Why prepare a business plan?

Q: My partner and I are planning to start our own business in a field in which we are very experienced. We don’t need financing, so why should we spend time preparing a business plan? My father didn’t have a business plan when he successfully started and ran his business many years ago.


A: Starting your own business can be the most rewarding experience of your life or it could become your worst nightmare. Though the overall statistics vary, at a minimum, half of the small businesses fail within the first two years and 80% fail within the first five years.

Why do so many small businesses fail?

Business is risky, especially starting a new one. You may be risking your own, someone else’s, or borrowed money, but, at the very least, you are risking your own time, energy and self-esteem.

Many things have to go right for a business to succeed. You need the right idea, right market, right place, right time, right management and right amount of capital.

A well prepared business plan will help you answer these questions and reduce the risk. The value of a business plan lies in the thought process – not necessarily in the finished document. The disciplined, systematic approach helps you, and your advisors, to think things through thoroughly, to research to ensure all relevant facts are known and correct, and to look at your ideas critically.

So taking prudent steps to prepare an appropriate business plan which increases your chances of success would seem to make good sense.

A business plan does not necessarily guarantee success - you can start up successfully without one and you can fail with a good one. It simply increases your odds of success.

And, of course, business planning does not stop with a successful startup. Our business environment is always changing. The process of keeping your business plan current will provide you with a good decision making tool to deal with new challenges and opportunities when they arise.

Get help in preparing a business plan by attending SCORE educational events and using our free counseling services. Visit the SCORE website, www.scorehouston.org, where you will find training schedules, useful templates, links and other information to help you deal with many business issues including preparing a good business plan.

Lessons from an experienced entrepreneur

My SCORE colleague, Irwin Miller, spoke at a luncheon some time ago about his long and very successful career in the pharmaceutical business in Houston. He spoke about his struggles to get started and the difficulties and many successes along the way. He concluded by identifying several key lessons based on his experience in running a successful small business.


• Hire good people. Effectively managing people is, of course, very important in running small businesses but it all starts by hiring trustworthy, hardworking, and capable people in the first place. If you don’t, you’ll spend more time doing their job than doing yours.


• Constantly improve. Irwin says, “If it’s not broken, fix it.” If it works today, it may not work tomorrow because the environment is always changing. You need the attitude that whatever is done today, can always be done better.


• Always innovate. Finding new ways of doing things is the best way to beat competition. The market rewards those who are the first to produce a new and valuable product or service.


• Put the customer first. Business starts and ends with your customers. If they feel they are your first priority they will keep coming back. Understand their needs and do everything you can to satisfy them. Satisfied customers are your most effective marketing tool and often are the best source of information for improving your business. So, ask them what you can do better.


• Take care of internal customers. Internal customers are your employees, suppliers, and service providers who are indispensable to operating a profitable business. Treat them well and they’ll spend that little extra effort to get the job done well and help you through difficult situations.



• Always keep commitments. Never let anybody down even if you have to eat some additional expense or spend some extra time to do what you promised. Your word must be golden and is essential to building a good, long-term reputation.


• Work hard. Most small businesses require a tremendous effort by the owners especially in the early going. You’ve got to attend to all the little details. Running a small business is not for the faint of heart. There will be many bumps along the road but you need to keep plowing through to succeed.


Other successful business men or women may have other key points but they won’t be too dissimilar to Irwin’s.