I posted 10 questions on this topic last week. Today I have three more, on the same topic.
It sounds attractive, doesn’t it? Get a business plan by hiring somebody to do it for you? I can see how you’d think of that as division of labor, like hiring an expert to do design, or programming; have an expert do a plan. And you can do that, if you’re careful; but you really have to understand the underlying management questions, what you’re getting, and what you want.
Still, here are 3 more questions:
- What would you estimate to be the hourly rate of somebody with business experience, financial knowledge, and computer knowledge to do a competent business plan?
- How many hours would you expect that person to take?
- What would you get if you multiplied that hourly rate question by the number of hours question?
I don’t know about you, but I’d estimate $200 or so per hour for that first question. It would depend on the market, and the specific person, but we’re probably talking about MBA or CPA. I’d say 20-40 hours for the second question, although that depends too, on other factors. And for the third question, multiply $200 times 20 hours and you get $4,000.
So what are you planning to pay that business plan writer? And how is it that I see business plan writing advertised for a few hundred dollars? How do they make money like that? And if the plan writers’ prices are that cheap, is the plan quality cheap as well?
(Photo credit: Artem Samokhvalov/Shutterstock)
12 thoughts on “3 More Questions About a Business Plan Writer”
Hiring a business plan writer is like paying someone to do your homework.
I completely agree with Mike. Hiring one to do your business writing for you is like having a tutor for what you already know (and think you are better at).
Mr. Barry, as much as I respect your incredible amount of work in the field of business planning, I absolutely disagree with your reasoning for why one should do business plan development on her/his own as opposed to hiring a professional.
On an average, how many times in life one develops a business plan? – More than certain, it would be only once at the most. So, if your buy a land and you want to build a house only once in your life, would you do it by yourself or you would contract a building company to do it for you? Would you do the architectural drawing yourself, since you know exactly how the house you want to live in should look like, or you would go to an Architectural company?
How about preparing the cash flow projections that are required by lenders? On your financial projections, how would you account for the annual asset depreciation – as an increase or decrease to your cash balance???
I appreciate your role in empowering entrepreneurs by providing them with self-educational materials. There is a place and role for those too. But the point is that the business planning requires education, training and experience in different areas of business management such as finance/accounting, operations, and marketing. Do you ever wonder my more than 90% of the startups fail?
Galia, thanks, I’m glad you disagree and you say so.
I think you’re making my point: the idea that there is any use in developing a business plan only once, for example, is priceless. What happens for the rest of the life of the business? No planning? And really, projections prepared once by an outsider are going to help anybody manage cash flow? Do you think it’s hard to understand that depreciation is a non-cash expense? And if so, what happens for the rest of the business’ life? Nobody manages the cash? Call the business plan consultant to tell us what depreciation means?
What, me wonder why businesses fail? In context you seem to be suggesting its because they do their own management. Planning is, after all, management. Why would a business want to manage itself? Hmmm …
I sincerely appreciate your reply! The question is about the role of the Business Planners and the business planning development services. Are they important? Are they needed? Let’s give them (us) credit for the knowledge and experience we share with the entrepreneurs they (we) help.
You are making THE POINT- “Planning is, after all, management.” Someone, after 10 years of managing a customer service department for a mid-size company, decides to open a restaurant. Obviously, management skills are present; however, at a departmental level only. Managing a business, i hope you would agree, requires some skills UPGRADE. Self-study materials, on-line resources, and/or SBA seminars are great beginning for first-time start-ups but are designed to serve the wide public in a simplistic way. Why? Because their purpose is to preset a common case and answer common questions. The needs and the challenges for a 20K, 200K, 1M start-up obviously can be quite different and unique.
So, in cases of first-time start-ups, my point is:
1. Start with self-study materials- books, on-line instructions, how-to guides, seminars… to gain understanding about business planning.
2. Contact the local SBDC for business classes and/or seminars to help process the written materials.
3. Follow the instructions that are found in the self-study materials and document your research about the business idea and venture.
4. Call a Business Planner to HELP you analyze the “business story”, critique the outlined business development process, and review/revise the financial projections.
NOTE: Select carefully your business planner. He/she should have solid experience in finance, operations and business development and be willing to share knowledge not simply do the business plan proofreading. Look for a Mentor who can guide you and lead you.
The truth is this: besides just evaluating your business plan, lenders and investors determine how risky your venture is by considering the quality of the people on your TEAM. Who are they? – your Accountant, Attorney, Insurance Agent and Business Advisor (Planner). At the end of the day, these are the people who help you plan (manage) your finance (accounting, taxation), operations (production, marketing) and risk management (compliance, regulations, asset protection).
