6 Steps to Build a Better Business Plan
A thorough business plan can help you spot potential problems before they happen. Learn how to build a better business plan.
You become an entrepreneur because you have a great idea. Now, you need a plan to bring that idea to fruition. Your company’s business plan is one of the first things you’ll do in an official capacity as an entrepreneur. It has 2 purposes: keeping your business on track and selling it to investors.
A thoughtful, thorough business plan can help you spot potential problems and opportunities before they happen. It can also help you stay on target and on task – entrepreneurs have to keep a lot of balls in the air and it’s helpful to have a clear reminder of what you’re trying to accomplish. Having a good idea isn’t enough – you need to write it down, think it out, and prepare for all possible contingencies.
Your business plan also tells investors what you want to do and why they should want to be a part of it. Of course, there are lots of entrepreneurs and lots of business plans. You need think-outside-the-box strategies to stand out in a saturated market. This is where your fledgling marketing skills come into play. You want a plan that captures the unique spirit of your company and brand while also showing a clear path to returns for your investors.
Those are lofty goals for a simple document, but you can do it. You can follow a few simple steps to create and implement a successful business plan. Once you have a general idea, it’s time to talk strategy. This is what you need to know to take your business plan to the next level.
1. Simplify Your Executive Summary
The executive summary should capture the essence of your business and intrigue the audience. You’re excited about your project, so it’s natural to let the executive summary get away from you. This is something you could probably write a novel about – don’t. That’s a mistake.
You want to share your enthusiasm and convince your audience about how good your idea is, but this isn’t the place to go into depth. It should be an hors d’oeuvre, not an entrée. You should be whetting your listeners’ appetites so they can’t wait to see what’s on the next plate – er, page.
So, what makes a good executive summary? Focus on the trifecta: background, vision, and message. Tell them where you come from, where you’re going, and why. Use broad strokes – the details will come later. According to Stephen Dukker, pro entrepreneur and startup advisor, “If it takes more than two or three slides to communicate the overall picture of what your company is, you’re going to either lose interest or you’re going to confuse them.”
This isn’t just about marketing yourself to investors, either. Forcing yourself to sit down and come up with an accurate, concise explanation of what you’re doing can help you clarify your own goals and tighten your focus.
2. Data Is King
If your executive summary is the appetizer, data is your business plan’s meat and potatoes. You have a vision, but you need to show you’re your vision is viable. Dust off your spreadsheet skills and dig into the data that supports your idea.
When you’re building your business plan, balance is key. You and your investors need complete information and a clear picture of how things are going to work, but you don’t want to bury people under a mountain of nitty-gritty details. Show where money will be going in and coming out of your business, along with a summary of the data you used to create those projections. If you used the information to make business decisions, it should go in the plan. If not, leave it out.
This isn’t easy. Detailed accounting and financial projections don’t come naturally to most folks, but they’re a crucial part of running your business and marketing it to investors. You need to have a clear handle on your costs and projected revenues in order to run your business. Going through this process can help you refine your ideas about how to run your business. It’s not enough to say you’re going to make widgets; you need to know where you’re getting your raw materials, how you’re going to afford a widget machine, where you’ll put it, how much you’ll pay to run it, how fast it can make widgets, how many widgets you can sell, and what people will pay for them.
Your investors also need to know that you’ve thought that process through. They also need to know when and if they can expect a return – they don’t want to throw their hard-earned money at any old idea that comes by. Showing that you’ve thought long and hard about how your business is going to work can help you gain potential investors’ trust.
There’s going to be some guesswork involved; you obviously can’t predict the future. This is another balancing act. You need to have a blue-sky broad vision of your business’s path to success; confidence is catching and your enthusiasm will help investors see your vision. You also need to be honest in your assessments – don’t fudge the numbers to make them work.
Most of this detailed data work will go into 2 sections of your business plan: operations and financial projections.
Your Operations section is where you get to show that you understand how a business runs in general and how your business is going to run in particular. Show how you’re going to get the job done and why you chose that method – is it the most efficient manner? Investors are looking for operations that do more with less. Some pros recommend describing this process as if you were teaching a college class on how to run your company. What are your routines? How do you get from raw inputs to finished product? What are you doing that’s different from other, similar companies?
This is the “show me the money” step. This is where you show how much money you need, where you want to get it from, and what returns you’re expecting on it.
Your projections may differ depending on the stage your business is in. If you’re just starting, you’re likely to have a lot of up-front costs without a lot of revenue to offset them. As you get established, you’ll have more revenue and more ongoing costs – supplies, equipment, labor, insurance, rent, etc.
In your financial projections, make it clear which costs are startup costs and which are ongoing. Make it clear when the revenue is expected to start covering the costs. Make it clear where any funds will go and how they’ll be repaid.
3. Stand Out
Your unique business contributes something to the world that no other company on the planet does. What IS that thing? You need to know what makes your brand, your message, or your product stand out from the others. Now, put that narrative into words for your audience. This is basic psychology: humans like exclusivity. Investors want to feel like they’re getting a crack at something special.
