As a wanna-be entrepreneur, I've been reading magazines like Inc. and Entrepreneur for years. In those magazines and online, I've read articles that claimed that the business plan is dead. The modern entrepreneur, these articles claimed, needs to be nimble and fast. They shouldn't get bogged down by taking the time to write a long business plan. If anything, an entrepreneur should just write a one-page plan for their start-up, and then get out there and start testing their assumptions and selling product ASAP, they said.
As someone who never had much fun writing book reports in third grade, or any kind of reports for that matter, this advice was like music to my ears. So, I happily ignored all of the more traditional advice out there that said, you certainly do need to write a business plan.
Chad and I jumped right in. We got all the paperwork together for the microbrewery license (or so we thought), and turned it in. Our plan was to get our license, and then figure out where the money was going to come from afterward. Well, things didn't turn out quite that way. The Michigan Liquor Control Commission doesn't approve a license until they know the source of every penny of funding for the brewery.
So it turned out that our plan was backwards. We needed to figure out how to fund our operation first. Our first thought was to get investors: friends and family who would chip in and in return, own a piece of the business.
How do you get investors? Good question. First, we had to figure out how much money we really needed. So we got to work looking up prices for equipment and materials, scouring online brewing forums, talking to other local brewers about the way they set up their equipment and unexpected costs they had encountered. I wish I could say that we did this all within a couple of weeks, but it took us months.
Back to answering the question: how do you get investors? You've got to convince them that their money will be well spent on a solid business that won't fail, and that the investment will pay itself back in time. To make a good case, you've got to show the numbers, explain your assumptions, give lots of description for how the business will run and why it will be successful... This is starting to sound a whole lot like a business plan, isn't it?
Yes folks, that is the cold hard truth that I could no longer avoid. We needed a business plan.
You see, I think the advice I read in those magazines probably does have some value. We probably shouldn't have taken months to come up with our start-up costs. And it is important to start talking to your customers early on, and to find ways to test your assumptions. But I really think that the "throw out the business plan" advice makes a lot more sense for companies like tech startups, with a service or app to sell. They can create a quick prototype and start testing it out on potential customers in the beginning. With a brick-and-mortar business in a highly regulated industry, on the other hand, we needed actual economic resources. Heck, we aren't even allowed to make a prototype of our product until we have our license.
Luckily by the time I accepted the fact that I needed to write a business plan, we were halfway there. We had already done a ton of research and planning. Working on the numbers to create our projected financial statements was the hardest part. Once we did that, we felt a lot more confident about the viability of the business. Actually writing the plan itself was so easy. We had been tossing ideas around for over a year, weighing different options, and cultivating our vision for Dimes Brewhouse. By the time I started writing the business plan, I knew exactly how I wanted Dimes Brewhouse to look and feel. I knew how I wanted my customers to feel when they walk in the door. The words poured out onto the paper because we had already spent so much time thinking everything out. And THAT is the point of a business plan. To show that you have taken the time to think of the details, to come up with a cohesive plan, to anticipate the challenges that lie ahead.
We aren't likely to pursue investors at this point, but the business plan was certainly crucial in moving the business forward, as we are now working with our local Union Bank and the Small Business Administration to hopefully secure a small business loan for Dimes Brewhouse. Should we have taken months to write it? Maybe not. But the time we spent clearly shows in the document.
My conclusion? At least for this entrepreneur, the business plan is alive and kicking.