Startup Series: The Business Plan
A roadmap to your startup's success will save you from a world of headaches down the road
A business plan is the roadmap to your startup's success. It informs the decisions you'll make regarding its management, financing, marketing and operations. It'll also completely change the second you start doing business.
That said ‒ do you really need one?
Well, just diving in, pulling a prototype together and hoping for the best has its bootstrapping charm. Still, a plan ‒ no matter how rudimentary ‒ is going to save you from a world of headaches down the road.
For example, Richard Branson’s first venture when he was still in grade school was a magazine called Student. What did the business plan that launched a $7 billion dollar international empire consist of?
A list of contributors, advertisers, distributors and costs.
From there, well, now he’s building spaceships. So the question isn’t, “do I need a business plan?” Rather, it’s “what do I need this business plan for?”
Here are some considerations I’ve made and a few practical uses I’ve found for a business plan in my own entrepreneurial quests.
Consider Your Audience
Firstly, who are you writing this business plan for? This will greatly dictate the approach you take to writing it.
If it’s for yourself, the business plan should help organize your thoughts and give form to the nebulous idea that’s been keeping you up at night. It should have vision, be lofty and frankly seem undoable. From there, you can start peeling away the layers until the plan is lean and focused. It’s this version of the business plan you might want to present to another audience ‒ the investor.
When you’re presenting a business plan to investors, they’re not going to be impressed with your assertion that “no one’s ever done something like this before” or the financial forecast that says you’ll be making $10 million by year two. Banks and investors like conservative, slow growth plans that are realistic.
A Captain’s Log
The business plan is a living, breathing document that will evolve over the course of your venture ‒ and that’s a good thing. Markets, consumers and industries change. If the business case for your startup doesn’t grow with these changes, it means you’re not innovating ‒ and this is crucial.
My first business plan went from being a management agency for college bands to a production company producing online videos for hotels to a coffee shop and co-working space. Looking back over the seven years of this constantly changing document, I’m able to track my successes (and failures) to make better decisions in the future.
A Success Metric
How can you know things are going bad if you don’t know what good is supposed to be?
The most important thing I used my business plan for when running my coffee shop was to check myself against what I said we’d be doing. If two years into your business you planned on having a second location but you’re barely able to make the first one profitable, it’s time to literally go back to the drawing board.
A Means of Self-Accountability
When you are the one ultimately accountable for everything, who do you turn to when things go awry?
The business plan can serve as an “imaginary boss” to remind yourself how on or off-target you are. This is particularly useful when you have other people involved in your startup. Whether they’re business partners, investors or even employees, the business plan can help rally people together if things begin to deviate from the original vision.
It’s also easier to say, “this is what we agreed on in the business plan” than it is “because I said so.”
To Ask The Questions You Never Thought Of
Finally, a business plan helps you address questions you haven’t thought to answer. As you go through the process of answering the questions a business plan poses, you’ll probably say to yourself, “I didn’t think about that.” This is good. The business plan, in essence, is a really long and in-depth research project that should make you an expert in your industry. It’s as much for people reading it as it is for yourself. Make no assumptions and be willing to adjust things if the information you’re getting contradicts your original vision.
It’s better to be wrong in a word document than it is to be wrong in real life.
Monster Wants to Know: What are lessons you've learned from making a business plan? Did everything pan out the way you expected? Share with us in the comment section.