Ahh, the joy of having a business plan
By Gary Trauner
When I work with entrepreneurs, I tell them the two traits that are most essential to success are tenacity and focus.
Today’s column will detail the latter — focus — and one of the best tools available to help entrepreneurs find, keep and maintain the requisite focus needed to succeed. That tool? The business plan.
Maligned. Necessary. Reviled. Revealing. Too much work. High priority. Low priority.
For those starting a venture, where does the venerable business plan (“BP”) fit into their plans for a successful undertaking? I’ll attempt to bring some clarity to the importance of a BP, the elements it should contain and why a seeming “academic” exercise should be a key part of any entrepreneur’s journey. Let’s start with the basics. What actually is a BP? In simple terms, it’s a written document that lays out the future of your venture. In essence it is a forward-looking effort to understand, predict and put in place strategies and tactics to help you succeed in your venture. If you and a co-founder scribble notes or a paragraph on a napkin at lunch with your thoughts and ideas, you’ve essentially created a BP. Of course the legendary “back of the napkin” plan is almost universally too rudimentary and insufficient for any serious venture.
While this column doesn’t provide enough space to get into the details, a comprehensive BP should include the following topics (note, this is not an exhaustive list of what should be included): executive summary, business description, problem/solution, revenue model, market definition, market share, marketing/promotion strategy, product distribution (if relevant), quantitative financial projections, analysis of competition, personnel, risk assessment/management, operations, organizational structure.
Yes, the topic list seems daunting, but trust me, it’s worth exploring and analyzing each subject area.
Perhaps the most frequent response I get from entrepreneurs when I mention the importance of putting together a BP, is some version of “Do I really have to do that? I’m super busy and it seems like a waste of time when I’ve got so many other things to do.” I get it. Starting a new venture generally requires more time than hours in a day. But in my experience (and I’ve written too many BPs to count), there are several important and valid reasons to take the time to write a comprehensive BP. Let’s touch on a few: Viability. Every entrepreneur starting a new venture believes they’ve identified a product or service that will provide an acceptable financial return in exchange for their efforts. Working through the aspects of a BP should give the founder and their team a much better feel (based on empirical data) for the true viability and prospects of their endeavor.
Risk assessment. Part of writing a BP is consideration of the problem you want to solve, the solution you are offering, and the viability of that solution in the marketplace (i.e., will consumers pay for your solution to a problem they are dealing with). As you move through this aspect of the process, you should be getting a much more refined idea of the risk level involved in your endeavor.
Core competencies. An integral aspect of “focus” is ensuring that you stick to core competencies as your venture grows. By nature, entrepreneurs are seemingly always looking for that next opportunity, searching for that next problem to solve. Working through a BP should provide the entrepreneur with a better understanding of the core mission, the strengths of the team they’ve assembled, and the main solution to the identified problem. Staying focused on core competency is critical to success — many ventures fail when they spread their attention and efforts too thin in an effort to grab for the latest and shiniest brass ring.
Now that I’ve laid out the reason why a BP makes good sense, I’ll add an unfortunate coda: More often than not, within the first six months or so of operationalizing your venture, you can take a large percentage of that detailed BP and throw it out the window.
Why? Well, maybe the market is sending signals that your product or service needs to be changed. Perhaps potential investors don’t agree with your problem/solution premise. Maybe the competition is different than you expected and you need to pivot to something else. There are a host of reasons.
That said, if you’ve devoted the time, effort and thought in a BP for your venture, you’ll have a better understanding of market dynamics and will be more to adjust to what the market is signaling.
Maintaining focus is essential to the success of any new venture. A well-researched and thought out BP can serve as the roadmap and reference document that allows entrepreneurs to keep their “eyes on the prize” and increase the odds of a successful outcome.