“Failing to plan is planning to fail!” was a phrase commonly heard as far back as high school when speaking with my career counselor.  As cliche? is the statement is, most business leaders will suggest that there is a great deal of merit to it, to the extent that most business leaders either a) have started thinking about writing a business plan, b) have started writing one or c) have one tucked away on a shelf that they haven’t looked at, ever.

Business plans take too long to write, they are more of an academic process, they are impractical, they are only used to raise money when starting a business and most good business leaders don’t need one, anyway, right?  While there have been many the albatross thrown around the neck of the business plan, we hope to give you new perspective on creating a business plan and hope that you will engage in one for your business.

In this issue of “Had an Aepiphanni, Lately?” we are going to discuss the justification of the business plan, or why the heck we need one, anyway, and how you might implement one into your daily business without it becoming a burdensome exercise.  Topics we will cover include:

The Business Plan: Why?
The Business Plan: Types
The Business Plan: How?
The Business Plan: When?
The Business Plan: Why?

Your business plan is a way to get the idea or vision for your business down on paper in order to determine:

if it makes sense, as in, does it fill a specific want or need and can that need be met, if it is feasible, as in, are there people or businesses who would be interested in buying your product or service at a price that works for you and them explore potential risk, how to avoid some and how to manage others,  costs of starting it and keeping it going and financial outlook.  

Additionally, simply going through the process of building the plan will provide you with a great deal of information you will need while running your business.  Additionally, as the business grows, you will want to use the business plan to help guide you in your future planning and decision-making processes.  Finally, if you expect to raise money using investors – whether friends and family or through venture capitalists, you will need a good, strong business plan.

The Business Plan: Types

The first thing you’ll want to do for your business plan is to determine what it is going to be used for.  Basically, there are four types of business plans:

Startup plans – sometimes this will be more of an overview of the business with expected sales and expenses, discussion about the product or services, the market and marketing.  These plans can be very short (10 pages) and effective for the startup phase of the business.

Operational plans – that focus on how the business will operate, heavily focused on processes, systems and people.  Ideally, cost analysis of the various processes and systems should be included, but often, current financial information and projections are used in the plan.  These can be equated with business architecture and strategic planning.

Presentation plans – these plans are used to attract partners, donors, executive teams and investors.  The key, here, is that this plan is used to attract them. Rarely will they be the final piece of information required.  In this type of plan, we focus on outcomes: the product and why there is a great need for it in the marketplace, what an investment will do to bring the product or service to market and what type of return one might expect as a result of investing or partnering with the company.  It will normally include a lot of visuals and is, essentially, a marketing piece.

Investor Grade Plans – these are the all inclusive business plans that combine all three of the other plans, with the addition of exploring risk.  This is the epitome of a marketing and investing tool that potential investors will try to tear holes in (versus trying to justify) to determine whether or not they will invest.  The executive summary, alone, needs to be powerful enough to engage potential investors to read further.  Financial plans need to extend three to five years.  This type of plan requires the greatest investment in research and financial planning of the four plans.  It will be the authority on operating the business.

The Business Plan: How?

Many people begin their business plans with a simple template.  Templates can be found all over the internet, in books, through SCORE (Service Core of Retired Executives) the SBA (Small Business Administration) and the SBDC (Small Business Development Centers).  You can take courses on how to develop the plan, or you can work with a consultant or business plan expert (Note: I emphasize with. For your business plan to be practical, you need to fully understand what is going into the plan, why it’s there and what to do with it!).  

The most important aspect of the plan, however, is that it needs to work for you and your business.  If you are a visual person, you might create a plan that is pictorially based.  If you are a task-oriented person, you might use bullet points to describe many areas of the business.  If you are a story teller, create a story, first, before even looking at a template.  Templates can be intimidating given all that is required.  Take it one step at a time.

The Business Plan: When?

When?  Your business plan should be your road map.  How often do you look at your road map when you are going somewhere you’ve never been?  Hopefully, you will look before you begin to veer off course.  Does this mean that you need to look at the whole thing, from beginning to end each and every day?  Not practical.  So when do you look at it?

The easy answer is: depends on your industry.

The better answer is – it’s too big to eat all at once.  Just like eating an elephant, you need to break it down into manageable pieces.  That means that you will want to put the marketing plan in one folder, put the SWOT analysis into another folder, your financial information in another, your processes in another, etc.  Your business plan does not necessarily need to be a single three inch thick document.  

With the plan separated, it becomes much more practical to use and update.  You might do marketing every day, but do your SWOT only once a month or once a quarter.  Ideally, you’ll manage your finances regularly and can look, at any time, to see where the business is financially.  As you update any area, stick it in the appropriate area.  Once a year, you may wish to pull out a whole section, or the whole plan section by section to review and make plans for the following year.

In Conclusion:

Your business plan should be a living set of documents that can be practically applied to your business’s every day operations.  Just the fact that you’ve invested so much time and money into the development of it should encourage you to squeeze every bit of that money right back out of it, even beyond the investment stage.  Keep in mind that creating the right type of plan and creating it in a way that makes sense for you and your business is a major determinant in the success of your plan, and that implementation of the plan is not a once and done deal.

