Posted by Eric C on August 31, 2000 at 11:42:14:
Hi Robert -
The old saying, “Failing to plan is planning to fail” is very often true.
In most cases, without a business plan, you’re going to have a tough time raising money from investors.
Oh, there are some that will take you up on your offers, but they may be “unsophisticated” investors; these are folks that might cause you problems later on. Your verbal agreements (promises) could be taken to be guarantees; that could interest a court or regulatory agency.
Most people are not prepared to lose money ; they are unable to face the difficult issue of risk. Our society places a great deal of value on monetary gains; we often equate making money with being “right”. For most of us, being “right” validates us and our strategies.
Most of us are wrong; nothing could be farther from the truth.
I would rather be rich, than be right. My goal is to select investments, businesses and other ventures that do not require me to be “right” to make me a lot of money.
After losing money, folks become angry (trust me on this one) – and they can take that anger out on you with the help of an attorney.
A well thought out business plan can (and should) help you to weed out some of these more undesirable investors (and projects).
It should spell out (in plain Englsh) exactly what you plan to do and cover every imaginable contingency.
Don’t be lazy here. If you cannot clearly express this plan on paper, how can you explain it to an investor? to a judge? to an opposing attorney?
I want to see a business plan every time I place money. No plan – no money. Period. No exceptions.
In addition to all the background information on you and your project, I want these five questtions answered:
- How much money do you need from me?
- When do you need it?
- What are you going to use it for?
- How are you going to pay me back?
- If everything goes wrong, what is your second source of repayment? In other words, how do I get my money back no matter what happens to you or to your project?
There are other things too, but these are critical.
The subject of business plans comes up a lot; you can explore this site for more information. In addition, many community colleges have small business programs to assist you in preparing a business plan.
PS - I know it’s popular here to just say “go for it” and that you “learn best by doing”. I agree with those sentiments when it’s YOUR OWN MONEY AT RISK – not when the money belongs to someone else.