Tuesday, August 26, 2014

Business Plan Tip: Keep it short.

I had a guy -- an experienced businessman -- tell me that business plans are supposed to be at least 60 pages long, and preferably 80.  Baloney.  A business plan only needs to be long enough to cover the essentials:  Problem, Solution, Demand, Business Model, Marketing, Competition, Funding, Management.  If you can do that in 20 pages, great.  Anyone who reads your plan will thank you for being brief.

Monday, August 18, 2014

A Word on the Housing Market

Having worked in the residential development business I thought I would comment on the sometimes conflicting news stories we get these days on the state of the housing market.

Basically, the housing "recovery" we're reading about does not mean that the housing market is returning to its pre-recession normal.  Instead, a significant part of what we're seeing in the housing market today is the release of demand that was pent up during the Great Recession.  This is not unusual, and it is typically interpreted as meaning that the housing market is starting to recover.  However, things may be different this time around because of another factor that has not gotten nearly as much news coverage.

That other factor is that we have run out of financial band-aids to compensate for real household incomes that have been stagnant for the past 40 years or so.  Bringing more wives into the workplace, working longer hours and increasing household purchasing power with easy debt all propped up incomes for the past few decades and allowed the middle class to buy homes and other things which kept the housing industry and the larger economy growing.  But those band-aids are all used up and we don't have any others on the horizon.

In summary, there are some fundamental realities that need to be addressed before our housing market can return to the old normal.

Business Plan Tip: It's not just an investor pitch.

A lot of people seem to think that the reason they need to write a business plan is to raise money.  Wrong.  You write a business plan to plan how you are going to establish, operate and grow your business.  I can see how this misconception originates:  Before they invest or lend, investors and/or lenders often want to see the business plan to get an idea of how the business operates.  From that fact some people gather that the first step in raising money is to write a business plan.  That's wrong; Raising money is a secondary use of a business plan.