Business Plans: 9 Things Entrepreneurs Should Know
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Today’s Question: Entrepreneurs are always being told they need to draft up business plans – but many entrepreneurs need a little more guidance on that topic. What do entrepreneurs need to know about business plans? What should their plans include and to whom should they be targeted?
1. Your Business Plan Is Always Subject to Change
Writing a business plan is a futile, yet indispensable exercise. The exercise is a forcing function that will push you to really understand whether or not you want to proceed with the business endeavor.
However, no business plan survives its first touch with actual customers.
It’s important to organize your thoughts and your plan of attack, but much of what is assumed and forecasted in a business plan for a new startup are just placeholders and hypotheses.
My advice to entrepreneurs is to spend less time planning and more time building something they can get into the marketplace. That way, they can begin testing their assumptions.
— Bryan Clayton, GreenPal
2. Three Parts Matter More Than All the Others
There are three parts of a business plan that are extra important:
1. How you will build a competitive product and bring it to market.
2. Your sales/marketing plans.
3. Your financials – i.e., how will you do items one and two in a way that is sustainable and profitable.
— Alex Genadinik, Glowing Start
3. First and Foremost, Your Plan Is For Yourself
Most business owners get intimidated by the prospect of writing up a business plan, but the key is not to think of it as a document for lenders, investors, and other third parties. It as much or more a document for yourself that will help you articulate your vision for your business. If you can’t talk about your business intelligently, you can’t expect investors or lenders to trust you with their money.
— Priyanka Prakash, Fundera
4. You May Not Even Need One
Although business plans may seem to be the norm, they aren’t as widely used today as you might think. Several entrepreneurs have made it through to funding just by using pitch decks and highlighting the key elements of their businesses. For you, these elements may include an overview of your company, the key stakeholders, your product, your competitive advantage, and your sales projections.
Today, investors are looking more at proofs of concept and the entrepreneur’s ability to actually build/produce/sell the product they are pitching. If you have a new mobile app idea, you need to build it more than you need a business plan. If you have a new fashion line, you need to sell it more than you need a business plan.
— Chris Hood, ChrisHood.com
5. Data Is Crucial
It is critical for entrepreneurs to understand that the real value of the business plan is the data and thought they put into it. The process of customer discovery can save your business valuable time and money, and it can significantly increase your chance of survival.
Looking over the experience of thousands of teams, we have found that the teams that have done the most customer discovery have the highest probability of success – inflection points happen at the 30-, 70-, and 100-customer interview points.
— John Paul Engel, Project Be the Change
6. Use the ‘Do-Magic’ Approach
In a fast-changing world, even a well-thought-out business plan can become obsolete quickly. Furthermore, a vast majority of the business plans are filed away shortly after they are written, sitting idly in a filing cabinet for the rest of their days. Entrepreneurs revert to operating on autopilot or whatever seems to be the hot issue of the day. This is one key reason why many businesses go off track and do not realize their full potential.
A great way to stay on track is to use the ‘Do-Magic’ approach when writing your business plan:
D = Define the dimensions for your business and what you want to see accomplished in each.
O = Observe how others have done these things. Get them as mentors, if possible. Test for the objectivity of your goals.
M = Develop the right mindsets, establish milestones, and define the measures of success for each milestone.
A = Analyze what actions are needed to reach and cross your milestones.
I = Implement the actions and ensure you and your team stay inspired.
C = Check progress regularly. Celebrate the crossing of each milestone, and put controls in place to prevent regression.
Finally, post the business plan on the wall instead of filing it away. This ensures it is always in sight.
— Rai Chowdhary, Do-Magic With Your Life
7. Your Business Plan Can Double as Your Website
Entrepreneurs should start by mapping out all of the pages they want their websites to include. This will have a lot of synergy with your business plan.
If you know what services you’ll be offering, you can create professional verbiage for each page on your site that will relate to your target audience. If you are starting an eCommerce site, make sure to have all of the products that you’ll be selling mapped out, along with the proper description and imagery for each page on the site.
In taking this approach for your business plan, you will kill two birds with one stone. You will get a head start on your website (which will be needed when you launch the business), and you will gain valuable ideas while creating content for each page and conducting research on your target demographic.
— Jason Parks, The Media Captain
8. Your Business Plan Should Reflect Your Passion
An entrepreneur’s business plan is often very different from a time-tested business model. Entrepreneurs do things that are different and unprecedented. Their business plans need to reflect their passion and their potential.
A business plan should be targeted to appeal to investors. This target cares about ROI and needs revenue projections to support a company’s valuation. Unfortunately, unproven models do not have accurate figures to support their value. Thus, an entrepreneur needs to find all similar figures and statistics that can be moderately associated with their novel concept. The entrepreneur and the investor will both know these numbers do not carry much weight, but the potential still needs to be presented and supported to the best of the entrepreneur’s ability.
— Jordan Havercamp, ParkParkGoose
9. Your Business Plan Should Include an Exit Strategy
A crucial and often overlooked component of many business plans is an effective exit strategy (depending on the industry). Just as important as any entrance strategy, an exit strategy plans to incorporate the succession of the business and to reap the rewards of the endeavor. Lenders will be more comfortable when they see a complete business plan from start to finish.
— John Drabkowski, Red Hot Cruises