So, while nobody knows your business idea better than you, there are professionals who can help you by asking questions and requesting answers from you about your business venture about management aspects beyond your own professional and personal limitations.
Tim, what i am saying is that your resources are outstanding self-study materials, which have important role in the business planning process. Yet, there is a place and role for the business planners and advisors to step in and critique/finalize the entrepreneurs’ “homework” which is their business plans.
Galia: yes, I think now we’re on the same page. I can agree with you on your revised version here — if and only if there is money available for real help and guidance and coaching, but not if it’s just creating a plan as a document, never to be used. What you want to avoid is what I’ve posted here as my worst-ever business plan engagement.
There’s nothing wrong with getting guidance and help wherever you can, if you can afford to. The important thing is whether the plan is going to be kept alive and used to manage. Who owns the plan: the manager or the consultant?
Tim, I appreciate your reply very much! I agree! If the business plan is something that would never be used, then there is no even point of involving professionals of any kind. But if the entrepreneur is committed to his/her business idea, is devoting time and energy, and “failing” is not an option, then getting the right professional help at the right time is critical. Indeed it costs money, but failing to have accurate and reasonable business planning would ultimately result in both- business and personal disstress.
The role of the business plan should be to:
1. define the scope of the business venture
2. understand the competitive environment and the business opportunities
3. time-project MONEY – cost and revenue
4. answer the BIGGEST question – What is the return on my time & money invested in the venture? Does is make sense to pursue?
If the answer is YES and it does make sense, then the actual business planning comes in place in describing the organizational, marketing and financial strategies in the business development process.
As a Business Planner and Advisor, in most startup cases, i work with clients from crystallizing the business idea and planning the venture, to actually launching the business (“opening the doors”). There are clients who recognize the type of help they need and there are others who think they know everything. Yet, during the business planning process they realize that a business is not simply a buy-sell game, but rather, the business venture is a “live organism” requiring team of people and experts to prevent and reduce the risk of making costly mistakes and eventually failing.
As a Business Advisor, i also work with distressed businesses which in most cases are in the situation because of poor planning (financial and operational). And as you said earlier, planning means management. There are many like us with advanced business management training and experience. We are in business of helping other businesses plan/manage finance and operations in a prudent, orderly manner.
Again, thank you sincerely for your time and inputs!!!
To my readers: I moderate comments on this blog. Here’s the comment that was submitted 1/4/12, all of it:
What if you simply don’t have the time? Tim makes the point of it taking approximately 20 hours to write a business a plan… I have kids and a full-time job. Not to mention, there is a lot to be said for talented writing. Also, the $200 per hour thing seems a little steep. What if it’s $35 – $50 an hour? What if it takes less time? I was skeptical about the lower priced business plan services, but but I went to bankreadyplans and it worked out really well for me. I got funded. Period. Mike, you can say “i paid someone to do my homework”. I’m fine with that. Isn’t the main goal to get the loan?
It was submitted with the name Marcus and the email [random aim email address]
Please notice the tactic here, specifically the plug for something called bankreadyplans. What do you think the chances are that there is really a person named Marcus who submitted this comment, and not somebody using sleazy blog commenting tactics to put plugs up as ads, looking like honest recommendations?
I emailed back to the so-called Marcus, at the email address given, asking if he is a real person, why the odd email address, and what was funded, what kind of funded, for how much money … and (surprise) nobody answered that email.
So I googled the company name, and results were mixed. I have no personal experience with this company, but I think we’re seeing a marketing tactic here that’s less than upright. I’m writing this on the evening of January 4 and I’ll add to it if the supposed Marcus answers back.
I think it’s dishonest to go around pretending to be somebody else, talking about how you got good service from a company, when you’re really that company. Do you think that’s what’s happened here? I do.
I never got your email. I checked my inbox from January 4th. Why post my email address on your site?!
Marcus, bot, or whoever is running your marketing scheme — I’ve removed that email address in response to your request, 15 months later. I published it originally because nobody answered emails to that address, and it goes to the point of my comment, and makes it not much of a risk of violating anybody’s privacy. You, or somebody running your marketing scheme and impersonating a human, having found it 15 months later pretty much confirms the guess I made in the comment you refer to. Tim
Thank you for removing my email. I assure you, I’m not impersonating a human and I’m not marketing. i just made a comment on a blog that I enjoyed reading.
Good. Thanks for your comment.
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