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Why going cheap on your business plan is going to cost you.

Because nobody knows your business like you do.

August 9, 2019

Like most freelancers, I sometimes browse available projects and job offers on platforms like UpWork.com and Graphite.com, among others. It’s just part of my routine and, on occasion, I even respond to select requests that look like they could be worth my time. What puzzles me on each of these occasions is the seemingly infinite stream of job offers, which seek business plan writers based on a budget of “$250 or less”.

To me, budgets like this are completely unrealistic; hence, I tend to think that people get what they pay for and keep on scrolling. I know this sounds harsh, but the reality is that helping a client develop a solid custom business plan takes around 30 billable hours, and that’s not even a cushy estimate. What’s more, contractors submitting bids for $250 will only net around $200, because most platforms charge a service fee between 15%-20%. So, even if we were to spread this meager pay over just 20 billable hours, the contractor would end up working for just a hair above minimum wage. Of course, I’m aware that even hourly wages south of $10/hour go a long way in less-developed parts of the world. In the end, talent can be found in even the most unusual places, so aspiring entrepreneurs need to decide for themselves, if you going with a budget provider would help to add real value to their project.

Beware of Business Plan Mills.

But not everybody is playing it straight. A few weeks ago, I received an “Invite Only” request from somebody who was looking for help to complete “a nearly finished” business plan. In 7 out of 10 cases, this rhetoric is a dead giveaway that a professional bailed from working on the assignment and the project derailed. There are many good reasons for why I don’t meddle with another professional’s work and thus, decline such requests. In this case though the guy seemed in a real pickle; so, I agreed to take a look. The document he received was a mess. It was one of these bloated brochure-like business plans with an intricate layout, lots of images and generic, page-filling language. While the guy on the receiving end knew that his business plan wasn’t up to par, he had no idea he was facing a do-over. According to him, this was the product of a premier business plan consultancy, which claimed to have raised $4 billion and served more than 2,400 clients. Suspecting that neither was likely to be a true statement, I made contact with the firm. After eventually getting through to the consultant “in charge” and confronting him with the severe shortfalls in his document, he admitted to being only the project manager and that, due to the client’s limited budget, it was, in fact, a junior associate, who created this business plan. Of course, there was no junior associate. Following another verbal fistfight with the project manager, he gave up a Gmail address that led to a young guy in Nepal, who confirmed to have won the project on one of the platforms based on a bid of $300. He said that this was his fifth project with this buyer and that the buyer sometimes helps to “make good document for their client”. So, the premier business plan consultancy turned out to be a business plan mill. In case you are not familiar with the term, a business plan mill is nothing but a broker. They secure business planning projects only to outsource them to third-party providers often based on no other criteria than who submits the lowest bid.

In this case, their client agreed to pay $800 for a complete business plan, including 5-year financial projections. The business plan mill in return hired the guy in Nepal to do it for $300. The difference of $500 was profit for doing next to no work at all. They certainly didn’t add any value, let alone deliver a usable document. Unfortunately, this customer was already $500 out-of-pocket and short of filing a complaint with the Better Business Bureau and perhaps the FTC, there was little he could do. He was back to square one.

It goes without saying that not every business plan consultancy works that way. While most contract with third-party professionals, some do provide initial guidance and manage to produce somewhat decent documents. Nevertheless, profit remains a primary concern; so, aspiring entrepreneurs need to be aware that whatever they claim as their margin reduces the budget and leaves the actual professional with less to work with.

Be realistic. Be wise.

So, if you are an entrepreneur on a shoestring budget, consider that (i) founding even the most innovative, disruptive, and lucrative business requires a minimum of capital resources on hand. No investor will consider funding a new business concept, if the entrepreneur or team behind it has no skin in the game. (ii) Business plans by themselves don’t raise any money. It’s a myth. If that were true, I would be a millionaire many times over. (iii) Outsourcing the development of a business plan back-to-back will likely leave you with more questions than answers. That’s normal and even wanted, because creating a business plan is part of an important filtering process that’s essential for honing a new business concept. (iv) If enlisting the help of a seasoned professional is beyond your means, consider taking to pen and paper yourself. It’s your business after all and nobody knows it better than you. There are many quality resources that can help you get started. Writing style isn’t that important. You can always work with a seasoned professional down-the-road to tie down any loose ends. If you believe to be too busy to become involved in this initial strategy-setting process, you will only cheat yourself.

© 2020 Karl Mohr. All rights reserved.