All business plans have similar standard parts – executive summary, financial projections, etc. The trick is to make sure the whole plan speaks with your voice. Allow the personality and vision of your company to shine through every part. You know what makes you and your business special, so your job is to get that message across to everyone else.
For example, take Embrace Global. Their company was founded with a humanitarian focus. They wanted to stop premature babies in developing countries from dying due to lack of medical care, especially incubators. Their product is simple – a $25 baby warming sleeping bag. It’s an elegant solution for a tragic problem and they’ve been much lauded in the health care world. Now, they’re seeking $1.5 million in funding. They’re making tiny sleeping bags. On its own, that’s cute but probably not worth millions of dollars. When you add in their story and vision, however, it’s much easier to get excited about investing.
Of course, your business plan does not have to involve saving babies in the developing world in order to be successful. It just needs to be imbued with your unique voice and vision so it stands out as something truly worthwhile.
4. Find Your Niche
It’s tempting to try to sell your product to the whole wide world all at once – a widget in every home and every car. Selling a lot of products means pulling a lot of revenue which means (hopefully) earning a lot of profit. However, that’s not always the most efficient or even the most profitable strategy. Does your product appeal to 75-year-old Canadians and 9-year-old Hondurans and 29-year-old Indonesians? The answer is probably no, which means you need to find a niche and make that a central part of your business plan.
Appealing to a particular market segment or specializing in a refined product can be highly profitable. Just look at Whole Foods (organic groceries) or LuluLemon (women’s yoga apparel). The key is finding a need that isn’t being filled and putting your business in place to fill it.
Refining your market to a certain niche may make you feel as though you are losing customers since you won’t appeal to everyone. In reality, the opposite is true. Unless you’re McDonald’s or Coca-Cola, you never had the whole world as a customer base. By finding the right niche, you can precisely tailor your operations to your ideal demographic and capture and keep those people as customers.
Let’s revisit our beloved widgets for a moment. You want to sell widgets to the world, and that’s great, but there are plenty of widget makers out there. Then you notice that old folks have a tough time using most widgets because they’re too small so you start to make bigger geriatric-friendly widgets. You didn’t really lose any customers – no one is loyal to a widget-maker in a saturated widget market. You did, however, gain a dedicated group of customers. That demographic will never again buy a regular widget. They’ll come to you for all your widget needs. You found a niche and filled it.
Take a look at what you want to sell and figure out where it’s needed most. It might be an age group, an ethnic group, a geographic area, a socioeconomic class, a group of hobbyists, or any other customer characteristic. Make that an integral part of your business plan – you want to make it easy for your investors to see how you’re going to get customers. You also want to make it easy for you to see how you’re going to get customers.
5. Show, Don’t Tell
Social media isn’t just for dating and friendship and photos and life. It’s also good for your business plan. Your prospective investors, lenders, and employees are going to look for you on social media. You need to make sure it’s worth their search time. Show that you care about the public face of your business and that you’ve taken the time to cultivate its online presence.
Profile all your latest achievements, publications, speaking ventures, and new hires on active social media accounts. Use blogs and Twitter to tout yourself as an industry “pro.” Reach out and interact with industry influencers so you stay on top of what’s going in their respective fields.
Whenever you’re giving out information about your company, make sure it includes your social media accounts. It’s a good backup for your business plan. It’s also good marketing.
6. Put Yourself In Your Audience’s Shoes
One of the first rules of communication is “Know your audience.” Who are you trying to reach with your business plan? Investors in not-for-profit ventures are looking for different things than investors in the tech sector. Both obviously want a thorough and thoughtful business plan, but you’ll need to tweak that basic content to make sure you’re hitting the right notes.
A non-profit audience, for example, generally wants to invest in the vision. Their goal is to fund the vision and not bleed money out on operations. They want to hear a story. They want to hear about how they can help make the world a better place. A not-for-profit business plan needs to have emotional appeal in addition to the hard facts.
Investors in traditional ventures, however, want to know about the money. They want hard numbers – how much you want when they’ll get it back, and what rate of return they can expect. They’re less likely to be swayed by sad pictures or stirring narratives. They want facts and they want you to seem competent and confident.
Tailor your message to who you are addressing and what your company is, what it does, and who it serves.
Change Is A Good Thing
You’ve got a clean, simple executive summary, plenty of relevant data, a voice, a niche, a social media platform, and a target audience. You’re good to go, right?
Well”¦ not quite. You’re good to go for now. But you’re going to change and the world is going to change and your business is going to change. Your business plan needs to be as dynamic as you are. Sometimes that means small tweaks and sometimes it means major overhauls, but don’t be afraid to make changes. Revisit your plan regularly. If you find that the business and the plan have diverged, figure out what happened. Decide whether the business needs to change or the business plan does. Then go back to the top and start again.