My friend and accountant Bob Cole used to say that he loved when entrepreneurs came into his office with a business plan that fit on the back of an envelope. It made it easy to grasp the essence of what the business was trying to do, how it would work, and the amount of profitability. As businesses grow, we often lose sight of the essence and simplicity of the key drivers of what makes our business successful. Then it’s time to return and write it all down on the back of an envelope again.
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What is a back of the envelope business plan?
Hi Everyone. I’m Coach David J. Greer.
I want to talk to you about the back of the envelope business plan. My long time sailing friend and accountant Bob Cole used to tell me that he loved when an entrepreneur came into his office and had a plan outlined the back of an envelope or maybe on a couple of restaurant napkins. That’s a back of the envelope plan.
Why do we like these? The idea is that you can take the core of your business and write it on the back of an envelope. What I’ve seen works best when doing a back of the envelope is figuring out for example each sale. Say the sale is for a $100, it takes you $30 to build the widget that you are selling, it takes you so much money to sell it, and there is this much left over, and this is what the profit will look like.
In that discussion, you already know what the channels to market are going to be because that is factored into your cost of sales. You have some notion of how you are going to make your widget or create your service. Finally, it shows you how much money you are going to make.
Also, on the back of the envelope we would usually write down some notion of what you have to invest in order to get those sales. Or how much investment for 100 sales or a 1,000 sales. You have an investment thesis to go with your sales thesis and profitability thesis. That’s why if you are doing this at a restaurant you might need a couple napkins.
Often times you are doing this with another person. Often times two people can make a business better than just you thinking of it yourself. It’s okay if you are just by yourself and you’ve written it down on the back of the envelope.
I think as an entrepreneur whatever stage your business is in you should be able to describe the core, the essence of your business and the financial metrics of selling and investing on the back of an envelope. You should be able to do that at any time.
What I have seen is that as businesses grow and inevitably get more complicated, we lose this essence. A lot of my work as a coach and as a facilitator is to peel away the layers and get back to this really core, core notion about your business. As often times to go capture profitability and efficiencies is to get back to really understanding this back of the envelope idea. Because after all the back of an envelope is not very much paper to write things down. If you can get it all down there, then you really understand your business.
If you would like help in simplifying your business, understanding it at a deeper level, or making it grow to whatever next level you want, I’m here to help. Give me a call, send me a text message, send me an email. Let’s book time to be together and see how I can help you simplify your business so you can write it down on the back of an envelope.
