Business Planning

For people who have not tackled writing a business plan before, I suggest that you put it off for five minutes and read a 500-word article, "Five wAys to more success before you start." Then go back to the task in hand.

Make sure you focus on the territory and not the map¹.

Should you or should you not write a business plan?

You may think that they are only for those people who are in the high-tech game and want to raise money from a venture capitalist. Wrong.

Even if you're building a kitchen-table or lifestyle business, you'll be likely to fail without writing a business plan of some sort. It's interesting to know though, that only 53% of the Inc. 500 CEOs surveyed (in 2004) created formal written business plans before launching their companies, but I bet the others did do some planning. They just did not call it a business plan.

How to write business plan is a tough question to answer, especially since it can take many forms.

The Purpose of the Business Plan

It can vary from

• a back-of-the-envelope kind of a thing for you to get clear focus (you'll be surprised how helpful this is);
• a here's-an-opportunity-for-you appeal to friends and family (you want their support, but they will be risking their money, too);
• a give-us-a-loan request to your bank (who want above all to judge whether you will be able to repay and what security you're offering);
• an I-need-a-loan-guarantee evidence for the SBA or a Government body (they have to avoid being profligate with public money);
• a surely-this-venture-qualifies application for a grant or sponsorship (these state/foundation guys want to see if you can meet their objectives as well as your own);
• a can-you-help-with-money-and-experience pitch to an angel investor (who will need to see an opportunity and like the proposition as well, since they are doing it for money and enjoyment);
• an all-bells-and-whistles-formal-plan seeking serious funding from a venture capitalist (they will be after high growth and an exit strategy + few invest in startups or what may be called Series A funding).

It is possible that you'll need more than one of these at some time and you may need to move from one to the other, but in any case the underlying principles for any kind of business plan will remain constant.

Keys To Successful Business Planning

• start with yourself—know who you are and what you want
• remember that your habits can speed or delay success
• be clear about purpose and execution
• answer the question, "why do it?"
• define the problem and your solution—the value proposition
• ensure a workable business model—how will revenue come and where from
• create a clear vision—to steer by and make course corrections when needed
• search for what and/or who is missing—evaluate necessary resources
• know the market opportunities for your product and who your customers are
• set achievable strategies—far too many business plans are overly optimistic and fool no one, even you
• establish quantified goals—you need some idea of scale
• state realistic numbers and timelines—it's vital to have something to aim for
• be honest on risks—do a SWOT analysis
• share drafts with valid reviewers—don't be shy, nor worry about confidentiality (most VCs won't sign an NDA)
• polish the plan to perfection and set firm milestones.

Seven Caveats To Bear in Mind

1. When to do it? Not at the very beginning. That's when you need to 'know' what IT is, why the world needs IT, who it's for and how they're going to buy IT. You need to start selling as well as figuring out how you're going to make money. Plan when to plan, though.
2. Since so few businesses actually get to pitch a VC firm, I suggest you stick with the nuts and bolts. I prepared a small business plan for WorkSavvy, even though I needed no external funding. Why? Because it helped me to get clear about what I was going to do and see where I had no answers. A business plan provides a benchmark for the life of the business. It also provides a discipline and a reality check on yourself.
3. Bear in mind that your business plan will be little use unless it is dynamic, you update it and change it as your thinking and data evolve. According to a survey of Inc. 500 founders, of those who had prepared business plans, 65% said they had strayed significantly from their original conception, adapting their plans as they went along. My experience of business plan writing tells me that a plan will get significantly rewritten several times, even if the purpose of the business remains constant. If you are not learning from those who give you feedback, you will probably not make it in business anyway .
4. BUT do not change the financial forecasts in mid-period, once the business has started. If you do, you'll confuse yourself and anyone else who reads them. A 'financial person' I monitored (as a board member of a VC company) changed his forecasts every couple of months. At the six-month stage, the management of the company had no idea where they were and I had no way of understanding anything anymore. At the year-end, the company was in trouble and he departed.
5. Do not be too verbose. Keep the document to 30 pages maximum. If you can't cover the ground in less, it may mean that you are not yet clear enough to press the button. Put the detail in appendices.
6. Who does it? No one can tell you how to write a business plan! At least not yours, even if there are many helping hands available—including WorkSavvy.
7. You need to write or mastermind the writing of the business plan yourself. Of course you can, and probably should, get help.

