Start With a Simple Business Plan and Grow It as Needed
What does the phrase “business plan” mean to you? Do you even need one or want one?
Too many people, including some experts who should know better, think of a business plan only as it was years ago: a long formal document that's hard to prepare and easy to forget about. Don’t fall into that trap. Your business deserves a plan. Here's how to proceed:
Develop a simple lean plan first.
Start with a lean business plan. That's my name for a business plan that’s simpler and easier to use than the formal ones that most people think of. I define a lean plan as one for your eyes only. It includes just four essential parts: a bare-bones strategy summary; a list of tactics to execute the strategy, such as the pricing, marketing, selecting sales channels and product-launch dates; concrete details of assumptions, tasks and milestones; and basic forecasts for revenue and spending.
Writing down the essential strategy and tactics will give you something to use to steer the business if it starts to veer off track. Lists of milestones and tasks can help you track growth and progress toward reaching goals. And the basic business numbers will guide you in managing the money.
A lean plan should never be completed and forgotten. Instead, review it regularly, track results and revise it as needed. Keep it up-to-date. Comparing the company's actual results to the plan will help you figure out how to better stay on track or, if needed, to change the track.
Add to the plan as needed.
Later when business developments require you to reach people outside the company, you can add additional material. Having an up-to-date lean plan means you already have a core document.
You might add details about the management team, company history and product features. You don’t need this for a plan used internally, but outsiders need such explanations and additional detail.
Investors will need market analysis to support the growth projections. So include specifics about the underlying market needs and segmentation, competitive analysis and the company's early traction. They will also want to know more about the background and startup experience of members of the management team and the eventual exit strategy.
Bankers will want to see standard fiscal information that addresses credit history and risk, such as financial statements for the company and usually personal financial statements of the entrepreneurs. For a loan application, they’ll usually look at specific business ratios that measure risk, such as the debt-to-equity ratio, current ratios, quick ratios and inventory-turnover ratios.
Investors, bankers, analysts and other business professionals have their own world of standards, definitions and expectations. Projecting revenue and spending is enough for when creating the lean plan, but for the formal plan, you’ll need to show three essential financial projections -- for profit and loss, balance sheets and cash flow.
Outsiders also need summaries. A formal plan starts with an executive summary that covers key points in just a few pages. That summary could be sent as a standalone message in email as a convenience to the people who have to read your plan for business purposes. Give them a break. Make the information they care about easy to find. Don't show off and get to the point.
So keep things simple, keep it lean at first but have a plan.
Article Credit: Entrepreneur