How to Succeed at a Business for Young and Old

By Dani Greer

Here’s how Annie’s mind map is coming along so far. (See the two posts below this one for how she started.) She has covered who, what, when, where, and why of a business plan. Today she and her mother explore how. 

This is of course one of the most important parts of putting together a solid plan, and because it seems like a lot of work and hours, most entrepreneurs don’t spend enough time at it. But it’s better to do it now rather than when you are already in business and discover all kinds of expenses and rules and surprises you didn’t anticipate. Don't be impatient!

Once you’ve decided on a business and a location, you can start thinking about how much money you’ll need to earn every month to support the business and help it thrive. This is especially important if you’ve committed to a lease and other contractual agreements like yellow pages advertising, most of which require you to sign up for a year.

So start with basic monthly costs – the cash flow projection – and begin with the expenses you know for sure. These might be rent, utility costs, telephone expense, inventory costs, advertising expense, office expense for things like envelopes and postage, and so on. Write down everything you can think of. Once you know your basic expenses, you’ll be able to add up and get a total for the very least you need to earn each month. That sounds pretty easy, doesn’t it?

You’d be surprised how many people never get to this point. But it’s so important, and really is kind of fun. You haven’t actually spent this money, so pretending is an enlightening experience.

If you haven’t chosen a location for your business, estimate your costs for each possibility you have in mind. Now get really wild – do it again and give yourself a nice salary, add a few employees, and add twice as much inventory cost than you think you can afford. Now is the time to think big, and to explore possibilities! You aren’t spending anything except time and paper right now, so be fearless with your dreams. But be sure to put it all on paper so you don’t forget anything and so you compare your options.

It’s always a good idea to practice writing more than one business plan: small, medium, and large. Annie and her mom will probably look at a plan for selling their thank you cards from home versus opening a real store. The first step for Mom in that case would be to get the phone number for the owner of a store location she likes, and ask how much rent is. Then she would call the power company to find out how much the highest and lowest bills for that location were in the past year. Step-by-step, she would find as much information about all her costs as she can. Then she would add them up to see how much she has to earn each month. If she needs $5,000 for her shop, and is selling her thank you cards for $2 each, then she needs to sell 2,500 cards each month, right?

Which is a lot of cards to make in one month! Do you see a possible problem here? Now Annie and her mom have something else to think about! They can't make all those cards, so they might have to get other artists, which means paying them. Or they can make copies of their own art, but then they might have to buy a copy machine. Or they can just find printed cards to buy and resell. They have some decisions to make and maybe some new ideas to dream up.

So you can see already how planning can answer some very important questions. By thinking of everything you can, getting the information you need, and writing it all down, you’ll be better prepared for when you actually take the big step of opening a business. In the beginning, you can keep it simple like we did and still gather the ideas and facts you need to make good choices and decisions. Keep thinking until you simply can’t think of another idea!

Have you started your plan yet? What is keeping you from giving it a try? Tomorrow we’ll talk about what to do next if you’ve gotten this far.