What is a business plan?

A New York man was forced to take a day off from work to appear for a minor traffic summons. He grew increasingly restless as he waited hour after endless hour for his case to be heard.

When his name was called late in the afternoon, he stood before the judge, only to hear that court would be adjourned for the next day, and he would have to return then.

“What for?” he snapped at the judge.

His honor, equally grumpy because of the tedious day and the sharp query, roared, “Twenty dollars contempt of court! That’s why!” Then noticing the man checking his wallet, the judge relented. “That’s alright. You don’t have to pay now.”

The young man replied, “I’m just seeing if I have enough for two more words!”

Emotions can be costly. And most people are emotional.

And unscrupulous businessmen know this. They even teach their sales people to take advantage of it. Appeal to the prospect’s emotions, they say, and let the sucker sign his name on the dotted line and be the one to defend the purchase. Meanwhile, advertising appeal to our fears or dissatisfaction, hoping to stir us emotionally so we would buy the products or services being peddled. This is the power of emotions.

Most people make emotional decisions and come up with the weirdest reasons to justify those. Take shopping for instance. Most equate shopping with an experience, which deals more with the emotional side of things rather than the rational. And watch how people mob stores just because they’re selling stuff at 70 percent off. And sometimes, even when you know your budget is limited, or that you don’t have the resources to make that expensive purchase, you go ahead and make it anyway. These instances have little, if any, to do with logic. But they have everything to do with emotions.

I am not against emotions. In fact, I am extremely emotional when it comes to certain things. But when emotions are not controlled and mastered, they can lead to disasters, especially when it comes to doing business.

Most people are scared of going into their first business. A business plan actually helps demystify this process. It takes some of the fear, the emotion, out.

But controlling emotions and mastering them is just one thing; in business, one also needs knowledge. You cannot create a realistic business plan unless you understand cash flow for one. And the truth is most people starting their first business seldom do. It is this lack of understanding about cash flow that leads most start-up business people to believe that all you need to be successful is to generate sales.

I have said this many times in my seminars, and I will say this again: To have marketing or sales people run their own businesses is risky. Throughout their corporate careers, most of them, if not all, have been exposed to all kinds of motivational talks and “Rah-Rah Rallies” on how to increase sales, and develop the “Can Do” attitude and achieve the impossible. Who knows, they may even have attended one of those talks of mine in their sales rallies (but, possibly, may have forgotten the saner and the more logical part of my presentation). Marketing people bring to their own business this ultra-positive and optimistic approach where sales is all that matters, without understanding cash flow. Then they end up sitting on the sidewalk, wondering how something so good could turn so bad and how the promising business could go belly up.

Cash flow is not sales. Neither is it the money you have in the bank.

What these and most people fail to realize is that, it’s not just about sales but having the right kind of sales. The kind that would increase your money supply because you have the right margins.

Set fancy emotions aside. Be honest about your business plan. First, understand that your capital is limited. Second, understand that you need to stretch it long enough to determine whether or not the business is viable. Viability means getting to the point where your business is generating internally the cash it needs to pay its bills. It’s the point where the business can survive on its own. Most important, you have the margins deep enough to earn you a profit long after the expenses are paid or the taxmen have gone home.

Does your business plan reflect all these?

Emotions are important, but you need to conquer and master them. Learn the lessons from those who were unable to do it.

(I’d love to hear from you! Click on to www.franciskong.com to send me feedback. You can also listen to my radio program “Business Matters” aired at 8:00 a.m. and 6:30 p.m. on weekdays over 98.7 dzFE-FM, ‘The Master’s Touch’, the classical music station.)