Mind Your Business: Starting An Answering Service

By Steve Michaels

April 2008

Q.  I am thinking about starting an answering service.  Do I need a business plan?

A.  Some entrepreneurs spend too long polishing overly long business plans (fifty to a hundred pages or more) when they should be completing a market survey instead.  It doesn't take a year of planning to figure out whether someone wants your service or not; all you have to do is start selling.

I recently received a call from a prospect who wanted to start her own business and outsource her traffic in lieu of purchasing equipment.  She spent hours going over the outsource agreement and is spending thousands of dollars on a Website.  Does she have one client yet?  No!

A recent University of Michigan study of 100 businesses started by individuals who graduated between 1985 and 2003 found no statistical difference in success between those started with a formal written plan and those without one.  According to Tom Kinnear, executive director of the Entrepreneurial Studies Institute at the University of Michigan, "Unless you need to raise external start-up capital from institutional sources, you do not need to write a formal business plan."  If you need money to start your business, venture capitalists often base their decision to invest on their trust in the people running the business as much as the idea itself. 

While a formal written plan itself may not be worth much, the planning process is essential in honing strategy and dodging potential calamities; just don't spend too long on it.  "Entrepreneurs should spend no more than a few months planning and writing a plan of less than twenty pages," concluded Kinnear.  It would be more important to define opportune sales channels and decide on the ideal price – decisions that have to be made before you hit the market.

Three key questions need to be addressed in the plan:

1)   Who is going to start and manage the service?

2)   What features/services will you provide that moves you beyond the competition?

3)   How are you going to sell your product or service?

Much of the real planning happens once you start selling and encounter situations that you may not have anticipated.  A business plan is just a compass pointing you in the right direction.

Steve Michaels is a business broker with TAS Marketing and can be contacted at 800-369-6126 or tas@tasmarketing.com for questions.  His Web site is www.tasmarketing.com.