QUESTION.
I'm a medical doctor and I have some cash I want to invest. I have a close friend who is a successful small business owner. He knows his business pretty well, and he would like to open another store in a distant county from where we live. He wants me to finance the new store. I have heard his idea, but he has not written a business plan documenting the soundness of the idea. Should I require him to prepare a business plan before I agree to finance the project? Please advise.
ANSWER.
Yes. You should require him to prepare a business plan. You can help him prepare the plan if you like. Two heads are usually better than one when it comes to putting together a business plan. The key thing to keep in mind is studying the existing market where your new business will be started. Study the competition. I can't say this enough. You want to know who their customers are. You want to know how they market their businesses so customers buy from them. And you want to know what their gross revenues are.
After you have answers to the above, you should be able to figure out what the gross revenues of your market are in total. You strategy will be to grab a certain percentage of the market. Your business plan will explain why you can grab that percentage and how you will be able to grab that percentage. If you do a good job explaining those two things, then the finished plan will be your roadmap to grabbing that percentage of the market and in the process becoming a business.
Without a sound business plan in place you would be putting up capital to start the business with little security. Successful entrepreneurs are masters at miminizing risk in the things they do. And having your friend prepare a business plan will go a long way to helping you minimize risk.
I hope my comments are helpful to you. Good luck! Regards, -Jeff
Jeff Lippincott
SCORE.org Counselor
Princeton, NJ
scoreprinceton @ aol.com
www.scoreprinceton.org
www.jlippin.com
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