6 Business Plan Fundamentals
I've always liked the idea of turning back to fundamentals when you need a special boost--like when times get tough. A downturn is a good time to review fundamentals, keeping in mind that your business plan isn't good or bad because it helps or doesn't help your business grow and prosper.
A better way to gauge the value of your business plan is in the growth it encourages and the decisions it spurs. When writing or revising your business plan, make sure you've got the following six business planning tips covered:
1. Start with a good look at your planning needs in your business. Do you need a printed document to show outsiders?
If you do, then develop the document to serve its readers and meet its purpose. Spelling, editing and page layout matter because they represent you and your company to readers. For example, a plan for investors should show a solid exit strategy and good discussions of defensibility, potential market growth and your management team. Likewise, a plan to support a bank loan should contain financial history and owners' financial information.
If you're just planning your own business and not showing a document to outsiders, simplify it to serve your internal planning process. Don't include business descriptions and supporting information that only outsiders will read. For example, why deal with professional backgrounds of the managers, if outsiders won't be reading it? Why bother with a flowery advertising-oriented product or service description?
2. Cut your outline down to what you'll use. Start with a standard outline, and then delete unnecessary sections. Don't include what doesn't help you and your management team work better. For example:
- The spit and polish. Why sweat over the editing, the wording, or the page formatting when a plan isn't going to be read by outsiders?
- Exit strategy. Vital for investors, but awkwardly out of place for a small bootstrapping startup.
- Backgrounds of managers. Why would you describe yourselves to yourselves? This is only needed when a plan is for outsiders.
3. Write simply and practically. Use simple bullet points to record key concepts so you can refer back to them to track results.
4. Emphasize the kind of metrics--sales, costs of sales, expenses, leads, presentations, calls, units, prospects, whatever--that will lead to useful plan reviews each month. Strive for visibility of performance, so you get accountability and management as a result. Metrics like these--concrete and measurable--help you track progress against the plan later. They also help guard against "blue sky" planning, which is purely conceptual, and lacks specifics to make it real. Ask yourself, point by point in the plan, "and how will we know, later, how we're doing on this?"
5. Keep the plan alive with regular revisions, but keep it short and manageable. It isn't a market research paper or a graduate thesis, it's a plan.
Don't measure it in pages, but in readability. Just to cite a specific example, a 30-page plan with readable fonts and a lot of useful bar charts and tables might be much more readable than a 15-page plan of dense text only. Don't skimp on charts: pies and bars and line charts make numbers easier to understand. And don't skimp on tables: monthly projections of any and all important metrics are very good for following up later.
How big is a good plan? Does it describe strategy well enough to lead to good business decisions? Does it describe the market well enough to generate effective marketing strategies? Then it's big enough. It might not even be a single document; maybe it's a combination of some spreadsheets, some slides, and some bullet point texts.
Remember, things will change. Your real plan belongs on a computer, not on paper. Market assumptions, strategies and metrics have to change. Plan to review them each month, and change them as necessary.
6. Store a business plan on your computer as a starting point for the occasional elevator speech or business pitch. Standardize your talking points and make them serve your long-term strategy.
I hope you see how both fundamentals apply to business planning more than ever. Don't create a business plan that's longer than absolutely necessary. At the same time, don't start, run or grow a business without a plan you can review and revise to keep you on track.