Great entrepreneurs have the tenacity and drive to keep trying until they find a way. They are not afraid to get started even though the business plan may not be perfect. They understand that a business plan is always a work in progress – which it is a living, flexible strategy that constantly needs to be reassessed and reworked to remain current and keep the business alive.
It’s the ‘business think’ that goes on behind the business plan that enables your business to fly.
The Case for a ‘Business Think’
Business plans are static and are far too often created by third parties who have no understanding of the business.
A Business Think is a living document created by the entrepreneur who is cognisant of the fact that the business environment is constantly changing and morphing and it’s more important that the entrepreneur is able to adapt quickly and effectively than to stick to a plan that was created by someone else, a month ago.
Banks and funding agencies all too often make the mistake of using the plan – and not the person – as the indicator of merit. It is therefore very disheartening to see rejection figures, such as those from the National Empowerment Fund which, in 2006, rejected 95% of the written applications it received, for non-compliance with its selection criteria (World Bank Report, Enhancing the Effectiveness of Government in Promoting SMMEs, 2007).
Were none of those rejected candidates worthy of support?
On the other side of the coin, it’s all too easy to employ a consultant to write a business plan for you. This may make you look good on paper, but unless your own careful thinking has gone into the plan, it is unlikely that you will be able to make it work in practice.
If we are to speed up the development of the small business sector in South Africa, we need to rethink how we select the beneficiaries of enterprise development initiatives. Just because there isn’t always a great plan to show, doesn’t mean that the individual behind it doesn’t have the potential to succeed.
Why I Back the Jockey, Not the Horse
In my own experience, in enterprise development, it’s always best to back the jockey and not the horse. I prefer to select candidates for our small business support programmes through a stringent, face-to-face procedure, to identify people with the right potential, not the best plan.
Those are the entrepreneurs who benefit most from support systems and they are the ones who go on to build great businesses, create jobs and make a real contribution to the growth of our economy.
If, however, I do look at business plans, I’ll take the following in consideration:
- How sensitive the business is to 25% changes in sales, cost of sales and expenses. This will test the rigor of the business model and its ability to survive the highly probable changes in these three line items. A business plan needs to be adaptable and flexible.
- The management team’s salaries. The closer the salaries are to the market, the less interested I am in the business. Market-related salaries depict and reflect a lack of risk-taking by the entrepreneur and, in some way, a lack of confidence in the business to generate profit into the future. Salaries that are related to the profitability of the business are seen in a far better light.
- The quality of the management team. Here I look for relevant experience, history of risk taking, prudence, a common vision amongst the team and, finally, a set of complementary skills.