How to Write a Business Plan
Most entrepreneurs recognize the need for a compelling business plan. A business plan 1) helps you set goals and gives you directions for reaching them, 2) gives you a yardstick for measuring your progress on the way to those goals, and 3) helps you demonstrate to others that you have an idea they should support.
How to Write a Business Plan
Analyze Your Audience
You should always start by identifying your audience, whether they be venture capitalists, commercial bankers, senior management, or others. And then you should ask what it is that each group needs to take away from your business plan.
Potential investors generally want to know that you have a viable concept, that there is sufficient market opportunity, and that you have a plan for getting there. Most importantly, however, they want to know that management has the ability to make the business a success and that they have a record of similar successes in the past.
A Business Plan Has Several Key Elements
Once you've decided you need a business plan, what should you put in it? Most business-plan experts agree that you need some combination of the following.
EXECUTIVE SUMMARY, which should be a snapshot of the entire business plan and which should clearly state the one or two key ideas in each of the sections that follow. Needless to say, you should write this last.
COMPANY DESCRIPTION. What does your company actually do? What are its vision, its mission, its goals?
DESCRIPTION OF PRODUCTS AND SERVICES. What does your company make, or what services does it provide? How will it develop new products?
MARKETING PLAN. How are you going to sell those products or services? How big is the market? Who are your competitors? What is your company's competitive advantage?
OPERATING PLAN. If you are a manufacturer, for example, what is your manufacturing process, and how will you get the labor and raw materials you need?
MANAGEMENT AND ORGANIZATION. How is your company organized and why? More importantly, who are the company's managers, and why are they the right people to make this venture a success?
MILESTONES. What hurdles do you have to get over to meet your goals, and when?
FINANCIAL PLAN. How have you performed in the past, and how do you expect to perform in the future? Financial projections have to be believable, and often different scenarios can be helpful.
Tell a Compelling but Credible Story
In a business plan, everyone wants to put their best foot forward. Everyone wants to communicate why their company is special and why they will succeed where others will fail. But you also have to be credible. If you tell a story that's too glowing, the reader may begin to wonder if something isn't up.
Once again, think of your audience. If you are targeting investment bankers or venture capitalists, remember that these are fundamentally sober people who are thinking of investing in your company. What they want is substance, not hype. Tell your story compellingly but straightforwardly, and emphasize your key messages. If your business plan reads like it would make a good article in Advertising Age or Fast Company, try again.
I once worked with a marketing-driven consumer-products company that targeted teenagers. They were experts at creating hype. That ability (plus a great product line and a dynamic management team) made them a huge success. They had a wonderful story to tell, but the first version of their business plan reminded me of their MTV ads. In this case, they had forgotten their audience.
Present a Consistent but Complete Message
If you've decided that your company's key strengths are, say, the diversity of its product line, its well-established distribution network, and its innovative management team, you should make sure that you consistently present that message. It may even bear repeating in different parts of your business plan.
But don't look at your company through a single lens. A business plan is a team effort. Involve Production, Marketing, Sales, Operations, Finance. Each new perspective will help you present a fuller idea of what your company is all about.
Here's where outside advisors and your Board of Directors can be particularly helpful. Not caught up in the day-to-day hurry scurry, they can step back and look at your business plan objectively. They can point out the (sometimes obvious) things you've overlooked, because they're not worrying about the widgets that haven't yet arrived from Toledo.
Look Professional but Not Slick
As part of putting your best foot forward, you want your business plan to look professional. It should be neatly printed and attractively bound, the format should help you emphasize your key points, and well-designed graphs and charts can be helpful. But don't overdo it. Most people realize that glossy documents take time to prepare and that often what they contain is yesterday's news.
Another company I've worked with originally planned on printing a four-color, richly illustrated business plan, but they finally realized that such a production would obscure, rather than enhance, their message. Not only would it have screamed "not urgent," but it would have raised questions about why they were willing to spend this much time and money. It would have made the reader ask, "Is this just a case of form without substance?"
So put your best foot forward, but don't forget the needs of the reader. Make a good case, but don't oversell. Have a consistent voice, but look at your business from a lot of different perspectives. And look professional, but don't give the impression that your business plan is just empty hype.
All the best,
P.S. Remember: a selection of my past newsletters is available online at http://www.holton.cc/archive.html.