Startup Steps #1: The Business Plan
We’ll kick off “Startup Steps” with the building block of every successful business: a well crafted business plan. I’ve asked my good friend, Warren Vollmar, who not only writes business plans for others but, as a serial entrepreneur himself, has to execute his own plans.
First, a bit of background on Warren. He is the Managing Director of the ROI Group, a business strategy and management consulting company. He is also the President of US-China Business Connections, promoting business between the two countries through networking and education. I came to know Warren through UCBC and over the years I’ve found him to be an astute advisor on a number of topics, and he’s my “go to guy” for top notch business plans.
For those of you looking for business plan assistance, you can contact Warren via email at firstname.lastname@example.org.
Now, to paraphrase the late, great Ed McMahon, here’s Warren!
“Write Your Business Plan on a Napkin” – Warren Vollmar
Writing a business plan is easy, anyone can do it. Microsoft’s first business plan was written on a napkin. You don’t really need a business plan; just trust your gut and go for it.
Ever heard the expression if you don’t know where you are going, any road will take you there?
There is a reason why successful companies plan and why startup companies should plan. It dramatically increases the chance of success, which is spelled out in dollars.
Let’s back up for a minute. Before you get to the point of thinking about writing a business plan you might want to think about whether you should be starting a business. Have you thought through your business concept (the idea that can be expressed on a napkin)? Are you passionate about the concept? Are you willing to work night and day, every day to make it work? Are you willing to risk all your money and beg more from family and friends? Is the idea practical? Is there a strong indication the business will be profitable?
If you can answer all these questions positively, you are ready to start planning – not writing. Planning, especially when it comes to financial aspects, has to come from research, facts and sound estimates, not guesses or what you think is true. This is your second set of hard questions, but these are about the business, not you. Be honest, real and conservative.
Break these questions into big chunks:
Product(s) and/or Services
Competition (This is a category many ignore – with disastrous results)
Positioning, Value Proposition, Strategy
Manufacturing or Implementation
Sales and Marketing Strategy
Do a Google or Bing search for business plan examples and pull three or four examples of expanded or detailed outlines of business plans to get an idea of what information you should gather for each of these “chunks”. The purpose of this is to first gather and build what you need for the plan. Worry about organizing it later. You will find many examples of sample plans, but be very careful about copying them. They are samples. Your business will not be – or should not be exactly the same – or why would you be starting the business?
The next thing to tackle is the financial plan. This is where you may need the most help. Financial assumptions. Key indicators. Break-even analysis. Cash Flow. Profit and loss. Balance sheet. If you are not familiar with these things, it may be easier, cheaper and better to get professional help to construct this information.
By pulling all of this information together you have the basis to write a plan. The final portion to be written in the plan is the executive summary; a one or two page synthesis of everything you have done so far.
Why would you go to all this trouble, effort and days or weeks of trouble to write a business plan?
Well, I believe a business plan should be a living document; a guide for you and others in the company to help you maintain focus and direction. But if you want a drop dead practical reason to write a plan, it is the first thing every bank or potential investor will ask for and you better be able to provide it immediately.
Don’t get trapped into thinking there is a normal length for a plan. It should take every single word necessary and not one more or less to write it. Nor is there a standard cost to have a professional write a plan. A very simple plan should run $4,000 -$5,000 and a complicated, new- to-the-world-technology plan can run into tens of thousands of dollars. Bargain basement plans are exactly that, and you probably will find yourself having it re-done.
Can you write a business plan yourself? Of course. But, most people may not want to take on that challenge or are not able to write a convincing, objective, logical, well presented document that is clear, concise and answers questions before they are asked. If you fall into one of those categories, hire an experienced professional. Hire someone you have good chemistry with because this effort will be, in essence, a partnership. After all, beyond your family or loved ones, making your business successful will be the most important thing in your life.