Small business planning
Posted by A Friend on 27 April 2009
Some people aspiring to start or get into a small business, especially those with available equity, often take proper business planning for granted. A proper business plan is typically required when applying for a business loan, but some people who do not need to apply for such loans may also tend to forget about the business plan, often to their detriment.
Take the case of Elsa whose eldest daughter Terrie was graduating from college. Like any good parent, Elsa was planning to give her daughter a good career start, and she thought getting her to manage her own business was the way to go. Problem was Elsa never had a background in business herself, so she did not really know where or how to start.
Elsa’s sister Brenda, on the other hand, married a local businessman and it just so happened that they had a small internet and arcade gaming business that they no longer had time to manage; or so they said. So they approached Elsa and suggested that it may be a good idea for her to purchase the business from them, with the eventual goal of getting Terrie to manage it after she graduates.
Elsa looked at this gesture as a benevolent offer from her sister and she gratefully accepted it without much thought. Meantime, Brenda offered for Terrie to work in the business part time to both learn how to run it, as well as have some idea of projected cash flows. The business was fairly simple to run, and cash flow was also reasonable.
What Elsa and Terrie did not know was patronage in the business was in fact declining, something that would have been readily apparent had they looked at historical revenue and profit records. They also did not know that a lot of the equipment used in the business needed constant replenishing, monitoring, and maintenance.
Elsa bought the business from Brenda in good faith, thinking that her sister was doing her a favor. But Brenda was in fact only disposing a business off that was already in its early stages of decline. It was only a year later that Elsa began to realize that she might have been taken advantage of by her own sister. Two more years later, she was forced to close the business down.
Roger is a slightly different case. He is Asian, and he comes from a fairly well off family of small business owners. He also just got married, and he and his wife Marcy are looking to start a business of their own.
But while the young couple has enough financial capital to start their own business, they could not really think of a good business idea. In the end, they decided to start small and low risk by buying a coffee shop franchise of a well known global brand. The only problem is despite the brand being popular globally it was fairly new in Roger and Marcy’s market.
However, instead of doing their own research to determine the feasibility of the franchise, Roger and Marcy relied heavily on information provided by the master franchise holder, which were all very positive. That and they also went to various religious temples and performed rituals asking gods and ancestors for blessings.
One ritual was to ask basic yes or no questions of the ancestors. To determine the answer, they will throw flat incense sticks in the air with labels on both sides. If the number of incense sticks landing with the right side up is more than those landing with the right side down, then the answer to the question is yes; otherwise, it’s a no.
The quirky thing about this process is if you are not satisfied with the answer, you can ask the ancestors again and again, like a child begging a parent for ice cream before dinner until the elder relents. Suffice it to say that Roger and Marcy did not leave the religious temples until they got all the blessings they wanted to start their own coffee shop business. The coffee shop business lasted less than two years.