Things To Know Before Writing a Business Plan
Before we dive into business planning, let’s make sure you are in the right section of this navigator tool.
If you are starting a new business from scratch, you may want to visit the Pre-Start section first rather than starting with this one.
Since this business planning section contains information for existing businesses and startups that require a business plan as a tool to help get them funded, this section covers only the information about the business planning process that the Pre-Start section doesn’t.
The most important part of developing a business plan is not the final product or the destination but what you learned during the process of doing it.
You May Not Need to Develop a Formal Business Plan
Many individuals contemplating starting a business or a side hustle believe that the first step is to always write a business plan. While this is conventional wisdom, it is not always accurate. Here are some reasons why you may not have to write a business plan for your new venture.
In fact, sometimes writing a business plan does more harm than good. Here is why.
Over time, everything becomes stale. The unfortunate thing about getting any kind of advice is that you may not know whether the advice is still relevant, or if it has been superseded with newer and better advice. Here is a white paper that describes why some of the advice you may be given about business plans is often stale and out of date.
New Small Business Manifesto – Why a Business Plan is Often the Wrong Answer
In addition to much of the data on the Internet being outdated, in some cases, the information is just wrong or overemphasized. By just looking at one source, it is easy to be mislead by Internet content. Therefore, your should employ lateral reading when you are doing Internet research.
We all know that the Internet was a disruptive technology that changed everything about business. Here is a video from a Business Model Canvas workshop which looks at some of the seminal things that changed as a result of the Internet and why we need a better way to test our assumptions and keep costs down.
Business Plan Overview
The assumption is that you have digested the relative content in the pre-start section and that, after looking at the reasons why a business plan may not apply to your situation, a business plan is still in order.
While there are many business plan templates you can choose from, I have included a simplified business plan template with a few notes/directions that you can download below. For the most part, it serves as an outline to make sure you consider the right things before you commit to moving forward.
Why You need a Business Plan
Where a new business being considered requires a significant amount of capital to get off the ground and/or requires outside financing, you will need a business plan. If the business also requires that the founder(s) go “All-In” by contributing a sizable amount of their personal capital/assets and/or requires that the founder(s) quit their current job before the business establishes any revenue, then a business plan is highly advisable.
Moreover, when committing to writing a business plan, remember it is not a static document. A business plan will need to be constantly updated to remain useful.
Many times – especially for a new business with a Unique Value Proposition (UVP) – you just don’t know how customers will ultimately react to your new product or service. Therefore, it might be better to produce a partial offering at first, and wait and see how the customer uses it before determining the final configuration.
When you sell retail products that come in different sizes, colors, and styles, it is especially hard to know customer preferences. Most businesses can take a lesson from Zappos to learn about customer demand.
Some businesses such as retail businesses, are subject to many external factors that can create or retard demand and therefore affect business revenues. However, other businesses have reoccurring revenues that are very predictable such as a subscription type business. Therefore, it is essential that you understand that not all business revenue is the same as you begin the construction of a business plan.
Moreover, revenue is not always just tied to cash.
There is an old saying that when you develop a project or business plan be sure to double the time frames and budget. There is some truth in this saying because of what is known as the planning fallacy.
One thing to keep in mind is that when a new product is introduced, the requirements of the customers that purchase it may change over time. Early adopters want cutting edge technology and performance and are more tolerant of bugs. Mainstream adopters are much less focused on the technology and more on solutions, convenience, and stability.
Not all businesses are based on a new and innovative product design. However, most businesses would be best served by having their own unique niche (UVP) to help differentiate them from the competition. As Daniel Burrus shared in his book “Techno Trends”, the best approach to finding a way to differentiate your business from others in your industry is to look to other unrelated businesses to see what you can rip off and duplicate.
If you are not clear about the business’s Unique Value Proposition (UVP), it is recommended that you consider developing a Business Model Canvas. I have developed a variety of ways you can learn more about the business model canvas if you are unfamiliar with it. Here are some you can choose from.
- Download the eBook or paperback from Amazon. Most extensive source of content (Small Fee)
- Watch a video presentation of a recorded workshop with supplemental content (Small Fee)
- Listen to the audiobook version (Free)
- Listen to Audiobook version on Audible.com (requires subscription)
- Listen to a podcast of a Business Model Canvas workshop(Free)
- Explore all the posts one by one in the database (Free)
I have also created a business model canvas tool that uses PowerPoint to help you develop your own business model canvas online. You can download the tool by clicking on the following link.
Jumping ahead, once you have developed a business plan, it is essential that you understand its contents backwards and forwards. That is the reason that I never recommend using a business planning program or outsourcing the development of a business plan to someone else. It is not the destination (completed plan) that is important, it is the journey (research and writing) that is most important. Therefore, if you want to internalize its content, you must write the plan yourself.
Finally, when it comes to business planning advice, there is serious injustice in the way entrepreneurs are introduced to the business planning process. The business plan is really three sub plans. Listed in order, they are:
- Operational Plan
- Marketing Plan
- Financial Plan
While that order makes sense for someone to read a business plan, the business plan needs to be written from the bottom up, not from the top down.
In the next few sections, we will follow the bottom-up approach to completing a business plan. You should complete it in the following order.
Each selection will open in a new tab. When you are done exploring the content, close the tab to return to this page.
A company called Growthink developed a wonderful and in depth article that looks at what it takes to write a business plan and includes links to several business plan templates, that can be downloaded and edited, depending upon where you are in your journey and your industry.
