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Business Plan

Do you need a formal business plan (a long document, printed on expensive bond paper, and reviewed by accountants, bankers, consultants, and lawyers)? Well... probably not. BUT, if you are going to make a major investment or borrow money to get started, you really need a business plan before you start. If you are going to cut off your old income (quit your job) before starting your craft business, you need a plan (or a psychiatrist). That business plan should not only cover what and how you are going to do business, but should also have goals and measures - to objectively know how it is working - is it going according to plan (okay to invest more) or not meeting goals (is it time to cut the losses)?

In my case it was simple. I had been making furniture for friends and family, and people asked "can you make one of those for me?" I had done a small amount of "work for pay" even with my full time job. When I retired, I simply started to advertise my services (on my web site), building things similar to what I had been doing all along, from the same shop, with basically the same equipment. If you have a hobby that can be expanded, then "just do it."

My business plan

Somebody recently asked me, do I need to have a business plan? Do you have a business plan? My initial answer was no, but then I started thinking about it. I do have a plan, and it has worked for the last 8+ years. Not the kind printed on fancy paper, but one clearly thought through and followed. If changes are required in this plan, it is done with careful consideration, not on the spur of the moment when I see something I want to buy. This is the first time my business plan has been written out:

This plan has worked for over 8 years, and every year has been profitable. But we are making a minor change. Each year after Thanksgiving, I get numerous requests for saddle stands for delivery by Christmas. Of course, if they are custom made, not much chance of delivery, shipped across the country, if I start construction on December 1. (Last year I could have sold at least 8, at an average price of $300). This year I will build a few on speculation, after much debate with my wife (involving cost of materials invested, storage space if they don't sell immediately, other projects in the queue, etc.). After the fact report: I made two and sold one of them. Not motivation to start building things for inventory. It was many months before the second stand in inventory sold.

An interesting approach

I stumbled on a TV show called "BizKid$" which I suspect originated in England. The episode I saw was on making a business plan. Searching for info on their web site, I found a file to help kids build a plan, which you can download. The show had 5 points for a business plan:

  1. What is your idea? Product or service? What makes your idea unique - why will people buy yours rather than someone else's?
  2. Marketing - who/where is your customer? How will you sell your product/service? How will you advertise or seek business? What is the name of your business? Is it unique, memorable, easy to pronounce?
  3. Finances - what are your start-up costs? Where will you get that capital? What is the cost per item sold (or per unit of service), including your labor?
  4. Pricing - how much will you charge? How does this compare to the price of your competitors?
  5. Profit - How much will you make on each item you sell, after expenses and your labor. Will there be enough profit to repay the investment in your start-up costs. Will there be enough left to reinvest in your business?

The show went on to emphasize how this business plan had to be very clear and concise - one page. It then showed kids trying to sell bankers on investing in their business - emphasizing professional appearance, enthusiasm, and clarity of the presentation. It was a great show for adults as well as kinds (as long as the adults aren't trying to set up a lemonade stand!).