Why Write A Business Plan?

How Do I Write A Business Plan is a question very much on a business executives mind usually around mid-year or during the last quarter of the financial year? As it is part of the management process, most businesses would have scheduled the business plan sub-process to start at a suitable time of the year. There are others, usually small independent entrepreneurs who may probably put it together as the need arises. This could be due to the need to apply for financial assistance or to impress a third party on some important business matter or venture. However it is done, a business plan is important as it serves as a performance reference, sets the business direction and rallies the team to an agreed business objective.

The 7 Elements Of A Business Plan

Executive summary which is written after the plan is finalized. It briefly provides an overview of the business plan in terms of the approach employed and key considerations in terms of business offerings, key staff and expectations in terms of financial results.

Introduction consists of a brief description of the business, the policies, mission, vision, purpose and objectives of the business for the specific business period. In some cases the introduction may even include a broad of the anticipated business environment. A short review of the previous business period would be appropriate.

Marketing analysis. Here the specific industry is assessed in terms of how the business would meet the challenges. A strengths, weaknesses, opportunities and threats (SWOT) analysis would be helpful.

Marketing plan. What would be the marketing strategy best suited to benefit from the opportunities identified and overcome the challenges foreseen.

Operations plan. The how and what of the business in terms of structure, location, rules and regulations, key operational processes and such other details.

Management plan. How the business is to be managed including key personnel, their qualifications and experiences as well as relevant business credentials.

Financial plan. The dollars and cents that will realize the business including costing and financial projections. Charts and graphs would be beneficial.

General Recommendations

In putting together a business plan the process must include adequate consultation, gathering of relevant inputs, discussion on strategies, review and validation of information. If the process is well oiled, the time taken to write the business plan, get it approved and put into operation can be minimized. Further, if the plan is to include different periods, these can be separately categorized into short, medium and long term plans. As the business plan is an important reference it must be well written. Spelling, grammar and flow would be key considerations in writing the document. To be well written, it has to be checked and re-checked. In this regard, many find software for better writing as well as dedicated business software to be helpful.

To view a software which was created with the latest technology, value added tools and features, visit better writing

Once you present a business plan to an investor or lender, questions may begin to fly at you. If this happens, do not be alarmed! It is evidence that they are truly interested in your business. You can prepare for these questions by running through potential questions, like these seven, ahead of time.

“Why did you choose to begin with this target market?”

“We have to start somewhere” is not a great answer. Consider why the costs are lower or returns greater with your chosen first target market, or, better yet, how tackling that market first will make entry into additional markets easier later on.

“Why can’t competitors imitate your competitive advantage?”

Know the strengths, weaknesses, and branding of your competitors to understand what will stand in their way from doing what you are doing. It could be that your competitive advantage is contradictory to what they are trying to do or that you have protected intellectual property in your business, for example.

“Why is your team best qualified to launch this company?”

Funders know that there are potential managers in the job market who could be hired to run a startup like yours. Know how your chosen team combines industry, functional, and leadership experience with an understanding of startups.

“What best practices of the industry will your business use?”

Study best practices companies in the industry use to become more efficient and know which will translate into your startup, which can be implemented only as you grow, and which will not be possible because of their conflict with your underlying strategy.

“What is your unique selling proposition (USP)?”

If someone asks what makes your new business unique, you had better have an answer. This should be stated explicitly in the business plan.

“What would it take to reach break even sooner?”

Be prepared to defend the time you estimate it will take for the company to break even and to start making a profit. If funders want to see you break even sooner, know what it would take in terms of different staff, additional resources, or increased investment, but do not be too quick to push your schedule up. This only shows funders that your estimates were based on flimsy assumptions to begin with.

“What are your projections of growth based on?”

Be able to explain the assumptions about the market and your company’s conversion rates (of potential customers to actual customers, for example) which led to your projections of growth. You should know how your projections compare to other success stories in your industry and in other industries so you can be sure there is precedent for the growth you anticipate.

