The Business Plan: Not Just a Blueprint
How to choose the right business plan format
Business planning is a vital component of starting and growing a successful enterprise. Many different templates and variations of business plans exist, so you must choose the right one for your purpose and your enterprise.
Who is the intended audience?
Some business plans are designed for internal audiences (owners, employees, Boards of Directors or Advisors, and senior management) for an existing organization for the purposes of implementing a growth strategy and may be referred to as a strategic plan. It can also serve as a guide solely for the owner of a new business to help clarify their vision and goals.
A business plan could also be for external audiences (investors, clients, suppliers, new hires, bankers and other lenders such as government) for the purposes of attracting financing, talent or suppliers for a new or existing business. A document for this audience may initially take the form of a condensed version of the larger business plan, especially for attracting funding. This version is known as the business opportunity document or business funding proposal and is typically followed by the business plan itself.
Obtaining financing is a significant issue for many businesses and this tool can be an enormous advantage when approaching investors or lenders.
What goes in the business plan?
The business plan is a comprehensive document that is created to describe the future of the venture, consisting of:
- executive summary
- company history and background
- clear description of the business concept and value proposition
- marketing analysis including competitive analysis and market development plan
- production and operations assessment and development plan
- financial assessment and projections
- management and human resources assessment and plan
- implementation plan
- identification of resources
- proposed deal structure for investors (if appropriate)
- survival strategy describing inherent risks and mitigation strategies
Some of these may be longer or shorter, or even optional, depending on the format and the intended audience.
The reader should be able to clearly understand what the value proposition is, why the business will succeed and how it is going to achieve this success. If the plan is being pitched to investors, the investor should understand as soon as possible what the proposed deal structure is and what the return will be. To do this you must support any claims and assumptions about what the business will do with realistic research. Unrealistic financial projections are a sure fire way to lose investors’ interest or for an owner to lose perspective.
How long should it be?
A typical business plan may consist of 20 pages although some business plans can be 100 pages or more, depending on the purpose of the plan, who the target is, and the nature of the business. For example, if the plan is going to be used to attract investors it may require more detail than if it was to be used internally to communicate a growth strategy, while if the business concept is relatively simple it may be conveyed more briefly than a more complicated enterprise.
Should I use a template? Or a consultant?
There are so many business plan templates to choose from that it’s tempting to simply cut and paste or hire outside consultants to write your business plan. However, it’s best for the owner(s) of an organization to write the plan, even if you decide to bring in outside help to review and refine it. Often entrepreneurs do not take the time, nor do they feel a business plan is necessary for their businesses to succeed. They often think that taking the time to write a business plan is just impossible and would be a waste of time.
But when they learn how the process could benefit their organization they are more likely to get started! Even if there is no immediate audience for the document itself, the planning process itself is invaluable.
A business plan is an easy way to communicate the business idea to the prospective audience, to assist in preventing problems, and to identify growth strategies, as well as a tool used in the search for funding. A business plan should be used as a tool for the entrepreneur to guide the business operations rather than a strict manual or blueprint to be adhered to and implemented exactly. The business plan can also be designed to help owners of businesses to clarify the strategy of a particular business and provide insight to manage risks.
Entrepreneurial training is becoming a significant component of many learning institutions in response to the escalating numbers of business start-ups worldwide. Business plan writing is being taught to would-be entrepreneurs more than ever before. New venture analysis is an integral part of the business plan creation process as is what to do with the opportunity once it is identified.
Although being a successful entrepreneur is attractive, over 70% of new businesses do not survive after year two. Having a business and knowing what to do with it are very separate issues and creating a well-executed business plan for the right reasons will enhance the odds that your venture will be one of the ones to succeed.