In the course of my work with entrepreneurs and start-up teams, I’m often asked about business plans. Do we really need one? What are the main topics? Should we do a detailed 30-page version, or is a PowerPoint presentation good enough?
Even though many books, articles, and blogs have been written about business plans, I still sense that there is much confusion, especially among young entrepreneurs, regarding their purpose, use, and value.
Therefore, I would like to use this two-part post to offer my humble opinion and some useful suggestions. While business plans apply to all businesses, my primary focus in this article is on start-up companies.
The Purpose of a Business Plan
I’ve probably developed tens of business plans so far in my career. In large corporations and start-up companies; for established businesses and new ventures; for disruptive technologies and industry standards; targeting emerging markets and mature ones.
Consequently, this vast experience has given me a good perspective on the purpose and value of business plans; which elements in the plan are the most critical and which are less; and how to develop and communicate plans effectively.
The motivation behind a business plan is to “sell” a business idea/venture to a potential investor or an internal stakeholder (board of directors, CEO, etc.). However, I personally believe that a premier motivation is the planning process itself.
You simply should not start any business activity, let alone raising funds to launch your company, before you have a clear and detailed plan.
In addition, strategic business planning provides an organization with several important benefits, including:
Learning. Learning about your target markets, competition, customers, and your own capabilities and competencies.
Goal setting. Discussing and defining the organization’s long-term goals and objectives.
Strategic thinking. Brainstorming, developing, and setting the company’s strategy, business model, and priorities.
Alignment. One of the important outcomes of a business plan is achieving an alignment throughout the entire organization, and in particular, among its leadership team.
These are essential activities and habits for any company. That is why I think business planning should not be a one-time event, but rather it should be revisited, reviewed (and modified if needed) on a regular periodic basis, at least once a quarter.
The Key Elements of a Business Plan
The primary purpose of a business plan is to describe and communicate a business venture and how it will be implemented. Therefore, the essence of a business plan is to answer the following key questions:
Who are you? What’s your company’s purpose (why are you doing this)?
What problem are you trying to solve, or what need are you trying to address?
– Who would want to buy your product/service?
– What is their jobs-to-be-done?
What’s your unique value proposition? Why would someone want to buy this product/service? Why would they prefer to buy it from you?
What is your business model? How do you intend to create, deliver, and capture your unique value? Can it scale fast to big business?
What are the main risks (market environment, competitive, technology)?
– Also, list any limiting factors and obstacles
– Therefore, what are the critical success factors?
Your funding requirements.
In fact, I think these are the most important parts of the business plan itself. Also, notice that I didn’t mention any revenue projections or financial statements (income statement, cash flow statement, balance sheet, etc.).
More on that in part two of this post.