When Ron Cook talks about business he often refers to the mythical pie from which everyone wants a bite. And he knows that to get a piece of it means following the right recipe, and that, to an entrepreneur, is the business plan.

Cook, chairman of the entrepreneurial studies department at Rider, will give the first workshop of Global Entrepreneurship Week at Princeton when he presents, “Writing a Business Plan … Are You Crazy?” on Tuesday, November 18, at 9:30 a.m. in the Frist Center. The workshop kicks off a day-long series of free seminars and workshops aimed mainly at promoting entrepreneurialism to young adults (see page 6). For more information, call 609-392-3800.

Cook, who also heads Rider’s Small Business Institute, grew up in New York and earned his bachelor’s in business from SUNY at Oswego, and his MBA and Ph.D from Syracuse. Between degrees, Cook worked with his entrepreneur parents (who still own an ATV and snowmobile franchise after 35 years) and started his own mobile disc jockey service. He came to Rider in 1993, where he developed a program and major in entrepreneurial studies, and created the Center for Entrepreneurial Studies.

Though a business plan is mentioned to everyone looking to start a business — and is one of the most important tools for an entrepreneur to have on hand — not everyone bothers to write one, Cook says. “Most businesses don’t have a business plan from the get-go,” he says. “A lot of entrepreneurs go into business with a ‘Heads I win, tails I don’t lose much’ attitude.”

And while this is all right for some types of businesses — IT companies, for example, or any other type of business that is in a continuous state of change — crafting a blueprint of your company-to-be, says Cook, should be on the minds of every budding entrepreneur. The reason why this lack of planning works for some and not for others lies in what a business plan ideally is supposed to represent — a snapshot of your company three years out. Some types of businesses — a bagel shop, for example — will not fundamentally change in three years while technology, development, and IT-type businesses change almost daily.

Think of cell phones over the past 10 years. In 1998 cell phones retailers cashed in on selling pager/phone packages. Three years later pagers were made obsolete by text messaging, and three years after that Internet companies started making phones mini versions of a laptop. And as the business changed those who could not change with it were left to antiquity. It is, therefore, admittedly hard to write business plans in such lines of work. “Your plan might be obsolete in four months,” Cook says.

If there is a watchword inherent to the business plan it is stability. More than anything, says Cook, business plans provide entrepreneurs with a valuable recipe to follow as they grow their companies and show potential investors that their money will be in good hands a few years from now — even if the type of business you are in is one that keeps changing the rules mid-game. One of the key elements of a business plan, Cook says, is its managerial projections, which should show entrepreneur and investor alike how adaptable are.

“Investors buy into an initial concept,” Cook says. But in the long run, when their money is supposed to be coming back to them, investors are more interested in the management’s malleability. “Ask any venture capitalist,” he says. “They’re betting on management.”

It’s a guessing game, yes, but at its core is a need to understand the fundamentals of your business, perhaps even more so than the specifics. You might not know what the cell phone business will be like three years from now, but you should know that while you might still be in communications three years from now, you might not be in cell phones anymore.

A business plan, then, should concentrate less on your fabulous idea and more on the roadmap you plan to follow. “I teach developing business plans from a process standpoint,” Cook says. “I couldn’t care less about your idea because your idea will change.”

Essentially, Cook says, if the process is soundly outlined, things will fall into line.

What is it good for? Ideally, a business plan provides an entrepreneur with three main advantages. First, it helps you think through your idea and define your business.

Second, it gives you a roadmap against which you can check your actual progress. Are you really bringing in the sales like you had hoped by now? Or, have you launched the next product or version of it on time? Third, business plans can be a remarkable sales tool. It provides potential investors with something concrete, projections against which they can weigh their interests and risks.

Importantly, says Cook, a business plan, when used in the elevator pitch, needs to have the “three Cs:” concept, customers, and cash. Investors will want to know who you are and what you do, who you plan to make money from and how, and what kind of cash flow you expect these customers to provide.

Critical Elements of a good business plan. Starting with the executive summary (i.e., the elevator pitch), a good plan should quickly follow with the business concept and a study of the external market. Understanding the market and the competition helps zero you in on your share of that market and define what makes competitive sense. It also allows potential investors to see how you differ.

Next should be a general marketing plan, including sales projections, operations costs, management profile, and a summary.

The one mistake to watch out for. “People make up numbers,” Cook says. “They show me first-month projections of $10,000. I add two zeros and tell them if they’re going to make up numbers, at least make up something big.”

While no one has a crystal ball, Cook says, there are ways to arrive at sensible revenue projections. If you do open that bagel shop on Route 1, how do you know you can bring in $1,700 in your first month? Well, if you calculate 67,000 cars a month pass by the shop and figure that 1 percent of those cars will pull in for a bagel and coffee at $2.50 a customer, the grand total for the month comes out to almost $1,700.

Is it accurate? Who knows. The important thing is that it’s a reasonable conclusion. “It’s a huge difference from just writing $10,000.”

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