On Your Own or With the Team?

If you are building the business as a team, then the team needs to work on it. The lead entrepreneur will naturally enough take the lead and will draw up a timetable (weeks/months) with responsibilities clearly identified; critical path analysis is useful.

Planning the plan will involve knowing when you need what data/numbers. Chances are that by now you are working with an outside accountant and he/she will have things to say about the numbers, but do not be tempted to sub-contract the business plan to the accountant or any one else.

There is a huge amount of advice on writing business plans (in addition to the services of WorkSavvy). One is my own Guide to Creating Your Own Good Fortune: Setting Standards for Business Success. Another is to use business plan software. You will find strong proponents as well as strong opponents of using software. Either way, it is vital that you chose software that is highly adaptable and you should never simply 'fill in the blanks'. If you do, it will be obvious to the reader that you have not really considered things carefully enough.

What the Business Plan Is and Is Not

The business plan is

• a way of testing yourself and your ideas as much as writing a sales pitch for the bank or investors;
• about finding out what you don't know—you'll see the gaps and probably will know how to fill them;
• the means by which realism can be injected into the vision;
• an opportunity to describe and assess all the functions of the business;
• a disciplined way of avoiding self-deception—disclosing bad news to yourself;
• a document you can share with others, get useful feedback and reinforce your resolve;
• a matter of writing things down to encourage your own commitment;
• the basic tool for codifying how the end results are to be achieved.

The business plan is not

• cast in stone and is likely to go through many iterations;
• going to gloss over missing material and human resources, since the writer almost certainly hasn't got them all;
• a way to avoid the evidence staring you in the face;
• about making over-optimistic claims— your forecasts will probably not turn out to have been right.
  

The business plan is unlikely to

• work out to the letter;
• achieve capital funding (probably fewer than 0.006% of all US business plans do);
• be convincing through the use of adjectives and especially not superlatives.

Tools For Business Plans

A Business plan outline will not solve all your problems, but can help you sort out how to plan your plan. The link takes you to my suggestion, but you may want to compare it with others and decide what makes sense for you.

If you want a simple and inexpensive guide to writing a business plan, beyond what is here, get How to Write a Business Plan.

If you do use software, my opinion is that you should use BizPlan Builder from JIAN, with whom I have built up a good partnership. Burke Franklin is continuously improving the product which he originally created from his own experience of business startup. The thing is that, whether or not you intend to produce a full blown plan, using Burke's package will ensure that you cover all the bases and the tools contained in the package can be used individually—the income statement spreadsheet, for example. "Write your business plan so you can build and run your business without investors. Then they'll want to invest," says Burke Franklin, one of my alliance partners (see his BizPlan Builder product to help you write your business plan).

Business plan competitions have a couple of uses. The first obviously is that you might win and prize and some money. But the second is that you will have a deadline to meet and some structural requirements to follow. They may help you produce a plan that works.

Assuming that you have now written one, you can get a review of your business plan by WorkSavvy in seven days.

John Mullins, head of the Entrepreneurship Faculty at the London Business School and author of The New Business Road Test has some excellent advice about words to avoid in a business plan:

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1. The amazing map oat the top of the page shows the island of Corsica, where I used to live. It was produced in Pri Re'is in 1551. The interesting thing is that though it would be considered 'inaccurate' today, if you know the island, you will recognize that the schematic nature of the map really is still a good guide about 500 years after it was drawn. A good business plan never works out exactly, but it should provide a very good general picture of what the business is about, where it is going and its main features—just like the Piri Re'is map. You can see the original, by the way, in the Topkapi Museum in Istanbul.