This post looks at a couple of critical areas relating to business plans. Initially, I identify 8 reasons why a business plan is important, I then consider are arguably the 5 most important questions which need to be answered quickly by the plan, and finally, I look at what writers of such plans can do to make them more compelling. This article is not intended to look at detail at the different sections which should be included.
Why is a Business Plan Important?
It forces management to think through the proposed business in detail and to consider tradeoffs
It enables management to plan company growth and to anticipate changes in a structured way
It allows goals to be set, against which the project’s and participants’ future performance can be measured
It states what the venture will not accomplish
It enables quick and objective decision making
It is a persuasive argument for investment funds
It commits the management team to a common set of goals and contains a blueprint for achieving those goals
It becomes a vehicle for communication
5 Most Asked Questions
We all know that a reader of a business plan is not going to spend a long initial time reading it. Further reading will only take place if sufficient interest is generated. In fact, you need to make a positive impression within 5 minutes if you do not want your plan rejected. So, what are the 5 most asked questions which need to be answered in that time frame?
- Is the business idea solid (answered initially in the Executive Summary)?
- Is there a sufficient market for the product or service? (again, answered initially in the Executive Summary)?
- Are the financial forecasts healthy, realistic, and in line with the investor’s or lender’s funding patterns (answered in the Financials section)?
- Is the key management described in the plan experienced and capable (answered in the Management section)?
- Does the plan clearly describe how the investors or lenders will get their money back (answered in the Exit Plan section)?
What Can be Done to Make the Plan More Compelling?
There are a number of relatively simple and, possibly, obvious things, including the following:
- Ensure that your facts are accurate. Wrong facts can lead to a loss of credibility. Facts must also be attributable to a reputable source;
- Make it the ideal length. No ideal number exists, but less than 10 pages is too short, 30+ pages should only be used for complicated businesses or products, suggesting that about 20 pages are likely to be sufficient. Appendices should not be more than the length of the plan. It should also be portable so that readers can carry it when traveling;
- The plan should ideally cover 3-5 years, or up to exit strategy, if earlier;
- Financial projections should not be overly detailed. Monthly for the first 2 years, quarterly for second and third, and annual for the fourth and fifth;
- Use positive language. The right language can convey you as thoughtful, knowledgeable, and prudent, wrong language might indicate inexperience or naivety. Use superlatives with great care. Avoid ‘best’, ‘terrific’, ‘wonderful’, ‘unrivalled’;
- Use third-party testimonials. These give meaning and depth to your offering;
- Use business terms. You are in business, after all;
- Think of the style you will adopt. Use numbers for impact. Investors and lenders love numbers! Use bullet points. These draw attention to specific information, break up boring blocks of text, and eliminate the need to write long sentences.
- Use appropriate visuals. Think of using graphs and charts (but make sure you use the right type for the purpose). Use photographs and illustrations.
ConclusionWhilst the above points are important, the most important aspect of the plan is the content. Getting this right is critical to you achieving the plan’s aim.
Innovation for Growth is a business consultancy firm offering strategic advice, business planning and plans, innovation advice, research, and coaching.