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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 10+ 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:

• Build custom furniture for specific customers. Don't try to get a "line" of furniture or try for a production run. Don't focus on cheap small items, but on quality furniture for individual customers. See Approaches.
• Keep building the type of furniture that I have experience doing. Don't be lured into kitchen cabinets or subcontract work for contractors (where I am driven by somebody else's schedule). I have gradually learned new skills, and now make things that I couldn't make 5 years ago, but they always started as an interesting project, without dropping all my customers, going off to school, buying new equipment, and basically starting a different business. That would have required a new business plan.
• Advertise by web site to build custom furniture. Plan on one-to-one sales, not going through a salesman, gallery, fancy catalog, or other methods.
• Little or no work done on speculation (occasional small pieces when I can make two at once, or want to use leftover materials). This implies no shows, no sales through galleries.
• Continue working from my home shop. I would love a large fancy shop, but I also like to wander in and out of the shop throughout the day (and evening).
• Keep this a solo business. No employees. No helpers. Ever. Yes, this limits growth (if you want a business that grows, you should be looking elsewhere for advice). But this also means that I can have a shop too "compact" to safely have concurrent workers. I can operate some tools without guards - OSHA would have a fit if I ever had a helper, but I don't have room for a 16 inch guard to swing away from my 16 inch jointer. And having been a manager for much of my business career, I don't want to be a manager again.
• No new equipment unless it can be paid for from revenues in the year it was purchased.
• Don't work hard. If I needed this revenue as a real job, I could probably make a decent living by working 50-60 hours per week. But I am retired, and don't need to work even 40 hours per week. Of course, if I worked less than 10-20 hours per week, my wife would legitimately want the garage back for one or both of our cars.
• Be serious. Treat this as a business, not a hobby. Sell at a fair price. Try to make a profit (even if we won't get rich from it). Keep good records.

This plan has worked for well over 10 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 (bizkids.com/wp/wp-content/uploads/Kids-Business-Plan.pdf" 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!).