I read a lot of business plans. I may be one of the few people who read them for business as well as pleasure. Having read a ton of business plans over the years I have seen my share of truly well crafted, edited and delivered business plans. I have also seen my share of business plans that I considered an embarrassing display of business thought.

Mistake #5 – If you’re bored writing it, guess how much more bored someone else will be reading it?

If you’re not enjoying writing your businesses plan then what makes you think someone else is going to enjoy reading it? When I look at a business plan, the person who is buying a business or starting the business usually writes it. This person more than anyone should be the most passionate about the business or the idea they are pitching.

“Make it your own and own it”

When I get a business plan and its boring or lacks any passion the first thing that comes to my mind is to wonder if this person isn’t passionate about their business why should I be passionate about it?

There are a lot of business plans on the Internet, books and software. Most of them use a very specific formula and approach. Many authors of business plans believe that the outline or the piece of software that spits out a business plan, or the way its written in a book is the way a business plan has to look, sound and feel. Nothing could be further from the truth!

TIP: Use and outline so you don’t miss any relevant parts of the business plan, but use your own voice and style. Make it your own and not another software rehash.

MISTAKE #4 – Bigger is better –

You know what? If you have a 200-page business plan for a coffee shop with 3 employees then your plan is too big. Most lenders or investors are looking for very specific information in your business plan. Usually, they are looking at your assumptions, your management team, your exit strategy, etc. Adding more words will not make your business plan more true. Most investors will not be fooled by a thick business plan, especially if they have to dig through a bunch of pages to get to one or two paragraphs.

TIP: If a word, sentence or paragraph doesn’t add value to what you’re trying to convey in your business plan take it out. A well-written 5-page business plan is worth a lot more than a 15-page mess.

“Let Every Word, Sentence and Paragraph add value to your plan”

Investors and lenders are usually very busy people. Show them that you appreciate their time and intelligence by writing in a clear, concise manner that is crisp and to the point.

MISTAKE #3 – Making a presentation that doesn’t match the plan

I have once had a guy come in to give a presentation for a start up business. In his presentation he said he needed $50,000 in seed capital. He then went on to give a great presentation about this new product and how profitable it would be to the investors and for the company. It was very impressive.

“Know your business and know your plan”

A few hours later I was reading through the plan and what he actually needed was $375,000 to get he plan off the ground. The number was so different that it couldn’t have been a mistake. I don’t know what he was thinking but it totally ruined his credibility with all of us.

TIP: Know what’s in your plan and make sure what you are saying matches what are in your plan.

MISTAKE #2 – Leaving out information that is damaging about yourself, your company or your market.

If you’re attempting to obtain capital from outside investors then you can expect them to do, at a minimum, a background check on you, your company and do some comparative analysis of your market. There are always going to be additional questions about your assumptions, your market or questions about you, but the worse thing you can do is purposely fail to disclose something that is potentially damaging.

“Be totally open and honest about everything”

Hiding bad credit, a bankruptcy, a criminal record or anything is just as bad as being caught in a lie because it destroys your credibility more than if you would be honest about it up front.

TIP: If you have something damaging to disclose make it a part of your presentation and get the facts out the way and how you have handled it. Make it a non-issue.

MISTAKE #1 – Editing

If three people haven’t seen your business plan and presentation before you give it to a lender or investor then you are asking for trouble. I am very careful about the plans I write for others and myself. Even after I have spent hours or days checking and rechecking a plan, I ask a couple of people who I trust to look at it and check it for spelling errors, tone and making sure everything matches.

“There are no second chances to make a first impression”

Once an investor gets your plan it’s too late to go back and say that “too” was suppose to be “to” or the $123.00 was suppose to be $1230.00. One mistake might not hurt you too much, but if you have enough of them the investor will probably think you lack an attention to detail.

TIP: Pay to have a professional proofreader or editor look at your plan. If you’re applying for any amount of money it will be money well spent.

There are of course many more mistakes that a business plan writer can and do make when creating a business plan. But at lease you can make sure your plans do not have these mistakes.