant accounts), sometimes they are $400-$700, sometimes you can buy used ones on eBay for $100, some just require purchasing a magnetic card reader for a labtop (which you can also find cheap on eBay).  Other solutions such as Square offer a card reader free with signup that plugs into your 3.5mm head phone jack on your phone.  Intuit Payment Solutions sells a card reader you can plug into your USB port of your laptop for about $70.
• The transaction fee - usually Visa/Mastercard is the least 1.5%-2.5% and Discover Card and AMEX is typically higher 2.5%-3.5% although lately Discover Card fees have been edging close to Visa rates to remain competitive.  These fees can be even higher when you punch in a card number manually vs. using a swipe reader because there is more fraud when the transaction happens with the “card not present”.  That is why businesses typically ask for the CCV 3-digit code on the back because it lower the swipe fee because the assumption is that the card is present.
• The swipe fee - This is usually a specific amount like $0.10 or $0.50 – you may find a company with a very low transaction rate (like 1.5%) but a very high swipe fee (like $1.00) – if your average transaction is $10 that wouldn’t be a very good deal cause the swipe fee is 10% alone.  If the average transaction is $100 or $1000 it’s a better deal.
• Other fees - Back in 2007 a business partner and I owned a pizza place and our merchant provider charged us $10 just to send us a paper statement – we could not opt out of paper statements but they charged it anyway.  In other word it’s was just another way to make money.
• How often you can batch - with a merchant account you can batch (send the payments and get a deposit) daily.  Usually you get paid in 24-48 hours.  With others (like square) you might have to wait days.

So if you look at the continuum of providers it goes from High Transaction Cost with Low Monthly Fees to High Monthly Fees to Low Transaction costs.  Here are some examples:

Paypal Website Payment Standard – no monthly fee but allows you to accept payments using a website, email, or a smart phone but the transaction costs are as high as 2.9% plus a $0.30 transaction fee.  Paypal generally can be deposited within 3 days unless a payment hold is put on your account which then requires 21 days to receive.

Square – Square offers 2.75% rates if the card is swiped or 3.5% + $0.15 fee if the card number is manually entered with no monthly payment.  Square holds payments for 21 days before you can have the balance deposited.

Intuit Online Terminal – Allows you to process credit card payments on your labtop with a magnetic card reader.  Pricing is 1.9% if swiped and 2.93% if manually keyed in plus a $0.30 “swipe fee” for both.  Payments are batched daily and deposited within 1-3 days.  The monthly fee is $12.95.

Merchant Provider – Typically used in retail stores where they have the counter top machine or an integrated magnetic card reader in their point of sale system.  Monthly fees can be as high as $50-$60 not including transaction costs or swipe fees.  Typically rates are lower and swipe fees are $0.10-$0.15 but not always so do your homework.

Hopefully this gives you some basic insight into choosing a credit card processor that is right for you and your business transactions.  Remember, in this industry there always seems to be a “gotcha” and it’s your job to vet each provider properly to ensure the solution will make your business more profitable by being able to provide a convenient payment processing solution for your customers.

So you want to start a business but don’t want to fail massively.  here are some general recommendations to put you on the path to success:

Start Small – most businesses fail because they run out of money, they run out of money because they put bills in place before they have customers (rent, utilities, salary, etc), so do as much as you can on as little money as possible. Start at home, sell on eBay, get someone to help you build a website for nothing or build your own using a click and build application, get a free Google Voice phone number, and join networking groups or use social networking to market your product/service.

Do something you are passionate about – It’s hard to make a successful small business and it takes a lot of hours, work and dedication. If it is not something you love….you will burn out fast. If it is something you love it will sustain you when you have down days/weeks/months.  The myth is that business owners get to work half days, the reality is that you get to choose which 12 hours of the day you want to work.

Have a Niche/Specialty – My son and I sell used hockey skates at www.fmhockeylocker.com.  We ONLY sell youth/kids hockey skates because a) kids grow out of skates FAST, b) parents don’t care at that age if they are new they just want to save money c) there are TONS of used skates on the market in those sizes. We still have to compete with Play it Again Sports and the like but we don’t have a $500,000 building or employees to pay so we can make money on less markup. It’s easier for us to get 10% of the youth market here in Fargo vs. trying to get 1% of every skate buyer of all ages.

Get Paid What You Are Worth – Don’t fall into the “I’m going to be 20% cheaper” trap. If you are cheaper the competition will just lower/match your prices, if you lower prices again they will lower again, eventually neither of you will make money but they will stay in business and you will eventually quit. Be 20% (or 100%!) better for the same price. VALUE is what sells…plus when people see cheap they often think it less because it is lower quality.

Follow this advice and you will dramatically increase your chances of success.

So another year has passed and again it went too fast.  Walking across the kitchen, I spotted my list of 2011 goals taped to the backboard of my desk and pulled it down with a grin.  It has been at least 6 months since I looked at the list and though I got off to a good start in the first two quarters of 2011, I was afraid to look back knowing my “resolve” had weakened in the waning months of the last year.

