Monday Challenge: Writing a Business Plan: Week Two

The first week of writing a business plan was focused on the Business Purpose Statement, answering the question “What is the purpose of my business?” Now that we have answered that vital question (and eaten a big chunk of the elephant trunk), we can turn to fleshing out our plan. To better understand how to write our business plan, or business “roadmap,” let’s think of it as planning a road trip.

Business Vision

Google Maps

Google Maps

“Where are we going?”

The first thing we do in planning a trip is determine our destination. In business planning, our destination is the most important part of our Business Vision, and answers the question, “Where do I want my business to go?” This is the ultimate goal for our business, the point at which we say “I have arrived at my destination. I don’t want to go any further.”

Think of this in terms of growth (do you eventually want employees?) (do you want to rent space outside your home?), your customer base (do you want to gain a high-end customer base?), your product (do you want your product to gain a local following?), your selling venue(s) (do you want to set up your own website? sell in brick&mortars? do both?), benefits of profitability (what will the profit from your business allow you to do?).

Example:

Where do I want my business to go?

I want to profitably sell my handmade products to local small shops and boutiques to build a local customer base, while maintaining a reputable and profitable online shop. The profit from my business will allow me to (live comfortably) (finance my child’s education) (buy a house) (finance two family trips a year.)

or

I want to profitably sell my handmade products online exclusively via (Etsy) (my own website) (another venue). I want one employee as an assistant to mail out packages and do my bookkeeping. My goal is to make enough money from my online shop to quit my day job.

or

I want to profitably sell my handmade products through craft fairs and markets across the country. My goal is to make enough money to buy a travel trailer, pay my travel expenses, and have some fun.

Now that we have a clear vision of where we want our business to go, let’s answer two other important trip-planning questions:  “How long will it take to get there?” and “What are we planning on doing on the way to our destination?”

The answer to one of these questions will be dependent on the answer to the other. That is, it depends on what we want to do on the way as to how long it will take to get there. And depending on when we want to arrive will determine what we can do on the way.

So, we might ask ourselves:

-Am I in a hurry? Do I want to get there as fast as possible?

-If necessary, will I run that slow car ahead of me off the road? What if the driver is an old man?  With a cat?

-Do I want to take a leisurely trip and enjoy the scenery?

-Do I want to stop and read   every       single           one        of the historical signs along the way?

After we have determined when we might arrive at our destination, and what we will do on the way, let’s add that to our plan. (I would like to get to D.C. in two years, but I really want to read all the historical signs along the way, so I’ll give it three years. During my trip, I will run all slow-driving old men (without cats) off the road.)

So now our business plan looks something like this:

Purpose Statement: The purpose of my business is to generate a profitable income by working independently doing what I love.

Vision:  My vision is to profitably sell quality handmade products through local b&ms creating a local customer base, while maintaining a profitable and reputable online business. I want to get to know my local customers, and build a solid local reputation, while representing handmade at its best. The profit from my business will allow me to significantly contribute to household expenses.  I intend to realize my vision within three years.

_____________________

Getting Specific – Setting Our Monetary Goal

This is where we get specific and define exactly what we mean by profitability. How much profit do we need to fulfill and maintain our vision?  And, how feasible is this goal?

Example: My vision is to quit my day job. I make $50,000 a year, so I need to make $50,000 a year in profit.

Is this feasible? The profit on my widgets is approximately $10 each. To make $50,000 a year, I need to make and sell 5000 widgets a year to meet my goal. That is 417 widgets per month, and 105 widgets per week. In keeping with my vision, can I realistically make 105 widgets per week? Can I realistically sell 105 widgets per week? If the answer is yes to both of these, congratulations! Skip ahead to the arrow > below. If the answer is no to either or both of these, do not skip ahead (do not pass go, do not collect $200). Read on.

At this point, we realize that only when pigs fly will we make $50,000 a year selling our widgets. So now we have some decisions to make because we are going to have to modify our vision. And of course, more questions are in order:

alexpig

Flying Pig from woodenaht

-Could I mark up the price on my widgets to create enough profit to meet my goal? (No, the market will not bear it.)

-Could I hire an assistant to allow me more time to dedicate to making my widgets? (Yes, I could. But I don’t want an assistant.)

-Could I create a different product with a higher profit margin? (Yes. I think I will. or, No. I love making widgets and widgets it is.)

-Can I change my monetary goal to something more realistic? (Yes. But you may not realize the full benefits you were looking for, so you will have to adjust those too. Question: So, you mean I can’t quit my job? Answer: Not yet.)

Okay, once we have questioned and answered ourselves, made necessary adjustments, and have a feasible monetary goal, we can move ahead one space.

>Once we have our monetary goal, let’s add it to our plan: Our plan will then look something like this:

Purpose Statement: The purpose of my business is to generate a profitable income by working independently doing what I love.

Vision:  My vision is to profitably sell quality handmade products through local b&ms creating a local customer base, while maintaining a profitable and reputable online business. I want to get to know my local customers, and build a solid local reputation, while representing handmade at its best. The profit from my business will allow me to *  contribute to our household expenses. I intend to realize my vision within three years. (*Note: after my monetary goal failed the feasibility test, I adjusted my goal and also changed my vision by deleting the word “significantly”.)

Monetary Goal: $20,000 a year.

>>If you are not a hobbyist, skip ahead to >> below.

________________

Scenario Two: Hobbyists

It is a bit tricky for hobbyists to create a business plan. For one thing, many hobbyists don’t see their Etsy shop as a “real business.” But if we sell things and have customers; we ARE a real business. However, the benefits we derive from our business may not be monetary and our main purpose may not be to make a profit.

In that case, our business plan might look something like this:

Business Purpose: The purpose of my business is to fully enjoy my hobby.

Vision:  My vision is to sell my products on Etsy so that others can enjoy the fruits of my labor. I want to represent handmade at its best, get to know my customers and gain an online following. I want to connect with others who value handmade and enjoy the camaraderie available through the Etsy community. I am fully realizing my vision now.

Monetary Goal: None.

Or, maybe we want to make enough money to cover our supply costs, or enough to buy higher quality supplies. After thinking this over, we might decide to add a monetary goal.

_____________________________________

>>Okay, now take a big gulp of water. We have eaten the elephant’s trunk!

elephant2

Next Week:  Our Products

(Eating the Elephant’s Head)

Need some help, or want to discuss? This thread.

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