Before you go rushing that freshly minted copy of your business plan into the venture capitalist’s office, there’s something you should know: that restaurant isn’t sexy.  Let’s step back and explain what we mean and then see if there’s something we can do to fix it.

The Lifestyle Business: Small Business Owners

Most small business owners are operating what we will loosely call lifestyle businesses.  These are the “mom and pop shops” and the “Main Street” type businesses that you read about when a new Wal-mart store is coming into town and (allegedly) threatening the livelihood of everyone who has an open sign hanging up in the downtown block of small-town America. 

These businesses are not typically the type that venture capitalists and investors want to pour money into.  Therefore, most of these small businesses rely on banks for business loans.  With the need for a loan, comes the need for a little different spin on the business plan, since you’re looking for debt instead of raising (selling) equity.

The Need for a Plan

On the surface you might say, “why would a small business owner waste time writing a business plan?”  It’s not like they are going after venture capital or aspiring to take the bistro or boutique public.  I would argue these people need business plans more than ever.  There’s more to a business plan than just attracting financing. 

In fact, many banks would be delighted to see a business plan for a small, lifestyle business.  They might make you the loan without a business plan if you have plenty of related work experience and good credit, but a business plan shows the lender you’re serious and you’ve thought through what you’re going to do.

Here are some excellent reasons to write a business plan, even if you just have a small lifestyle business:

Continuity Planning

Have a plan in place to keep the business running in the event you lose a key employee, which in fact could be yourself.  What happens if you get sick or injured in a car accident?  Having a plan in place to maintaining the business during these times will ease the amount of stress in your life and could ultimately determine whether your business will survive.  The bank will still want their loan payments regardless whether you’re sick or not.

Marketing Plan

The marketing plan should include strategies to help identify and reach your target market and how to develop a strong, loyal customer base.  This could be a number of things: from designing an effective advertising campaign, a frequent customer/loyalty program, a method of seeking feedback after the sale, a unique approach to requesting referrals, and so forth. 

I understand that small business owners can feel squeezed when a major corporation like Wal-mart comes to town to open up shop.  But having an effective marketing plan in place can help maintain and grow the business regardless who your competitors are.

There will always be competitors, or at least the threat of competition.  Having a plan in place will help maintain and grow market share.

The SWOT Analysis: Strengths, Weaknesses, Opportunities, Threats

Similar to the marketing plan, the SWOT (pronounced swat) analysis is important to determine where the leaks are in your business.  Strengths:  What do you do best?  Why do customers come to you instead of a competitor?  Weaknesses:  What do you need to improve upon?  Opportunities:  Where do you see potential growth in your business?  Are there additional segments of the market that you have not yet catered to and how do you reach them?  Threats:  How quickly and easily can someone else come in and duplicate your product or service?  What could you do to deter competitors from being interested in entering into business/competition with you?

Succession Planning and Exit Strategies

Eventually you will want out.  Or at least you will eventually die.  One way or another, the business will cease to be or will need to be passed on to someone else.  When the time comes to get out of the business will you sell off all the assets?  Will you sell the business to a competitor or someone interested in taking over the business?  Do you want to hand it down to a son or daughter?

So your bowling alley, restaurant, or gas station isn’t sexy in the eyes of the venture capitalist.  It’s still important to have a plan in place.  While it may not be a requirement to get the business started, it certainly does not hurt to have one in place and in writing. 

Thomas Goodwin is an Ohio licensed real estate agent (Realtor) and insurance agent.  He is the Founder and CEO of Northern Pine Properties, Inc., a real estate investment, development, and management company in Cincinnati, Ohio.

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