May 4, 2009
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Business Forecasting 2012
Our special feature on forecasting sheds light on how to choose the right model, offers advice from Jack Stack and more.
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A search for "business plans" at Amazon yields more than 75,000 matches. What is the world coming to? Perhaps "planning" has become more important than "doing." I'd like to save you some money and time by explaining the eight most important characteristics of business plans.
Focus on the executive summary.
That short section at the front of the business plan is the most important part of the whole document. If it doesn't suck the eyeballs out of your reader's head, the rest of the plan doesn't matter because people won't read any further. Indeed, if it does suck the eyeballs out, then the rest of plan still might not matter because the reader will immediately pick up the phone or send you an email. You should spend 80 percent of your effort in crafting one or two paragraphs that explain what your product is, what pain it solves, why you have a competitive advantage, and who you are.
Write it for all the right reasons.
One purpose for writing a business plan is to raise money, but it is not the sole or most important reason to do so. Communication and team-building is also an important outcome of a writing a business plan. Therefore, even if you're not raising money, you should still write a plan to get everyone talking and working towards a common goal.
Make it a solo effort.
The actual typing of the text of the plan is a solo effort, ideally of the CEO because you want one consistent voice from start to finish. And nota bene: don't use a consultant to write your plan because your plan should reflect your blood and sweat. And using an outsider is a sure fire way to lose most of the team-building value of the plan.
Pitch, then plan.
Most people take their magnificent business plan and pull fifty or sixty PowerPoint slides out of it. That's ass-backwards. Instead, create a great PowerPoint presentation of ten or so slides, use it a handful of times, revise it, and then fill in details to make it into a business plan. A good business plan is an elaboration of a good pitch. A good pitch is not a distillation of a good business plan.
Keep it short.
The ideal business plan is twenty pages or less, including all appendices. Less is more, if you think you have a patent-pending, curve-jumping, revolutionary plan that requires fifty to one-hundred pages, you probably have a sucky business. Remember: the intended outcome of a business plan is usually more due diligence leading to an investment. The goal is not a Pulitzer Prize.
These are the ten sections that your plan should contain:
1. Contact information
2. Executive summary
3. Description of the problem you're solving
4. Description of how you solve it
5. Underlying magic
6. Marketing and sales strategy
7. Competitive analysis
8. Financial projections
9. Team
10. Status/timeline
Summarize your financial projection.
This is related to the previous recommendation. Many entrepreneurs believe that they should create a one-million cell Excel model to prove how much they know about their business. Let's be honest: you know when your product will ship much less how much you'll spend on travel four years from now. The optimal length for your financial projections is one page. That is, at least keep your lies succinct.
Write deliberate, act emergent.
I stole this from Clayton Christensen, the author of "The Innovator's Dilemma."
Deliberate; means that you should take your best shot at describing how your company will evolve. People interpret flexiblity (we are considering a direct sale and dealer sales channel) as cluelessness. Take a stand, but then act emergent: make quick decisions, seize opportunities, and quickly revise your product and marketing.
One parting thought for you: a business plan should not take on a life of its own. At most it's a few week process. Entrepreneurship, after all, is not about planning. Its about doing. Its certainly not about reading 75,000 books.
Check your balance, review recent transactions and pay your bill on the go.
Indrek Vainu 8 months ago
An excellent post on the key topics when putting together a business plan. Having started several business I have struggled with similar issues so i put together a Business Plan Tutorial app in the Apple app store http://itunes.apple.com/us/app/business-plan-tutorial/id436748333?mt=8 It allows people starting out to get a quick understanding on how to pitch their idea and build a business plan. Good luck!