My On-Again-Off-Again Relationship With My Business Plan
I'm not a fickle person, but I admit I've treated my business plan shoddily. I had a quick, shallow flirtation with it before deeply committing, only to decide quite abruptly that I didn't need it after all. Now I'm interested again, but the relationship will be very different than it was the first time around.
A week before I began my FastTrac class on entrepreneurship at the Kauffman Foundation I received a textbook that walked me through the parts of a business plan: executive summary, management and organization, product, marketing, finances, appendix and so forth.
I was interested but not very serious. I filled out the related worksheets with answers that I could provide off the top of my head.
Q: Who will use your product? A: Parents.
Q: Why? A: Because they don't like what's out there now.
When a cost analysis showed me a host of small but real expenses that hadn't occurred to me—accounting and legal fees, education, trade shows, at least some paid marketing and advertising—it motivated me to pin down some equally real revenue.
I spent a day at the New York Public Library's Science, Industry, and Business Library in midtown Manhattan researching companies similar to mine, like TheKnot.com and Expedia, which owns Family Vacation Critic. I spent evenings pouring over Google and new-media advertising websites and talked to classmates who had worked in new media to estimate what kind of advertising fees and click-through rates I could expect with 1,000, 5,000 or 10,000 (or more) monthly users.
I turned up very little. My likely first source of revenue, Google AdSense, is auction-based so rates fluctuate from day to day and can vary greatly depending on what kinds of ads are related to your content. I knew that at a certain point I could trade up to a vertical advertising network, which bundles websites together by theme, say fashion or parenting, to sell to advertisers. But those rates also fluctuate. I couldn't nail down numbers to plug into a break-even analysis, and I felt I couldn't put a real business plan together without them.
So I did what I always do when I'm stuck on a problem: I called my older brother.
Luckily, this brother has spent nearly 20 years as an accountant in San Francisco and Silicon Valley. He's worked with dozens of aspiring and successful entrepreneurs.
He told me that quite a few people have come through his door with flawless plans for businesses they could never bring themselves to launch. Quite a few others have started a project on a hunch and seen it take off wildly.
He reminded me that while a business plan serves many purposes, the primary reason you need good numbers is to convince a bank to lend you money. If I'm not looking for funding—at the moment I'm not—I ought to vet the idea and make sure I see a path to revenue growth. But he cautioned against getting bogged down in details that were likely to change anyway and stalling out.
I took stock: I had learned a lot about online advertising and how my options would improve as I hit various audience milestones (and put a lot of thought into how I would reach them). I picked up that my original content is likely to generate better than average advertising rates but that Google Ads would still at best provide seed money, not real revenue. I also knew my rates would fluctuate seasonally, peaking when people are planning their summer vacations.
I considered that maybe the research is the point and more important than whatever document might come out of it. I shelved the business plan and got to work on the business.
So Happy Together
Now I'm in the process of taking on a business partner. We want to make sure we agree on where we want to take FamiliesGo! and how we'll get there. The best way to do that is to—you guessed it—develop a business plan together.
But this plan will not be an 80-page tome. It will be 10 to 15 pages that cover the things most important to us right now: mission statement, job descriptions, most-likely strategies for monetizing, a marketing plan, and some short and long-term milestones.
Once again, the exercise of talking out the details and sharing ideas to see where we each add value and where our ideas complement and collide is more valuable than the document we wind up with.
So I'm back in a long-term relationship with my business plan. But this time I know what I want. I need it to be flexible and adaptable—and to not expect all the answers right away.