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I’m sure you have.Plan B is what you do when Plan A disappoints you, or just doesn’t work.
I have found that while most people like the idea of a Plan B, most people never actually take time to create it. We often consciously start thinking of our Plan B just at that moment when we realise Plan A has failed.
Most people create Plan B in a panic, without any forethought at all. Why should you have more than one business plan?
Many entrepreneurs have just one business plan – Plan A. That’s the plan they present to potential investors and lenders in the hopes of raising capital. In this business plan, we usually assume we will have start-up capital on hand to kick off and grow the business.
With this capital, we will pay the office rent, purchase equipment and stock, build the company website and hire staff. And once all of this is done, we will make a $10,000 profit in Year 1, $85,000 in Year 2, and $165,000 in Year 3.
What a beautiful plan! Round of applause. But I have a quick question though: What if you don’t raise that initial start-up capital? What if you don’t get the money to rent an office, buy equipment or hire skilled staff? What happens to all your expectations and profit projections?
You see, these are the types of questions many entrepreneurs prefer to avoid. Because we’re eternally optimistic people, most entrepreneurs prefer to look on the bright side of things – where we raise all the capital we need to start and grow our business.
But do you want to know the truth?
Every year, up to 90 percent of entrepreneurs FAIL to raise capital, especially from professional funding sources (like banks, venture capital etc.) The chance that you will raise start-up capital through these formal funding sources is just about 10 percent. Given these odds, you better have a Plan B.
What should be in your Plan B?
Good question. Your Plan B is all about what you’re going to do if you don’t raise the start-up capital you’re looking for.
Because many entrepreneurs don’t think carefully about a Plan B beforehand, they’re totally confused, frustrated and disappointed when they can’t raise capital. The lack of a Plan B is a big reason many entrepreneurs abandon their business ideas.
So, if you don’t raise that capital you plan to use for office rent, equipment and staff, what are you going to do? What other options are available to you?
Can you start the business from your home instead of a rented office? Can you lease the land, equipment, and machines instead of buying them? Can you bring a business partner on board who can contribute some of the resources you cannot afford? Do you really need that website now? Can you create and use a free social media page until you can afford a website?
Entrepreneurs who have a Plan B are LESS LIKELY to abandon their idea, business or project when they fail to raise capital. They are more flexible, resilient and adaptable to the shock, disappointment and frustration that most people suffer when they’re denied access to funding.
And you know what?
Having a Plan B is not the big deal. Having the guts to think of a Plan B is the real big deal. Most people don’t think like that. Most people prefer to hope, wish and pray that Plan A works.
But successful entrepreneurs are real and practical people. They always think of the “worst case” scenario. That’s what calculated risk is all about. If you really want to succeed in business, you must always be ready to respond to any surprises that life sends your way. If you don’t have one yet, start working on your Plan B.It’s the sensible thing to do.