The following post is modified from a paper I wrote for a graduate-level course in business management. I'm posting it because it is directly relevant to the business of writing.
If the world were a perfect place, entrepreneurs could
take their wonderful ideas, turn them over to honest business professionals,
and reap huge profits while pursuing the work they love. However, the world is
not a perfect place, and business professionals are not always honest. Even ethical
arrangements among honest parties sometimes fall short of expectations due to
improper planning and lack of funding. As Schermerhorn (2013) points out,
businesses go through three life-cycle stages—birth, breakthrough, and
maturity; each stage generates its own challenges which can undermine chances
for success. Having an initial business plan, being able to locate sources of
funding, and establishing both short-term and long-term plans can help new
companies stay on track; more, they can ensure the entrepreneur keeps her most
valuable asset: control.
What the Heck Is a Business Plan, Anyway?
A business plan is defined by Schermerhorn (2013) as a
document which describes the direction and financing of a new business. For some
creative people—and what entrepreneur isn’t creative?—writing such a document
can be akin to giving birth to Rosemary’s baby. However, if entrepreneurs want
to avoid their companies turning into a devilish offspring over which they have
little or no control, such as the namesake in the 1968 horror film, Rosemary’s Baby, a business plan can
make sure there are no unexpected surprises. Drafting a business plan helps
entrepreneurs study the market for their products, determine the sort of
products and services the company will sell, and even forecast the types of
employees needed to run the company (Schermerhorn, 2013).
Business plans do not even have to be formally written
down, unless one seeks funding from banks or other lending institutions. David
Riordan, owner of OOP! an arts and crafts supply store in Providence, RI, said
he formally creates only a budget while he and his wife discuss everything else
(“Do You Have,” 2003). Even so, a business plan can be very specific in
defining goals such as numbers of transactions, volume of business, and expected
income (Huseman, 2014). With such clear goals in mind, entrepreneurs can know
what they expect the business to accomplish and anticipate how hard they will
have to work to meet those goals.
Depending on the business, entrepreneurs might need to
precede writing a business plan by conducting a feasibility study. Such a study
helps the entrepreneur decide if a project is even worth pursuing (Hofstrand
& Holz-Clause, 2013). It can also
help entrepreneurs narrow the focus of the business, understand how to position
their products, and gauge the risks involved in starting the business
(Hofstrand & Holz-Clause, 2013). There is no point in proceeding with a
business plan if no market for the product or adequate sources of financing can
be found.
Financing--How to Get Money for Your Project
Financing is a major part of setting up and running a
business. Schermerhorn (2013) lists several sources of financing available to
entrepreneurs, such as debt and equity financing, venture capitalists, and
crowd funding. The last of these, popularized by Internet firms such as
Kickstarter, Inc., enables entrepreneurs to raise money by offering “backers” free
goods and services in lieu of equity. One author, for example, has rewarded her
backers who contribute small sums of money with downloadable “Epub” copies of
her book and a mention of support on her website (Ellyn, 2012). Such
arrangements have several advantages. They are relatively easy to set up. They
can encourage many people to contribute small amounts of money for no other
reward than “warm fuzzies” (“Feel-Good Crowd Funding,” 2014). They also help
entrepreneurs raise money without having to go into debt or give up equity in
their companies (“Feel-Good Crowd Funding,” 2014).
Long- and short-term plans must also be considered by
entrepreneurs. As with the initial start-up business plan, it may seem
counterintuitive to guess where the business may be in one, five, or ten years;
however, such a plan, if flexible, can be an asset to entrepreneurs. Thompson
Lange, owner of Landscapes Carmel, a furniture store in California, had a
three-year plan for his business to earn $1.5 million; however, he anticipated
that a sluggish market might push that goal back to five years (“Do You Have,”
2003). Lange also envisioned having a second store as part of his five-year
plan (“Do You Have,” 2003). Another entrepreneur, Patti Renner, used her
long-range plans as a “learning tool” and enjoyed adjusting it to help her general
merchandise business grow (“Do You Have,” 2003).
Don't Shoot Me--I'm Just the Comic Book Writer
Whatever business an entrepreneur seeks to establish—sole
proprietorship, partnership, corporation, or LLC—one of the main concerns is
control. A vivid example of what not to do can be found in the story of James
Shooter, former editor-in-chief (1978-87) of Marvel Comics. Shooter went on to
launch Voyager Communications, Inc., with two partners in 1989 (Berman, 1993).
By the early 1990s, Voyager’s Valiant imprint had successfully launched several
new comic book titles. But when conflicts of interest rose—in the forms of
dating, marriage, and nepotism—Shooter found himself outvoted and ultimately
ousted from the company into which he had poured his creative energies (Berman,
1993).
Shooter likely had all of these things—a business plan,
financing, and short- and long-term goals; his two partners, after all, were an
entertainment lawyer and a veteran publisher, while Shooter himself had been
involved in the comics industry as a writer and editor since the age of 13
(Berman, 1993). However, such experience
did not prevent one of the partners from dating a partner in the venture
capitalist firm backing the company. Shooter later allowed that he should have
walked away at that point; instead, he guided the company until it started to
turn a profit—at which point he was forced out by his remaining partner’s new brother-in-law
(Berman, 1993). Voyager became a successful company, but it did no good for the
creative entrepreneur who launched it.
No Guarantees--But Plan Ahead Anyway
The lesson from Shooter’s story is that even if an
entrepreneur does everything right, things can still go wrong. However, proper planning
can minimize the chances of entrepreneurs losing control of the company or at
least be aware of “red flags” which signal a shift away from the company’s
business and ethical goals. Writing a business plan, exploring suitable
financing options, and establishing long- and short-term goals can help
entrepreneurs retain control of their enterprises.
References
Berman.
P. (1993, June 21). How not to start a company. Forbes, 151 (13), 54-55. Retrieved from Business Source Complete database.
Do
you have a long-term business plan? (2003, December). Gifts & Decorative Accessories, 104 (12), 328. Retrieved from Business Source Complete database.
Ellyn,
R. (2012). Hot flashes of life. Kickstarter.
Retrieved from https://www.kickstarter.com/projects/1886729316/hot-flashes-of-life/posts
Feel-good
crowd funding (2014, February). Kiplinger’s
Personal Finance, 68 (2), 26. Retrieved from Business Source Complete database.
Hofstrand,
D., & Holtz-Clause, M. (2013). What is a feasibility study? Iowa State University. Retrieved from http://www.extension.iastate.edu/agdm/wholefarm/html/c5-65.html
Huseman,
J. (2014, September). Origination News,
23 (11), 1. Retrieved from Business
Source Complete database.
Schermerhorn,
J.S., Jr. (2013). Management (12th
ed.). Hoboken, NJ: John Wiley & Sons, Inc.
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