So here is my list and the results:

2011 Goals

7 Areas with 5 Traits – Specific, Measurable, Your Goals (Accountable),  Time Limit,  In Writing

Financial – Debt, Income and Worth

1. Pay Off Car #1 by March 31^st – double payments for 3 months +
2. Pay Off Car #2 by December 31^st – for 6 months Starting in April +
   A surprisingly large tax return from education credits due to my wife returning to the nursing program took care of the first two on my list before March had even expired.  What a relief to have no car payments!
3. Increase side income by $5,000 a year from websites, teaching and consulting.  0
   Profit from my website is up about $2500 and I made another $1000 buying and selling used hockey skates.  So I am about $1600 short of my goal but progress has been made in the right direction. 

Intellectual Goals – read 1 nonfiction book a month starting with:

1. QBQ – Question Behind the Question +
   Good enough book…but a rehash of how I live my life.  Very little new here. 
2. Parenting Book – Scream Free Parenting / Raising Positive Kids in a Negative World +
   Scream  Free Parenting was a revelation!  The biggest change was not making my 11 year old clean his room.  Unfortunately, he is ADHD and an electronics inventor so after about 3 months and a friendly mouse that committed suicide in our toilet after we finally made him clean his room we decided some screaming is necessary to keep things from getting out of control.  One HUGE suggestion from the book that still works is asking “Will you…____?” instead of “Can you…___?”  It’s strange but the kids do what I ask when I use the former but not when I ask the latter, no matter the question.  
3. Read two relationship books. - 
4. Boundaries – Henry Cloud. -
   I failed at the last two in this section.  No excuses, no reasons.  It will be the first thing I do in 2012. 

Family – Start dating your spouse and kids again.  Love is spelled TIME

1. Plan a winter break / vacation – Water Park before February 28^th. +
   Indoor water park at the CanadInn in Grand Forks, ND.  Thanks Grandma!  We had a blast! 
2. Have “Dad and kid” and “Mom and Dad” night one time per month with each kid and wife. 0
   Not exactly steadfast on the whole once a month thing… but my wife and I had several great date nights both in and out of the house and the kids and I each spent some special time together as the moving, ice skating and ice cream.  More of this to come in 2012. 
3. Plan an week long Fall vacation with just our family for early August (not just going to the lake). +
   We took a trip to Valley Fair with some friends and family in Shakopee, MN.  I took several Dramamine and survived some mid level roller coasters.  I think this will be an annual tradition.  We also managed to save 50% of our budget for a tropical vacation.  

Spiritual Goals – Time and Prayer

1. Attend one small group meeting in 2011.  Alpha meetings? -
2. Continue attending services during the summer. +
   While I didn’t make it to a small group meeting I did start teaching a 6th grade confirmation class and attended several summer church services outdoors at Hope Lutheran. 

Physical Goals – Exercise and Nutrition

1. Loose 1/2 pound per week by June 1^st 2011. -
   Nope.  But I am down 7-8 pounds from joining a hockey league twice a week.  
2. Stop drinking pop except one diet coke every Sunday. -
   Ha Ha!  Not even close.  I did however stop buying cases of pop and switched two a couple of two liters of diet coke per week.  Maybe this will be in the cards for 2012? 
3. Cardio 2 days per week / weights 2 days per week. -
   If you count hockey two days a week then I got half way there.  I did however break out the weight set once we got rid of the old guest bed and the “exercise room” is set up and calling my name! 
4. Sign up for Novice Hockey league in Fall 2011.  0
   Because I offered to teach Wednesday confirmation I couldn’t sign up for this league, however I joined two other men’s hockey groups.   

Career Goals – Professional Development, Applications, Contacts

1. Hang real estate license by end of January. -
   Nope.  In fact I am one day away from letting that license expire.  It’s like the skinny jeans in the closet.  After 3-4 years you should just throw them out if you are not going to use them. 
2. Review and revise DIYBizPlan.com – Software revisions. -
   Minor revisions were made.  Currently in talks with a value added investor to finally do something with the software.  Something significant!
3. Launch www.TradeTurret.com – manage product end of the site partner to manage content. -
   Looking back this is one of the biggest disappointments of  2011.  Not only did my friend and business partner in this venture drop every ball thrown his way…a couple of months ago he informed me he was getting back into drugs.  End of friendship.
4. Look at job openings once a week.  Meet with a career consultant. -
   No, after looking for, interviewing and getting offers for two or three jobs I declined I just decided to refocus my efforts at my current position.  

Social Goals – Dinner Parties, Gatherings, etc.

1. Invite Friends #1 out for Dinner/Drinks or over with kids. -
2. Happy hour with Neighbors one night a month. -
3. Weekend with Old Friends out of town twice this year. +
   The social life has not been a priority. 

 Time to start working on the 2012 list…