Business Plans Are Not What You Think

Having helped thousands of entrepreneurs start, grow and sell their businesses, I’ve found many misconceptions regarding what a business plan is, why you need to create one, and what are the elements of a great plan. 

So, in this post, I will clarify the keys to business planning so you can be more successful.

Business plans are critical for entrepreneurs at various stages of their growth. At the startup phase, entrepreneurs absolutely must prepare a business plan if they need funding. Without one, no lender or investor will give the entrepreneur money.

Importantly, when seeking funding, entrepreneurs must look at their business plan the right way. Specifically, they must understand that their business plan is a marketing document. That’s right, the plan must “sell” the lender or investor on why they should write the company a check.

Sure, the plan should discuss who the company is, what products or services it offers, the market, the competition and the customers it serves. But importantly it must not be a data dump, but rather use each of these sections of the plan to convince the reader that this is a great company. In fact, the business plan should continuously strive to answer one question: why is this business uniquely qualified to succeed.

For example, what is it about the management team that makes it uniquely qualified? What is it about the market, about the customers it serves, about the company’s products/services, etc?

Importantly, by considering this question, entrepreneurs can build better companies. Specifically, they should ask “what do I need to accomplish for my business to become uniquely qualified to succeed?” This will inevitably create a roadmap for hiring the right people, building better products, etc.

So what if your company doesn’t currently need financing? Is a business plan still required? It sure is. However, the purpose of the plan is clearly different in this case. These business plans should focus more on goal setting and operations. Specifically, the entrepreneur must assess where they would like the company to be in 5 years. And then, they should identify specifically what they need to accomplish in the next 12 months in order to progress towards their 5 year goal.

The rest of the plan should focus on what needs to be done in the next 12 months. What R&D needs to be accomplished? What new customers need to be acquired? What new hires need to be made? And so on. Answers to these questions should culminate in a Gantt chart which clearly shows what initiatives the company needs to undertake each month.

This business plan not only serves as a roadmap, but it allows you to measure your progress month after month. And importantly, if forces the entrepreneur to focus on key business milestones rather than spending too much time fighting day-to-day fires.

Yogi Berra once said, “if you don't know where you're going, you might not get there.” He’s right. So spend the time to develop your business plan. It will not only tell you where you’re going, but how to get there.