Three Tips To A Better Business Plan

A Business Plan Has To Be More Then Information

I was reviewing a business plan yesterday for a client who had spent hours working on it. He had a deadline he had set for completion and was very frustrated as it seemed that there was so much still to do. He had taken a sample plan that he found on line, for a similar company and made modifications thinking that this could be the perfect plan to go forward with.

What he had failed to understand was what the plan itself was actually for. I explained to him a business plan should serve one to two purposes an internal one and, in his case, an external one. Because he was looking for funding, he needed to have a plan that he could show possible investors along with a tool to help him guide his business.

Where he had gone wrong was that he thought by copying someone else’s work he had developed a plan. As I explained to him, the external purpose of the plan is to prove to investors you accurately understand your business. Which means:

1) Do you know who and what your direct and indirect competition is?
2) Do you know how much money it’ll cost you to operate a business like the one you want to establish?
3) Do you understand the needs, demands and wants of the market today and into the future?
4) Do you know what your value proposition is and how to articulate it in a way that can make you unique?
5) What is your marketing strategy and how will you employ it to obtain clients and create a differentiation from the competition?
6) How long is your sales cycle, and what will it cost to get your sale?
And So On!

Your Numbers Must Make Sense

This is one of the things that will turn an investor off faster then anything else. The first page an investor will go to in your business plan is your numbers. They’ll bypass all the glossy pictures and your executive summary, they aren’t going to check out your resume and your background, they’re going to see if the figures make sense.

So make sure the fundamentals are covered. Make sure you have a spread sheet where all your numbers foot, silly as this seems, I see this problem all the time. Also, if you quote numbers anywhere in your plan, an investor needs to have the ability to find those numbers inside your spreadsheet easily, and they better match. So if you say that you anticipate 10% growth in the first year and your chart displays 12% growth, your plan will likely be rejected before you get any farther. Regardless of how great the copy is.

Your numbers also have to be reasonable for your industry. Try and find as many companies out there, doing something similar to what you do. Observe how their growth has progressed. That should provide you with an idea of what you can expect. Don’t be too aggressive, unrealistic targets either way are not good, but growth that’s too rapid can harm a business as bad, if not worse, then sluggish growth.

Your Business Plan Needs To Show You Understand What’s Coming & Its Impact

It’s not sufficient to be able to show your snapshot in time. Your plan also needs to illustrate where you see your market heading over the following five or more years. It will tell an investor that you actually have an understanding of current and future trends of the business. It will also provide them insight into how you see the strategy for your company going forward. They may challenge your strategy and assumptions, but that’s better then outright rejection because they feel that you don’t have a clue about where your industry is going.

Remember, your investors are in this with you for a long haul. What you do to build your business over the next twelve months will be a significant indicator of your survival skills. What you do over the following five years will make the difference between a so-so investment and a terrific one. So this is your one chance to prove you’ve got what it takes.

Two more quick points to remember when submitting a plan.

You don’t get the chance to explain anything when your plan is in an investors hands, if the plan doesn’t do a good and concise job of explaining things, then you are cooked.

With every paragraph you write, you will need to ask yourself “So what”. In other words, you write something about your market, how important is it to growth and profitability. If an investor can say “so what, how is that going to make me money?” to anything you have written, don’t put it in there, unless you have answered the question.

Finally, your business plan also must be a guidance tool that you can utilize to run your company. It is a gut wrenching process to get it completed. But after you have completed it, don’t put it on the shelf, use it as a road map towards your success.