Brower: COVID adds new questions for business
Grand Enterprise Initiative
Many people who want to start new enterprises or expand and improve their existing businesses feel intimidated by the idea of having a business plan.
And now, in the age of COVID-19, any business plan must be written with this key question in place: How will COVID-19 affect my business? Consider the likelihood of quarantines and stay-at-home orders that will surely affect business levels. For some, these mean lower levels of revenue. For other, they mean higher levels. But it’s important to anticipate.
We don’t know when these stay-at-home orders will be issued but it’s wise to assume they will come and go as the virus ebbs and flows in the country and our county. Plan for uncertainty.
Plan around liability concerns and safety issues for both employees and customers. This is not an easy problem to work around.
And most important, plan for the fact that the COVID-19 pandemic will end. After that we will all need to be ready to be back in business under the new normal. So read on.
For some, the idea of writing anything, business plan or not, is daunting. Beyond that, the idea that a person would have to do financial projections, draw up a mission statement and figure out a marketing plan just seems, at first blush, like too much.
But an effective business plan doesn’t have to be rocket science. And as I tell my clients, they don’t have to write all of it. The members of their team can help write the aspects of the plan that apply to their expertise.
So what are the elements of a good, basic business plan? From my perspective, it involves asking and then answering these questions:
1) Who is my customer? This seems self-evident but asking this question and answering it honestly in the plan goes a long way to determine the product or service itself along with marketing.
2) Why is the customer going to buy my product or service? This involves some honest questioning about what drives the value proposition of a product or service. What makes it unique? What makes it worth something?
3) How will they hear about my company? This is a basic marketing question that makes an entrepreneur come to terms with exactly the way in which his or her business will become known. (And, no, Facebook should not be the only way a business is known.)
4) How will the entrepreneur do the business? Once again, this seems like one of those obvious questions, but . . . this comes down to the nitty-gritty. Who will make the product and how? Who will offer the service and where and when? Who is going to open the door in the morning and who is going to answer the phone and reply to e-mails? How will you know if the product or service is good or bad? Who is the boss? Some businesses draw up operation agreements and operation plans that take up pages just to address this seemingly simple question.
5) How much will the product or service of this enterprise cost? Cost, that is, to the owner and then cost to the consumer. This financial planning question forces an entrepreneur to figure out if he or she can make money on a fairly priced item. It’s fairly common for people to overestimate by double or triple the price that a product can command on the open market. We’d all be millionaires if we could just make a simple product and sell it at four times the cost, assuming people will pay that price. But the problem is that it’s a competitive world out there and products or services many times simply won’t sell at a price that makes it worth doing. This simple question cuts right to the core of a business idea, encompassing marketing, competition and simple efficiency.
6) How much will the owner make? This drives right to the core of those ever-important expectations a person might have for their enterprise. Rather than simply assuming that the owner / operator will wallow in the great profits, this question puts a numerical value on what for some people is a vague concept. Put what the owner realistically wants to make in cash flow projections and see if it works. If not, some expectations and ideas need to be massaged.
7) Where does the owner / operator want to be five years from now? Is this business being started with the goal of selling in five years? Does the owner desperately want to be working away diligently in the back room far into the future? Is the idea to grow the business into many other branches or side-businesses, all springing from the same core idea? Or is the business being started to break even or even lose money as a tax benefit? These are serious questions that hit at the core of why a person wants to be an entrepreneur. It’s good to try and answer them ahead of time, not when five years rolls around.
For anyone pondering an entrepreneurial idea, answering these questions will do a lot to get started on the right foot.
Patrick Brower is the Enterprise Facilitator for the Grand Enterprise Initiative, a Grand County based non-profit that provides free and confidential business management coaching to anyone who wants to start or expand a business in Grand County.
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Ghosts, and goblins, and ghouls, oh my!