What is a Business Plan?
If you are in business or you are an aspiring entrepreneur, you either heard about this concept or someone already said that “you need a Business Plan!”
Could be your accountant or lawyer, or your bank manager or even a friend with “business experience”.
Then you have a big question mark in front of you: what actually is a Business Plan (BP)?
There are many resources available online for free (if you prefer to pay, I’m sure that you’ll find software that will promise to make everything for you) but still there is one thing that Business Plans cannot do for you: they can’t run your business.
Let me go step by step. Go to Wikipedia and read about the topic. Ask around. Your nearest public library will certainly have one or dozens of books on BP. New Zealand Trade and Enterprise (NZTE) has a wealth of resources on its website. Particularly useful are the “Guides to starting a business”, which include “Planning for Success“, a do-it-yourself kit. It is completely free, you can download it or ask for a hard copy
But there is still “a problem”: who will do the homework through the templates?
“Preparing an effective business plan for a startup can easily take 250 to 300 hours. Squeezing that amount of time into evenings and weekends can make the process stretch over 4 to 12 months” (Timmons & Spinelli, “New Venture Creation – Entrepreneurship for the 21st Century” – one of my text books at the Master of Entrepreneurship at Otago University).
So if it takes so long, how can be people out there offering to do a BP for you in one – two days?
The answer is simple: they can write down a few of your ideas in a way that others can read it. The only problem is who are those “others”?
In the following days, I’ll be posting comments about what is useful to be included in a BP, based in my experience as venture capitalist who between 2005 and 2008 reviewed around 3,000 proposals, did formal due diligence in 300 but only invested in three of them…
Like in every area of activity, you can write whatever you want, but the question that remains is simple: will achieve the desired outcome?
Some BPs are for the internal use of your company. Others are written to be presented to the bank for a loan. Or you are looking for an external investor that could become a partner.
You can be an established company that had been trading for 10 years. Or you are just playing with an idea that is looking feasible but has no numbers around it. Every case requires a different approach, but in general, a BP should cover the following items
1- Executive Summary
2- The industry and the company and its product(s) or service(s)
3- Market research and analysis
4- The economics of the business
5- Marketing plan
6- Design and development plans
7- Manufacturing or production and operations plan
8- Management team (existent and to be recruited)
9- Overall schedule
10- Critical risks, problems and assumptions
11- The financial plan
12- Proposed company offering (In case that you are asking for money)
This table of contents is adapted from Timmons (ibid) but there is no standard rule “written in stone” that says that “this is THE way to write a BP”. It is similar to write a CV: it must achieve the goal of finding a job for the applicant, not to be written in a specified format…
I will discuss the above contents in detail. But remember two things:
a) It’s different to prepare a BP for a high tech start up in an unknown scenario than one for an existent business that operates in a known industry with existent and recognised benchmarks
b) Do not completely outsource the process of doing your BP. No one knows YOUR company better than you. I can help, advisors can provide assistance in many specialised areas, but the BP needs to be clear and understood for the people that will be implementing it: that’s YOU and YOUR TEAM.
And you know that the best way to learn things is doing them.