Getting The Business Plan Right: Entrepreneurship

Getting The Business Plan Right: Entrepreneurship

Viewpoint by Rajeev Arora, Serial Entrepreneur, WCW Columnist

If you are a budding entrepreneur and have ever gotten stuck in complexity of understanding, let alone writing, a business plan, you are not alone. Everyone talks about it, few understand it, and very few put serious time and thought process to address every component of it while putting it together. One thing is clear: no coherent business plan with its strategic input and meticulous conciseness and no business.

There are numerous books, magazines, and articles about how to write a business plan. What else can I as a humble entrepreneur contribute to this most-talked and written about business topic?

Perhaps the wisdom and insight of someone who has been through the process. Knowing what not to do is as important as following a model.

As an entrepreneur with lot of ideas and ready to execute, I questioned the purpose of a business plan. What to write in it. How long a plan should be written. Why should I spend time and energy to write it.

I further questioned its validity when I heard that historically only 50% of successful companies had some type of business plan: Neither Apple nor Microsoft had any formal business plan to begin with. Only 2 out of 10 business plans are read by VCs, and only 1 out 10 is actually gets funded.

Those are the hard and cruel facts. However, let’s face it. You need a strategic roadmap and the business plan is the “map”. This alone makes it a worthwhile investment in blood and sweat. Whether or not VCs or Business Angels bite on your project is irrelevant.

You write “the plan” to clarify your thought process, to understand your own product, to understand your product’s market, and to make sure that other stakeholders clearly understand your precise vision and believe in you. In this manner you are acting out as your own guide and showing the tenants of business stewardship.

If I could put it in few simple words, they would be:

“Your Business Plan Is Your Roadmap for Success.”

After the document is written, It can be referred to as an article of faith and commitment
for your team, stakeholders and by your self. It provides movement to your business, directs you how to enter a new territory, how to take off and climb. It is like a pre-flight check manual as well as your flight guidebook. I love the fact that it acts as a bespoke manual.

Once in flight, you refer to it often for directions like a flight guidebook. Your business plan goes a step further. Unlike flight guidebook, you can make changes to your business plan as you grow and venture into new territories. The document is not meant to be the Rosetta Stone or a clay tablet.

Let’s take a look now at the ground rules or if you prefer key pointers to get you started:

Basic Rules

1) Executive Summary: What is the problem your business solves?

Even though this section appears at very beginning of a business plan, it is recommended to write it in the last. By the time you finish writing other components of the plan, you will have clear picture what your business is all about. In these two most important pages of the plan, you would want to provide most important details clearly and concisely.

This is the section where you define the problem that your business is trying to solve. You also write briefly in the section, along with highlights of other sections, about the management team and their experiences that would support you to execute your plan. Idea behind writing good executive summary is that you would like to provide sufficient detail in shortest amount of words to generate enough interest of the reader, so that he would consider reading rest of the 28 to 38 pages.

You can only write convincing summary if you have already written rest of the plan. Writing other components of the plan first would intrigue you to find the answers to some of the questions you had never thought of.

Start this section with a two sentences 15 seconds Elevator Pitch: What the problem is and how your idea or product would solve the problem. Direct. Focused. Energized. Descriptive. Distinctive. Authentic.

Spell out the Mission Statement next the long term focus and strategy of your company. For example, Google’s mission statement is, “Google’s mission is to organize the world’s information and make it universally accessible and useful.” General enough to cover vast fields it can operate, focused enough to concentrate on information world.

2) Company: Why are you the one to solve the problem?

This section explains the values, the culture, the structure, and the framework where problem will be solved. What is the background (if any) of the company and what is new your company would do to solve the problem.

Who are the people supporting you and the company. This details leads to the Resources (People) section of the plan.

3) Product: How would you solve the problem?

Talk benefits, not features, of the Services or Product that you intend to offer. If yours is a start-up, it’s a good strategy to keep focus on one product, and spell out the time-line for the future product and services.

4) Market and Marketing: How wide-spread is the problem (i.e. how big is the market) and how would you reach them.

Be realistic and be specific in explaining your market size. One company can never capture the entire market. And No company can outgrow its resources. Take into account the Economics conditions while discussing the tactics and strategies to price, position, and promote your product or service.

5) Competition: Who else solves the problem? And why your solution is better.

I never understood why it was so important to take into consideration various direct and indirect competition until my professor made me think that a Cruise-liner can be a competition to a TV manufacturer. Common thread: both offer a form of entertainment.

6) Resources (People): Who would help you to solve the problem?

Perhaps this is the most valuable section of the plan. Capital is invested on the people, not on the ideas. If I have heard the one thing most often in a venture circle, that is: An excellent team with ok idea is much better than OK team with excellent idea.

Remember, a business is as strong as its executive team. Hence as you start writing the plan, you would understand what kind of team you would want to build that would complement you for the skills that you do not have YET. Make a flow diagram. Including volunteer advisers for occasional consultation is the most affordable aspect of the business. These advisers have self-interest in your success. So don’t hesitate to consult with them.

7) Financials: What are the results of your plan?

This is the last part of the plan. Rest everything is a context/framework to make this section work. Be realistic, and do it yourself. Justify the need of the funds you are seeking, and how would you use the funds to grow the business. Be appreciative of investors needs.

Appendices: What else should the reader know?

You may include your team members’ resumes, and details that may be specific to some readers.

Above detail is to get you started on writing or at least thinking to write a business plan. Remember, you write the plan to help and guide YOU in your business venture. The more you work on the plan, the less the resources you’ll have to spend on correcting the execution.

I strongly believe that it is worth repeating 80-20 rule:
For any successful execution, 80% of the efforts are expended in the planning.