Yeah, we all groan about writing them, and put doing so off as long as possible. What’s worse, how many business plans wind up in a file drawer, or in the cloud, never to be read again? So, I just have to ask “What is your business plan for?”
First, your business plan is your road map of how you are going to accomplish what you set out to do. Remember ‘Crazy Ivan’s’ from the movie Hunt for Red October? The Russian submarine skipper made a wildly wandering path to confound the hovering enemy. Well, random action might be OK for a movie about the Cold War, but it sure isn’t the way to make your start up succeed. Let’s not leave anything to chance.
Plus, your job when you create a business plan is to inspire confidence in your business. Be convincing.
Your business plan is your roadmap to success. The Executive Summary and pitch deck may be your primary tools for seeking funding. But your business plan is your internal key to organizing your own thoughts at a much deeper and more detailed level.
Some investors want to hear more than how cool your widget is, how it will change the world, revolutionize a market, and/or make us all sleep better at night. These investors want to know how you will create whatever it is you’re creating and how you will market and sell it, and most of all how much you will return to them for their investment!
In short, your business plan should indicate a clear path to that end. Your start-up is not a non-profit and startup investing is not philanthropy; no one will invest solely for a worthy cause.
For example, how will your product be delivered, by whom and to whom? Obviously, you have to know your market, who your potential customers are. What’s more important is knowing how you will get your product to your purchasers. Whether your product is B2B or B2C, delivering it will be critical to getting it into the hands of your customers. To convince potential investors you will succeed, you must present a compelling, well thought-out distribution plan. Even if you have the coolest blue widget in the known universe that surely will attract a tsunami of buyers.
In architectural terms, your business plan is the concept drawing for what you will build. Why, you might ask, not make full architectural drawings? Well, you want to play your cards close to your vest until you know a bit more about your investors. Is this investor looking at competitors in your field? Has she or he invested in a competitor?
It would be naïve to overlook that potential investors may want to hear about your project because they are benchmarking another they are considering in your space. To attract investment, you’ll need to walk a fine line between outlining your plans and revealing too much too soon.
The basic elements of a business plan are available in many how-to’s online, in courses and in books. There are plenty of free templates online, but generally they’ll need editing to be usable for your company. For one thing, it leaned a bit basic. Feel free to edit out what feels like beginner enthusiasm. Similarly, feel free to rearrange core elements according to what you believe will impress and convince your funding target, or targets. Print out the pages and set them side by side on a large surface. You will easily see the best way to organize your arguments.
What are the core ingredients for a business plan?
- Projected revenue and three to five-year Income Projections – best to lead with this. After all, you’re in business to make money, right?
- Products and services – what are you selling
- Target market – who are you selling it to
- Marketing Plan – how to get your market to respond
- Competitive landscape and advantage – who else is selling in this space
- Management and Team – why are you the people to become the leaders in the field
Of course, you will want to include your vision, mission and goals, and a really good narrative in your executive summery that illustrates the problem you are solving and it’s universality, in other words – why you are in business.
Pretty standard stuff. But wait. Notice something there? Management and team follow all the other elements. Why? Have we not said many times a critical requirement for an investor is a management team that can take it to the finish line? Sure, but HOW depends on more than a crack C-suite and engineering squad. In order to be convincing, you need to articulate how your team will do that, and how this will make everyone positive returns on their investments of cash, time, passion and smarts.
Also, if you are writing a business plan in response to a specific request, make sure you include answers to the questions asked. When you have the attention of a potential investors, this is no time to go boilerplate.
#1 - Financial projections – be sure to include some detail on your short and long term financial requirements and the milestones you set for each. After all, your use of their funds is of keen interest to your investors. In a similar vein, your keys to success and how you have achieved them, or will, or how the climate is right -- right now – for your product, will serve to compel and convince.
#2-- Your product distribution -- Of course you have your production and supply chain figured out. Now ask who will deliver it over what distribution network? Will your distribution depend on people, or will you be able to automate connecting your customers to your product? Do you need to develop an interim solution that is possibly not as fully functional as your vision, yet will serve your market – and bring in early revenue?
Without doubt Steve Jobs envisioned the iPhone early on. But what he brought to market first was the iPod, to address the market for portable music in a sleek touchable case that was tiny by conventional standards of the day. Remember ‘boom boxes’? While he taught us all to walk around with our own personal soundtrack in a highly pocket-able form, instead of a large box on our shoulder, or even a Discman or cassette player, he further invented a similarly elegant way to deliver content online via iTunes . . . and oh, by the way, created another revenue stream!
This kind of thinking, that is, iterating your development and finding early and scalable revenue streams, is just what investors want to see in your business plan. And for you, an excellent exercise for mapping out your path to success as well. Many founders are engineers, and so more focused on their products’ innovative features and creating more of the same. This is not enough to make a business.
So ask, “What iterations will we need to get our products to customers?” Facebook expanded worldwide largely by recognizing that in many countries potential customers used mobile phones rather than costlier PC’s, especially in Africa and India. Facebook need to develop broad and efficient delivery over mobile networks.
Even if you are not building the next Apple or Facebook, you can adopt and modify their strategies – and you should, because they work.
If you will need increasing numbers of human bodies to deliver what you sell have you taken into account costs of acquiring them and the total universe availability? How many will it take to serve millions and millions of customers one-on-one? Frequently, developing your distribution chain will require targeted marketing to acquire distribution agents, in addition to the marketing you do to acquire customers.
#3 --Defining and sizing your market -- Your job is to convince your target investors you are worthy of their investment. When you talk about your market cite as much credible research. Footnotes add gravitas, especially from highly regarded sources.
#4 -- Your marketing plan – one-year, or 18 months or two years. You decide what fits your start up best. Be sure to include MEASURABLE objectives. These are different from your mission and goals, which name what you hope to achieve. Objectives articulate what you will change in a given period of time, from your current baseline, for example increasing your number of vendors in your distribution channel, or achieving a specific number of sales.
#5 -- Your competitive advantage – Never say “We have no competition”. The problem you will solve exists now -- or you wouldn’t be working on a solution. Right now that problem is being addressed somehow, even if not satisfactorily, efficiently or effectively. How that is happening currently is as much your competition as and product that does the same as yours.
#6 -- Management team – in a startup, it’s likely your founders are your team, and often key roles can be filled with outsourced vendors. Still, this feels a bit thin, because it is. Of course you need funding to fill your C-suite with those who will execute on your plan and make your company grow. Best to have some of those people on deck as new hires you will make when you receive the funds to do so. Doing so adds to your believability. Where you have outsourced, say so, and defend it with the runway outsourcing provides you.
- Think through all stages of your business as you prepare for stages of investment, and use measurable objectives for your milestones.
- Present milestones based on achievements you can quantify and use to draw direct lines to financial success. This is what your investors want to see.
- Be convincing, but save full transparency for when your investor has committed.
From a CEO Coach Podcast first aired on Cranberry Radio on December 5, 2016