The Art And Science Of The Business Plan
It’s hugely important, easy enough to do and frequently overlooked
by Marzena Czarnecka
Illustration Pete Ryan
I’ve been making the assumption in this column – you may have noticed – that each of you has a stellar business plan and that you filter everything I tell you through its lens. And more importantly, you use it to steer your entrepreneurial ship and what not. But it has just come to my attention that John – would you stand up for a minute, John? Thank you – that John does not have a business plan. I know! I was shocked too. After all, he’s been in business for 10 years. And he’s been perfectly adequately successful at it, right? Now imagine how much more successful he would be … if he actually knew where he was going.
You may sit down, John. And start taking notes. I’m about to change your life.
“A business plan is probably the most important document an entrepreneur will ever create,” says Rick Macnab, a managing partner with the Business Development Bank of Canada. Most people craft a business plan for one critically important reason: to get money. That’s why, incidentally, John hasn’t crafted one. His angel investor mother-in-law adores him, and just keeps on writing him cheques. Most of us aren’t so lucky. We need to prove to the people with the lucre that we can be trusted with it, and we need to do so in prescribed words and formulas that they will feel comfortable with.
Now, we’ll end with a quick cheat sheet on how to do that, but we will begin with why and how you should create a business plan that you’re writing, first and foremost, for yourself. Why? Simple: because if you don’t understand where your business is at, where it’s going, how it should best get there, what might most likely derail it and what ought to fuel it, you will never, ever be able to sell yourself to a client, much less a bank.
Yes, John? If that’s the case, you wonder, then how do I explain you? Well, if everyone would reflect for a few minutes on how you all got started.
According to Angela Pedrini, a partner with the Chemotti Consulting Group, for most of you, it went something like this: “Someone pats you on the shoulder and tells you you’re great at what you do, and then someone says, hey, if you start a business, I’ll be a client.” I see heads nodding. Yeah? And so you start a business with a client. And focus on pleasing that client. And maybe on getting one more, two more … Comparatively few businesses begin with a business plan. They begin with a client who is somehow personally or historically connected to you.
But to get beyond that tiny little circle, you have to do some planning. But how? Pedrini is almost reluctant to give you the next piece of advice, because it sounds like a shameless promo. “Get an external party to help,” she says. Self-serving, maybe – but also, critical. If you’re a total newbie to the business development and growth game, you don’t know what questions to ask, what risk avenues to ponder, what marketing strategies to explore. You can reinvent the wheel … or you can save yourself three years of making costly mistakes by working with someone who has some of the answers. If you’re a seasoned entrepreneur like our business-plan-free John there, you know your business – but that can actually be a problem. Because you live and breathe your business and because it’s everything to you, you have blind spots galore. “If you are doing all your business planning without someone reflecting back to you or giving you push-back, questioning your assumptions, it is very easy to miss things,” Pedrini says.
But, listen carefully: you’re not hiring the external party to write your business plan for you. This is your business plan. Your blueprint. Your everything. You are the one who’s going to have to do most of the work: your advisor will facilitate, reflect, question and challenge. The blood, sweat and tears will all be yours.
What’s that, John? That’s why you haven’t bothered to put together a business plan? Cause – work! So let me reiterate again. If you’ve managed to get this far without thinking about where you’re going, think about how far you could have come – how far you could go – with a map.
We’re going to skip some steps here, because each business plan is unique, and what your business plan needs to contain is very different from what John’s business plan needs to contain. Let’s assume you’ve done the work and have got a document that sets out your goals and objectives, your strategies, your costs, your risks and your plans to mitigate them, that explores your existing market and potential market, your dreams and how you will achieve them. John! Stop hyperventilating. Stay with me. Listen, listen: we’re not talking 300 pages here. Less, much less. Pedrini wants you to get all that down to one page. She’s a huge fan of the one-page business plan. Now, granted, the one-page plan has a lot of supporting documentation, maybe even 300 pages worth, but all that financial information and operation planning and strategic dreaming can be and should be condensed onto one succinct page. Your map. You can do this, John. You will do this.
Once you have a business plan, it’s the most valuable arrow in your quiver, the most multipurpose tool in your toolbox. You will use it to remind yourself of what you’re doing, where you’re going, and what you have to do today – this week – this quarter to get there. You will use it to communicate with your employees and partners, so they know what the present stage is – and what the short-term (and longer-term) path is. You will use it as the basis of explaining yourself and thus selling yourself to clients. You will use it to weigh and analyze new information – to consider if this particular mega-economic trend affects you, or if this apparently small-and-local domestic market change creates an opportunity you can exploit.
And you will use it to get money. Here’s how.
You have a one-page business plan that is, effectively, both your vision board and an “at a glance” picture of your business’s current state. You have supporting documentation for all the statements on that page. You have data on your internal operations; you know everything anyone needs to know about your market. Your competition. Your talent pipeline. It’s all written in a way that makes sense to you.
Don’t take that to the bank. Before you sit down with your banker, investment group or venture capitalist, tailor your business plan – one page and exhaustive supporting documentation both – to your audience.
Macnab can’t stress that enough. “Write with an audience in mind. Always. Who is going to read your business plan and to what purpose?” (He means, how much money are you trying to get out of them?) How does that audience think? What’s important to them?
John knows how to explain his business to his mother-in-law. To a Big Five banker? Maybe not so much. Again – pull in help. The more money you’re asking for, the more tailored and targeted that business plan ought to be. “Make sure you’re telling the story in a way the reader can understand it – and keep in mind that reader may not know anything about your business or even your industry,” Macnab says. “If you’re writing to bankers, get help from someone who knows how they think and what they’re looking for.”
Rule of thumb: the more money you’re asking for, the more technical and detailed your business plan will need to be. “Because the people you are asking for money are going to have to take more risk,” Mcnab says. So you have to reassure them.
This highly technical, detailed business plan is for them. Now, let’s go back to that highly personal, one-page business plan. That one? It’s for you. Pedrini suggests you put it under the Plexiglas of your desk. Or on your wall. Somewhere you can look at it every day. Ponder if you’re on track, following the route it maps out. Use it to consider whether you’re allocating your precious time wisely. If your goal is to grow Division X … should you be spending four hours a day wrangling with the challenges faced by Division Y? Spend some time every month checking in with yourself – and your senior management team if you have one – on whether you’re meeting goals and objectives. At least once a year – preferably twice – tear that baby apart and reconsider its every assumption.
Yes, John? What? Can you call your mother-in-law right now and ask her to help you craft a business plan?
Sigh. Fine. Whatever. The rest of you … you know what to do, right? So go.