I am frequently interviewed about business start-ups and entrepreneurship. The topic of “what is the best advice you can give a new entrepreneur” always comes up. It is a simple answer – the Business Plan.
Imagine being dropped in the middle of the Amazon jungle and told you have 3 days to get to civilization without a map. Starting a business with a goal to make millions without a plan in place is no different. Both are foolhardy and both doomed to failure without a plan.
So is there a standard for writing a business plan? Of course; and the good part is most of your favorite banking institutions have interactive templates on their websites. Banks make it easy to write a business plan because without one they will not loan you money.
What makes a great business plan?
- The Executive Summary In your Executive Summary you must identify who, what, when, where, why and how much money you’ll make or need to have to proceed. If you are going to the bank for financing the analyst will likely read your executive summary and decide upon whether he will read further – you need to hook them on that first page.
- A Clear and Realistic Financial plan You must realize that a banker, an investor or possible partner is going to want to be able to understand the basic financial position of your business. You should be able to put together a Start-up budget and have the basic skills to put together a pro forma (forecast) for the next 2 years of your business
- Detailed Market Research Do you know the type of customers you want to attract, the size of your market and what those people expect or want from you? Have you done your market research? Have you developed your demographic analysis and your psychographics? Have you figured what guerilla marketing tools, i.e. social media will work best for you?
- Competition Analysis Have you identified not only your customers but also your competitors? You have to know what your competition gives their customers in order to compete effectively. Sun Tzu in the Art of War advises armies to spy. It works really well to visit your competition to see their offering while working on yours.
- A Good Management Team An international CEO friend of mine once told me you need three things to have a successful business; money, good management and a good product. If you have any 2 of the three you can find the third, e.g. if you have a great product for sale and money you can find the management team.
- Serious Forethought Throughout You really must put considerable thought into the whole plan. Have you considered your pricing, your distribution channels, suppliers, strategic partners, cash flow and your handling of its growth or lack of growth?
- Scalability You should be able to handle slow growth and slower sales. You need to develop a plan that allows for a scalable business. If you need $100,000 in finance to run the company can you run it effectively if you can only get $50,000? Having scalability allows you to be able to maneuver through tough times and grow or contract when needed
- A SWOT Analysis That’s sounds scary. You need to understand the Strengths, Weaknesses, Opportunities and Threats of you and your business to be successful. Your strengths and weaknesses may be easy to identify but in your plan you must explain how you will mitigate your weaknesses, i.e. if you can’t sell hire a salesman. Opportunities and threats are external forces you must identify. George Moen will find this amusing. I was negotiating a lease for a coffee shop owner. It was going nowhere until I realized I was bidding against Starbucks for the lease – a big threat. Of course, it was a no-win scenario for us.
- Professionalism Let’s assume if you are going to a bank for financing you need a minimum of $100k for your company to go further. You better have a professional looking plan in place, Cirlox bound, written in the 3rd person and in a 12 pt. type. You need to have an appendix of supporting documents including resumes, job descriptions and copies of websites, etc.
The cool thing about writing a business plan is that you can use it for financing, use it as a guide to follow or throw it out (the process of writing it is the important aspect). Take it seriously, take your time and a well-thought out plan will be your best resource.
For more information on start-ups check out my book on Amazon http://www.amazon.com/Start-Successful-Business-First-Time/dp/0992098807/