Good Business Planning Involves Creativity

You can't say that Chip Conley, owner of San Francisco's second-largest chain of independent boutique hotels, didn't know better. Conley had heard — many times — about the importance of a business plan. He even knew the essential elements of a strong plan. But since he had written so many of them

"I was tired of them," recalls Conley.

Tired of writing business plans, but full of enthusiasm and passion for his idea — the Phoenix, a hotel catering to the rock-and-roll set — Conley set off on his own at age 26 with one big goal in mind: 10 hotels in 10 years. His employer, legendary rock-concert promoter, Bill Graham, had told him that there was a need for this type of specialty hotel, and Conley's background was in real estate. What else did he need?

Of course, he needed funding. And, from his business school training, Conley knew that meant he would need some sort of a business plan to show potential investors. So, Conley pulled together eight pages worth of his ideas. One page focused on financial projections, the rest painted a psychographic picture of his intended customers. In his mind, Conley had planned for the first hotel and each subsequent one to be designed based on a magazine. "The Phoenix was Rolling Stone," says Conley. He also came up with five terms to describe his concept and his target market. His choices for the Phoenix: young at heart, hip and funky, irreverent, adventurous and colorful.

His short but well-envisioned business plan raised $1.1 million to build the Phoenix, a hotel that would rise from the ashes in the Tenderloin, a rundown but well-located San Francisco neighborhood. Conley's passion for the concept helped when he ran short on money. "I underestimated both revenue and expenses," says Conley, who based the numbers for his first hotel on pure instinct. "Now my investor projections are very conservative."

The low cash flow taught Conley two lessons. "Follow your dreams — and create a plan," he advises. "You need to feel passionate about what you are doing to keep you going, but you can't just rely on your dreams. You need both dreams and a plan."

Today Conley has topped both his mental and paper-based plans. Joie de Vivre Hospitality now owns 25 boutique hotels in the San Francisco Bay Area. His camping resort, Costanoa, Conley envisioned as a hybrid of two magazines: Outside and Vanity Fair.

— Susan Smith Hendrickson