3 Elements of Every Successful Business Plan
Author: Lauren Hockenson on Apr 15, 2013
So you have a great product, platform or business that you’re stoked to start up. It can be an exciting and thrilling opportunity to get your own company up and running, but it’s also filled with stress and anxiety — that road can be full of obstacles and a lot of confusion.
Well, first things first: Have you done your business plan yet?
It sounds trite, but the business plan is really the roadmap to success. When done correctly and thoroughly, that document can not only put you on track to proper growth and healthy strategies, but it can also be the perfect way to introduce your company to potential investors.
Here’s a list of guidelines that will help you craft the right business plan for your organization. Keep in mind: All businesses are unique and have their own specific challenges that must be met. But, if you stick with these characteristics, you will already be miles ahead from where you started.
What’s your business plan must-have? Let us know in the comments.
1. Keep It Brief
Many people consider a business plan to be the novelization of their ideal path to creating a company, jamming all hopes, dreams and projected profits into a pages-long document that, frankly, no one is interested in reading. A business plan doesn’t have to be filled with everything you’ve ever wanted in your business — it just needs to be straightforward.
“People think that a business plan needs to be a multi-page document that’s poetic in nature, and that’s not the case
“People think that a business plan needs to be a multi-page document that’s poetic in nature, and that’s not the case,” says Barbara Findlay Schenck, author of Business Plans Kit For Dummies. “What you need to have is a piece of paper that details the main things that will keep your business on course.”
Schenck says the myth of the business plan as a lengthy document doesn’t match reality. In fact, just writing down the basics of your business is enough to think about your company’s pathway clearly, and how exactly you or your team will move forward.
Business plan specialist Greg Goodman agrees that excessive detail in a business plan, including month over month statistics or intense data projections, can not only be a burden on the company but also set unrealistic expectations for investors. An even worse mistake can be a business plan that includes a restrictive NDA.
“There’s a great grey area, and most VCs I’ve encountered will not sign one,” Goodman says. “They’re not going to sign it because they have the same liability issues as a company looking at an outside product. What if they’re already looking at developing it internally? Do they want to get sued by someone from Pennsylvania who thinks they have the greatest thing since sliced bread, but in fact they’re duplicative of something they’re already working on? It’s not worth it to them.”
2. But, Still Be Thorough
Simple doesn’t mean sparse — the best business plan will be diligent in outlining the characteristics of the company that are most important. Hammering down the basics of your business, everything from a personnel onboarding plan to securing the proper name rights and trademarks, will ensure no important detail is left unchecked.
In her book, Schenck says that there are must-do tasks to make the business plan a useful document:
Describe the business.
Describe the product or service.
Describe the competitive environment of the product.
Describe how the business will make money through a business model.
Describe how to market the business.
Describe how you’re going to produce the product.
Describe the business team, whether it’s you or a small team.
Describe the financial projection, including how much money you need and how much money you will profit.
These tentpole concepts may seem obvious to some, but Schenck says she is surprised at how often these characteristics are missing from business plans of all kinds.
“It’s amazing how many businesses start without that knowledge and fail without that knowledge,” Schenck says.
Goodman says that even though it’s trite, the “roadmap” analogy is the most accurate way to approach the development of a business plan. By outlining all of the major points and remaining stringent about your details, you can have a solid pathway without the need for unnecessary details — and perhaps learn more about your own business in the process.
“You always should have a business plan just so that you guide your own steps,” Goodman explains. “The reality is that it has a certain value — it’s not just plotting out Step A to Step B to Step C. Once you start putting details on paper, you see stuff you wouldn’t have seen otherwise.”
3. Uniqueness Speaks Volumes
No two businesses are alike, so business plans are not one-size-fits-all. Although it may be tempting to rip off a boilerplate business plan or to copy the plan from a successful business, that denies you the ability to address the unique challenges of your particular company. Worse, an untailored business plan is an easy way to set yourself up for failure.
“The business plan needs to mirror the proposed business endeavor
“The business plan needs to mirror the proposed business endeavor,” Goodman explains. “So, what goes into it is everything that is necessary to depict that particular proposition, whether it’s a candy store or some high-tech venture.”
Goodman says that when writing a business plan, it’s important to write to your particular audience. If the business plan is a strictly internal document meant to keep the performance and growth of your company on track, then it should emphasize internal information that will help that (such as hiring order or important partnerships). If the business plan is an external document, then it’s all about writing about your business as attractively as possible to get investors intrigued.
“Even seasoned people don’t necessarily get that you need to think about who is reading your document,” Goodman says. “Your audience is different, and your audience can only be judged in relationship to yourself. If you’re Joe or Susie Smith and nobody knows your background, you need to write differently and make a different pitch for venture firms.”
Schenck says understanding the nature of the business is key to producing a great business plan. It’s important for founders to think about the purpose of the business, what they’re selling, who their audience is, and how it will make money. Those are questions that need to be answered right on paper, although Schenck asserts many businesses can’t answer them right away.
“These questions can be answered on the back of a napkin for all I care, but when you’ve answered them, you’re in business.” Schenck says. “Those questions answer what you’re doing, who you’re doing it for, how you’re doing it and how you’re going to make money doing it.”
Remember, your business is unique and deserves special care when crafting a plan for success. Making a fair assessment of your needs and planning accordingly will ensure that your plan is stable enough to get you off the ground.
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