The hardest part of creating a business plan is getting the energy together to get started. At first it seems like a daunting task. But once you get going you’ll find that writing the plan is not as tough as it seems. Start with some of the easy steps first.
Describe your business and your product or services. Talk about the market you are targeting. Explain what stage of development your company is in. If you get hung up on a particular part of the plan, skip it for now and fill it in later. Don’t worry about making a perfect first draft; just get some thoughts down to get the process going and you can always come back and polish it up later. Similarly, don’t worry about writing it in the order it will be in its final form. In fact, the executive summary should be the last part that you write.
Keep Your Audience
Throughout the writing of your business plan, you want to keep in mind your intended audience and why you are writing the plan. For example, if you are trying to attract equity investors you will want to emphasize the big upside profit potential. At the same time, you need to be especially careful to adequately disclose the risks and uncertainties in your business, because investors often look for someone to blame (read “s-u-e”) if their investment disappears.
If you are trying to get debt financing, then you want to emphasize not the huge upside profit potential but the certainty that the debt can be repaid. In fact, talk of big profits may scare away debt financiers because high profit potential usually means high risks.
If you are writing a plan to help you run the business better, then you may write very simple sections with general background information on the company and the industry, or skip that altogether, and instead focus in more depth on the areas of your plan that are currently most important to you.
Strategy Is the Core of Your Business Plan
Basically, the first half of the business plan is geared toward helping develop and support a solid business strategy. You look at the market, the industry, customers, and competitors. You look at customer needs and the benefits of current products and services. You evaluate the strengths and weaknesses of each competing firm and look for opportunities in the marketplace. All of these steps are largely aimed at helping you create a strategy for your business. The second half of the business plan is largely focused on executing your selected business strategy. Your products and services, your marketing, and your operations should all closely tie in with your strategy. So, while it may be easy to select a smart-sounding strategy for your plan, I recommend that you give a lot of thought to the strategy that will set the course for your business.
Think Competitively Throughout Your Plan
In today’s crowded marketplace, you’re probably going to have serious competition no matter how creative your business concept is. That is why you need to think competitively throughout your business plan. You need to realistically identify where you will do things in a similar manner as your competitors, where you will do things differently, where you have real strengths, and where you have real weaknesses.
Trying to run a major aspect of your business significantly better than your competitors may be a very difficult challenge. Hence, you are often better to focus your planning on being different than your competition and competing with them less directly. Can you find a particular market niche to focus on? Can you find a unique strategy? Can you position your products differently? Can you use different sales or marketing vehicles?
Don’t Overreach with Your Business Plan
A lot of business plans sound good on paper but don’t work in the real-world marketplace. It’s difficult to attract people to a new product or service. Just because it’s better doesn’t mean people are going to switch to it! People or companies have established buying patterns and are currently doing business with someone else. To get them to do business with you, you need to do more than attract them to your business. You’ve got to steal them away from someone else’s business.
It’s also quite possible that when you enter the marketplace, your competitors may react with their own new products or services or by cutting their prices.
While it’s easy to overestimate sales projections, it’s just as easy to underestimate costs, especially for a start-up. There are always going to be a hefty amount of cost overruns, expensive problems, and items that you simply overlooked. So forecast conservatively and try to have an extra cushion of cash tucked in reserve.
More “Crafting” Than Writing
A really fabulous business plan is not something that you can write off the top of your head. Instead, it is something that you “craft” one part at a time, with the results on one part influencing how you shape additional parts. As you develop your thoughts on such inputs as the markets and the state of the industry, it may help shape your thoughts about your competitors and your competitive analysis.
Similarly, how you write about your competitors may influence your thoughts about your competitive strengths and weakness. This, in turn, may help you formulate strategy, which should form the basis for the rest of your business plan: the products and services you offer, how you market them, how you service them, how your operation supports them, and what your financing needs will be.
Doing it well can be a long, reiterative process. Maybe once you start to write about your strategy you go back and rethink how your competitors truly line up. Maybe as you write about products you decide to change your strategy. It might sound like a lot of work, but look at how most small businesses do this process—they typically don’t even have a good plan or any plan and they have to make changes only after they have messed up in the real world with high costs and wasted time and effort.
Slowly crafting a great plan over a period of time can be fun and interesting and result in a great plan. Quickly throwing together a plan can be frustrating and lead to lousy results. The best way to have plenty of time is to start now, well in advance of when you really need or want to have a finished plan.
Takeaways You Can Use
- Differentiate yourself.
- Take your time.
- Be ambitious, but realistic.