One of my favorite types of projects is working on small business plans with clients. There is an air of excitement as they work out their ideas and put their dreams on paper. I always think that I might be witnessing a birth of another future corporate giant. Some of those ideas are compelling, others seem unattainable, and yet the confidence and certainty my clients exhibit leave me with no doubt that they will succeed.

The Challenge of Writing a Business Plan
As excited as these entrepreneurs are about their ideas, for many of them the actual task of writing things down in a business plan format is very hard. They would rather get started already, develop their product or service, find a location – do all the things a typical small business owner does. They have such inner clarity about every single detail and yet communicating all of it in writing – in a business plan format – seems completely against their nature. It feels too structured, almost unnecessary.

Obtaining Financing
And yet, especially it today’s world, it is necessary. Most of the time the purpose for a small business plan is to obtain financing. No matter which group you are thinking of approaching – venture capitalists, commercial lenders, potential investors – they will all want to see a formal, written business plan.

Even though many people use business plans primarily, and sometimes only, as financing tools, they tend to write them in a way that puts the venture in too optimistic a light. Even if it gets you the cash you wanted, it will not help you succeed, because if the business has not been well thought out, or if the risks are too great, it will fail.

A realistic and objective business plan that also conveys your excitement about your business idea and your confidence in reaching your goals will have a much better chance of not only getting you the financing you need, but also fulfilling the other purpose it was meant to serve:

Planning a Business
Yes, that’s it! A business plan is a “planning tool”. That is its primary function and purpose. And it does this so well that shrewd business people like investors and bankers use it to determine who will get financed by them and who will not.

And you too will benefit from using it the most when you see it as such and not only as a sales tool.

It is a structured approach to refining your ideas about your business and devising a plan of action taking into account all aspects of the future enterprise: marketing, personnel, operations and finance. It helps you translate your ideas into actionable goals and it helps to predict your financial resource needs and financial results.

As you fine tune it, you will find out that it allows you to make many mistakes “on paper” and saves you from their consequences in the real world.

Monitoring a Business
The hardest business plan to draft is your very first one. Why? Because all you have are estimates and assumptions. But after a few months of operations, you will have some real numbers and you can update your plan at that point. Planning process has to be dynamic and on-going. A plan is not something you do once and put on a shelf. If it is to you, you have not realized the tremendous value it has for your business.

It should be an integral part of your management. Use it to compare your actual results to what you were anticipating. Analyze the deviations and understand them. Perhaps what you did was better than what you planned, perhaps not. Either way, you can learn from this comparison and refine your planning and your operations even further.

Any time you plan to introduce a new product, enter a new market, change the management structure, you should first prepare a business plan for the scenario you are envisioning. And don’t think this means too much time involvement for you. After all, you are just a small business owner. You cannot behave like a large corporation with a separate planing department, right? Wrong…

Large companies have large planning departments because they have learned the value and necessity of planning, but you need it just as much, if not more, because as a small business owner you do not have the reserves that can carry you through a sales slump or a bad business mistake.

This is what I always tell my clients – small businesses need all the sophistication of large companies. They actually need it even more, they just need it scaled down and adjusted to their size.

So you have found that the Internet is a vast resource of templates for various business forms, including business plan templates. If you think you can use some of them and you are looking at downloading, take extra caution. You need to be sure that they will serve your particular purpose, especially if you are eying to use a business plan template. Not all businesses are the same, so you need to make sure that while you use the template, you should also customize templates enough so that they speak on your behalf, and communicates your identity and value proposition accurately.

To help you work on a business plan, it pays to know the major parts that business plans typically contain. A business plan is touted as the most crucial document that a business owner or entrepreneur will ever develop before he launches his business. The business plan sets the direction of the company, especially during its start-up years. It is also the document that investors look at when they are deciding whether or not to put their money in the business venture. As such, business plan templates should contain the structure of the company, its revenue and growth goals, as well as its future plans.

So what are the parts of an effective business plan?

The first section should contain the executive summary. Here, you sum up the important points of the entire business plan in such a way that it piques the interest of investors who don’t have the luxury of time to read through the entire document. The gist of the business plan should be laid out in a three- to five-minute read, underscoring the key issues and should not be more three pages. While it is presented first, the executive summary is prepared last, when the rest of the plan has been drafted.

The next section is a description of the business. The purpose of this section is to provide detailed information about the company, as well as the products or services that it plans to offer. This is also the place for putting your company’s mission statement and milestones.

The third section contains the market analysis, which aims to present the company or business venture in the light of the market situation. Here, you talk about how you position your company in the market landscape so that your readers will have a better understanding of the prospects of your business. Make sure to include a discussion of your industry, your target markets and your competition.

Next, your readers, especially the investors, need to know that the people who will lead the company can be trusted with their money. As such, the business plan has to have a section on the management team. In addition, investors also need to have an understanding of the process of your business. As such, your plan has to have a section on your operations, including your go-to-market strategies.

Investors also have to apprised of the risks that they will be taking if they do decide to put their money on your business venture. As such, have sections on critical risks and financial projections, where you describe in detail the risks that are avoidable and expected, as well as how these risks relate to your ROI projections.

Finally, the best business templates are those that have room for appendices. These appendices provide supporting documents to the claims that you made in the entire business plan. They come in handy once the investors have initially decided favorably, and would like to scrutinize the plan better before they sign on the dotted line.