When you decide you want to launch your first business, you typically pick up a book on how to write a business plan.
Since business planning books are written in a linear format, it might give you the impression that planning will be a neat step-by-step process. In reality, planning is a messy process with lots of bouncing back and forth.
Over the years, I have read many business plans from small business startups. What I find is that people have a tendency to write a more fluffy, promotional document. In other words, their business plans seem to want to sell the reader on their product or service, instead of logically presenting a case for why their business will be one of those that succeeds.
Outlining the Basic Business Plan
It does not help that there is no single business planning format. If you look for examples of business plans, the structures you will find generally contain the elements outlined below.
- Business description (or Executive Summary) – Overview of what problem you are solving or need you are filling and, at high level, what your plans are for this business
- Target Market – Outline the characteristics of the types of prospective customers, whether individuals or other businesses, which your business is pursuing
- Product/Service Description – Describe what products and/or services your business will offer, how they will be offered, and how much they will cost
- Marketing Plan – Describe how prospective customers will find out about your products/services and then locate them
- Competition – Discuss what type of competition your business will face in the marketplace and how you intend to withstand it, also known as your competitive advantage
- Appendices – This section can include financial projections, founder resumes or bios, etc.
Given my own business focus on marketing strategies, it is probably obvious that I believe marketing is the heart of the business plan. This is because typically products or services have to be marketed and sold in order for the business to exist.
Decreasing the Length of Your Business Plan
As I mentioned in “Reducing Your Business Planning Fears,” a business plan is simply a snapshot of whatever information you have gathered up to that moment in time. The means that any business plan is essentially out-of-date as soon as you put your pen down (or stop typing). As you move forward with your plan and you learn more, you can always update your business plan.
This is why you want to try to keep your business plan brief, between one and five pages. (Note that critical supporting documentation, such as financial projections, can be added as appendices.) The shorter it is the more likely you are to keep it updated as you move forward. Most people would not want to constantly update a 50-page business plan.
This means that the business plan needs to describe things at a high level. Consider it practice in developing what will eventually become your 30-second elevator pitch.
Please note that I referred to the length of the business plan. This is different from the amount of paper you might create or collect while gathering information to fill in all of the gaps of what you do not know before your write the business plan.
In other words, the most important part of this process is the planning. The written business plan is essentially a high level summary of what you have learned about your new business as of a specific moment in time. Even if you do not need outside financial investment to start your business, writing the business plan will help you step back and view the business from a higher level perspective (and hopefully given you some objectivity in moving from your dream into your new reality).
Marketing Your Business Plan to Investors
However, if you do need external financial support in starting your business, the business plan needs to market your business (as if it were a product) to your prospective lender or investor. The plan represents your business case as to why investing in your company is a good investment. Therefore, put yourself in the lender’s shoes and structure the business plan so that it answers their questions (before they have even asked them). How do you do this? Just think about what questions you would want answered if someone with this same business idea approached you for a loan. What would you want to read in the business plan that would give you confidence that your investment would be paid back in a timely manner, hopefully with a profit.
Finally, get yourself in motion. The real business planning actually begins on the fly. Start testing your ideas locally (even if this will be an Internet business) and on a smaller scale, wherever possible. Make mistakes as quickly and as cost-effectively as you can and learn from them. Make course corrections and then scale up as you move forward.
Let me know what challenges you faced in writing your own business plan.
Best wishes on launching your business!