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Have you heard a business plan is worthless? That’s just wrong. A Business Plan proves to others and yourself that you can organize and articulate your ideas in writing. The process helps you organize any verbal pitch you may eventually give to outsiders. A business plan is also a living document to manage your business year over year. Every year I use it to gauge where I thought I would be versus where I am and make revisions for the upcoming year.
Here’s one of my real life examples: My first business was going to be great and I had done my business plan, research, and pitch. The bank approved my idea! A win right? It wasn’t until I read my plan over and over organizing my thoughts on paper that I realized it sounded good but it didn’t make sense. I needed to better map out the timeline to open. Along the way I learned a great deal about the power of putting it all in one place and thinking through each facet in depth. Ultimately each person has to make the “GO” or “NO GO” decision.
If you are considering starting a business, now is a good time to start thinking about a business plan. Other avenues such as Business Model Canvas can help too, however expect that banks and investors will want a formal Business Plan.
Here’s a few simple pointers to starting your own business plan:
Tip 1: Write something down
It can be anything that comes to mind about what you want to do. Just be sure to answer who, what, why, when, where, and how! This will be the starting point for your business plan.
Tip 2: Review a business plan template and plug in your own words from step 1
Try Googling “free business plan template” for an example. Now, start to organize the initial thoughts by where they should go within the plan. Don’t worry about filling out each part right away. Do homework on parts needing more content and be sure to cite any evidence you can find to support your ideas! It adds credibility to your thesis.
Tip 3: Check your work
Is it something you are ready to show someone else? You now have had time to revisit and contemplate your assumptions and clarify them. Knowing how much clarifying and testing before moving on to the next step is a challenge but this is what its all about.
Tip 4: Have a mentor review it with you
This is perhaps the most valuable step. Find a mentor (which everyone should have): a good friend, or a family member versed in business. A good resource will be with you for the life of your business as someone you constantly talk about ideas with. The value of someone who has been there is priceless.
This may be the first time you hear criticism. A real entrepreneur listens well, welcoming other thoughts. There may be something you haven’t thought of yet! Also, never outright reject someone’s ideas if they are trying to help you. Smile, nod. No one is right all the time, not even yourself. You can still have a good relationship with a mentor if you don’t listen to every bit of advice. But be careful on how you go about it.
Tip 5: Start talking to banks, investors, or family and friends for start-up money
Now its time to pitch, assuming you need money of course! If you don’t, good for you. Banks and seed funding investors alike will assume you have an iron clad business plan that answers all their questions: from who will run the show to how you will raise capital, find debt, and split equity. Your management team, marketing budget, and financials should be flexible. What happens if a number in your assumptions changes? You must to be able to answer that.
My banker told me one of the most valuable pieces of knowledge I can share. When I handed him my second business plan and first business I actually opened he said, “Why are you showing me losses in year 1 and 2?” I said, “Because I don’t think we will make money for a little while.” I was honest with not only to him but myself. Business takes time. He confided, “The reason I deny more loans than anything else is because entrepreneurs are often too optimistic” I locked in the loan. Think about that for a minute.
Tip 6: KEEP the document. Its not dead. Update it once or twice a year!
A good business plan is something that you’ll review and update. It helps you see if you did what you planned and if not, helps you learn change is good. Change the plan, make it work for you into the future. Ideally parallel the document with some metrics to see what was on track, what went astray, and future things needing additional planning.
Starting a business and doing it right can be one of the most rewarding experiences you will ever venture into. Don’t do it without a plan! You’ll be glad you wrote it down and held yourself accountable later.
Having a business plan is an on-going debate among startup mentors. UVC wants to know, do you think writing a full business plan is effective or a waste of time? Post your comments below!