For new enterprises, business plans have long been an essential document. Is their relevance still valid? If that’s the case, what best practises and data can you use to develop a winning document that will assist your company secure the cash it requires and assure its long-term viability?
Do you even need a business plan before diving into the best approach to write one to help you crush it and spending hours or thousands of dollars on commissioning one?
Anyone you approached with a company concept without a plan a decade ago would have scoffed and walked away. Even your closest friends and family members, as well as the most zealous angel investors. The situation has altered.
A business plan is still required in some cases and for some reasons, as I explain in my book, The Art of Startup Fundraising. However, others may believe that pitch decks and sophisticated presentations will eventually supplant them. Every entrepreneur and new business needs a strategy. There are certain key issues to answer and aspects to comprehend before selecting exactly what it looks like and how to make it.
What is the purpose of a business plan?
A startup founder’s language should never include the phrase “just because it’s the status quo.” Traditional business plans may be large beasts of a project, sucking up time, money, and energy at a crucial time. Don’t do it unless you’re sure why you’re doing it and what you’re hoping to achieve.
“Don’t develop a business plan,” argues David McClure, a Silicon Valley angel investor, venture capitalist, and founder of 500 Startups. If you want to get a funding check from him right away, we’ll show you what he wants to see. However, the point is that most ambitious business owners aren’t even attempting to align their objectives with what they believe they should be doing.
You should have a strategy in place to become organised and assure that you have some sort of business potential. You’re focused, and maybe you won’t run out of money or get hungry before you get started. If that’s all you need, and you don’t plan on raising funds, applying for loans, or bringing in partners, a 25-pound manuscript isn’t necessary. Maintain a straightforward approach. In fact, Airbnb founder Brian Chesky is known for his one-page business plan for worldwide dominance.
If you’re going to a local bank for a business loan or asking someone in your sphere of influence for help, you’ll need to make something they can grasp in a format they’re used to.
If your goal is to raise money for your startup, ensure sure anything you design is relevant to today’s fundraising landscape.
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Pitch Decks vs. Business Plans
There is a difference between a business plan and a pitch deck. There are a lot of factors that cross over. One is for presenting and, more specifically, for raising funds from angel investors and venture capitalists. The other is more internal in character and more organisational.
If you want David McClure to invest in you, he says he needs to see “a functional product that people are utilising.” Functional prototypes, client development, and, most importantly, scalability are all things that we seek for. Is it possible to scale customer acquisition on a low-cost, measurable basis?”
In contrast to traditional company planning, McClure suggests:
- Prototypes
- Budget forecasts over the next 12 months
- Marketing strategies
- Costs of acquiring new customers
- Customer worth
- The results of the tests (i.e. a dashboard of KPIs)
- Consistently improving evidence
- Knowing your burn rate and never having less than six months of cash on hand
The majority of this can be crammed into a pitch deck, at least if you have a strong appendix.
I recently discussed the pitch deck template established by Silicon Valley veteran, Peter Thiel (see it here), which highlights the most important slides. In addition, I supplied feedback on a pitch deck from an Uber competitor that had raised over $400 million (see it here)
Executive summaries vs. business plans
An executive summary is yet another document. It’s a useful and necessary item to use as a cover for your company strategy. This is especially true for people considering commercial real estate or an SBA loan as a source of capital.
This is a one- to three-page paper that summarises your business and plan and provides enough information for users to decide whether or not they want to see more data. If it’s excellent enough, like a pitch deck, it may be enough to persuade lenders and investors to cooperate with you and hammer out the details afterwards.
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What distinguishes a good business plan from the rest?
The format, content, and vital information that viewers expect are all critical. It’s the same with the amount of time you spend on it and when you do it.
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When Should You Write a Business Plan?
The main issue with company plans is that they often suffocate businesses. Spending a year or more rehashing and dragging out a business strategy can cost your startup the greatest time to launch and the best funding prospects. Too many entrepreneurs have tried to fit the equivalent of a business strategy into a pitch deck, only to discover that it is a roadblock to achieving their goals.
“The actual secret to winning in business is being flexible and receptive to possibilities,” according to Harvard Business Review (HBR). When it becomes evident that their original consumer is not the correct customer, or when it becomes clear that their product or service fits better in a different market, entrepreneurs are frequently forced to pivot their business. Because of these realities, company plans that are developed from the beginning wind up being nothing more than a fable.”
Additional stats from HBR show that:
The “most successful entrepreneurs were those that wrote their business plan between 6-12 months after deciding to start a business. Stating that this “increased the probability of venture viability success by 8%.”
Chances of success rose by 12% for those that spent no longer than 3 months on their plan. With any longer proving futile.
Startups chances of venture viability rose by 27% if the plan was created in the
According to Entrepreneur.com and Rule’s Book of Business Plans for Startups, founders should think about these things when putting together their business plan.
How will the business be vested?
The main goals
Statement of purpose
Success Factors
An examination of the industry
Market research
Analyze your competitors
The most important strategies
Marketing strategies
Organizational framework of management
The most important operations
Pro formas and projections
Analysis of the break-even point
Financial requirements
Fortunately, writing a business plan has grown a lot easier in recent years. There are numerous data sources available to support assumptions and complete studies. There are many excellent freelancers available on the internet who can assist with time-consuming aspects of the process such as research, formatting, and interactive pro-formas.
There are even templates that you can fill out and print so you don’t have to waste time deciding what to add.
SCORE provides fillable worksheets that cover the following critical pages in your new business plan:
Executive Summary Description of the Company Products and Services
Management & Organization Marketing Plan Operational Plan Marketing Plan
Capitalization & Startup Expenses
Appendices to the Financial Plan
The US Small Business Administration (SBA) has templates for both classic and modern lean startup business plans, as well as samples to look at.
