The thought of preparing a business plan for the first time can be very intimidating. There are many “moving parts,” and it’s easy to get lost in the details.

The task becomes much easier if you think of your plan in terms of four essential cornerstones that serve as the foundation of all business plans: Opportunity, Solution, Execution, and Outcomes.

Pretty much anything that goes into a business plan falls into one of these four categories:

1. Opportunity: Every successful business exploits an opportunity. Opportunities arise from “problems” that customers are willing to spend money to solve: they want to stay in touch with friends (Facebook and Twitter); they want to eat a tasty Italian meal (Olive Garden); they want to better manage their enterprise data (Oracle); they want to commute to work in a fun but fuel-efficient vehicle (MINI Cooper); they want to get and stay fit and trim (LA Fitness). The Opportunity portion of your business plan delves into the nature of the problem: who experiences the pain; the severity of the pain; the trends affecting the source of pain; how people are currently addressing the pain (both substitutes and competitors); and how much people are willing to spend to alleviate the pain. Broadly speaking, the Opportunity is a description and analysis of your potential market.
2. Solution: This is your brilliant idea. Exactly what are you introducing into the marketplace that takes advantage of the opportunity you’ve identified? How does it work, and how does it solve the problem? What are the features and benefits? How will you price it and position it in the market? Have you patented it? How does it stack up against competing solutions to the problem? A lot of first-time entrepreneurs think that a brilliant solution is the most important ingredient in building a successful business, but it’s only one of many important elements.
3. Execution: Execution – the hard task of turning ideas into products that people will buy – is what separates successful entrepreneurs from dreamers. What is your plan for completing the development of your product and getting it ready to market? How will you generate awareness and close sales? How do you manufacture and distribute it? What kind of facilities will you need? What kind of management team will your company require? What does the product cost to manufacture? How will you make money? How will you overcome the regulatory hurdles? What types of business partnerships will you need to forge? What could go wrong, and what can you do to mitigate the risks? How will you carve out a profitable niche and keep competitors at bay? What kinds of variable and fixed expenses will you incur to make this happen? How much investment capital will you need to pull this off?
4. Outcomes: This is your vision of the future outcomes if things go according to plan. How much of your product will you sell each year over the next five years? How will the inevitable changes in markets, consumer behaviors, and competitive offerings affect outcomes? How much cash and profit will your company generate? What will your balance sheet look like in five years? Can you get there without running out of cash? If your company becomes successful, what are the viable ways for your investors to cash out?

Use these cornerstones to organize your thoughts.

When you sit down to start working on a business plan, grab four blank sheets of paper and write the words Opportunity, Solution, Execution, and Outcomes across the top.

Now, start brainstorming. Get as many ideas down as possible. Don’t worry about structuring things into a business plan yet. If one of your sheets looks empty compared to the others, then you have more work to do.

When you’re done, put these sheets of paper away for a few days. When you’re ready, go back and look for a powerful, compelling story line that links the four sheets together. Next, go through each sheet and cross off the items that don’t support the story line.

A business plan, regardless of your target audience, is essentially a narrative that ties these four cornerstones together. Thus, by going through this simple process, you’ve half way to having a well-conceived first draft of your business plan!

P.S. As you work your way through your plan, watch out for the common mistakes described in our article, Why Business Plans Don’t Get Funded.

Do you have comments or suggestions for improving on this methodology? Let us know and add your thoughts below!

Life is full of lessons; we get new ones every day. I learned many of my lessons many years after the teaching event. In other words, I learned my lessons too late to help myself, and only after deep reflection on past events. I have a lot of these, as I am past retirement age.

We started a company in 1978 to sell Enterprise Resource Planning (ERP) software to manufacturing companies, with implementation and training services as our value add. At the time, the transition from service bureaus to mini-computers had just begun, and we intended to take advantage of the trend. A typical sale in those days was a bundled package of hardware, software, and professional services. Before we started operations, we had executed a reseller agreement with Digital Equipment Corporation (DEC) for hardware, and licensed a complete set of accounting software from Mini Computer Business Applications (MCBA). We could not find manufacturing software that met our needs, so we became a software development firm as well, and built a development staff soon after startup.

As with any startup, nothing was more valuable than a sales prospect. We directed our marketing entirely at manufacturers. From time-to-time, DEC would refer a distribution prospect to us. We sold several of these and developed the distribution functionality they needed. This digression did not dilute our efforts, since manufacturers needed the additional distribution functionally as well.

About two years after we began operations, a big opportunity — or temptation, depending on your point of view — arrived. Our DEC salesperson called and asked if we would take a lead in the vending industry. While a vending company is a distributor, they have routes that serve mini retail stores (a.k.a., vending machines). They require unique software. We had a meeting with the prospect and found that he also had friendly relationships with vending companies in other cities. We took the plunge, sold the prospect, and developed the software. We quickly got other vending customers and became a presence in the vending software business. We spun the business off, and the company is still in business today. Sounds like a success story, right?

The manufacturing software company also grew rapidly, making the Inc. 500 list in ’84 and ’85. It acquired venture capital in ’88 went public in ’94. Finally, after 21 years of operations, a European ERP company acquired it in ’99 during the great ERP consolidation. Sounds like a success, right?

Here’s where the hindsight comes in.

The lost opportunity was in the manufacturing software company. If the vending customers had been manufacturing companies, our manufacturing customer base would have been almost 40% larger. We could have invested more in the manufacturing software earlier, resulting in increased competitiveness, and consequently, even more customers. The manufacturing software company would have gone public at a higher valuation. The vending software opportunity, even though it became a new business, was a diversion that decreased total value.

Increasing product lines or expanding into new markets is a temptation that is difficult to resist. I have spoken with many entrepreneurs who were trying to do too much. I cannot remember any that were trying to do too little. Focus has to be on the minimum number of products and the minimum number of markets that still enable you to attain your financial goals. Anything else can create diversions that increase risk and reduce your overall financial success.

As a business plan consultant for both non-profit and for-profit startups, I find that non-profit founders, like for-profit entrepreneurs, are looking for experienced help in crafting their business plans. They see the value in strengthening their strategies for fundraising, board development, operations, and marketing before presenting to partners and funders. If you are an aspiring non-profit founder, it is vital that you understand four key differences between for-profit and non-profit plans.

1. Your non-profit must sell to TWO separate markets:

One market is your customers/clients/constituents who receive services and the second is your organization’s funders and funding partners. These are generally two very separate groups (those in need and those with the means to give) and each requires a  distinct marketing strategy to reach them. While flyers and good street presence may be all that is needed to reach your clients, an internet presence and networking may be what is needed to reach your funders. The first marketing strategy is generally covered in a ‘Marketing Plan’ section and the second in a ‘Fundraising Plan’ section.

2. Your non-profit plan must include ‘Outcomes and Evaluation’:

Your non-profit’s results are much more difficult to measure and explain than a for-profit company’s. Growth in the size of your budget is less relevant than the extent to which your organization fulfills its charitable mission. Your challenge is to find specific, quantifiable ways to measure this mission fulfillment through related indicators. For example, a charter school may seek to increase its students eventual college enrollment rates, but must settle for measuring improvements in test scores for many years until it graduates its first class.  Your non-profit plan must demonstrate what the key metrics are and the specific target numbers (‘Outcomes’), as well as the plan for when and how those metrics will be measured by your organization or by others (‘Evaluation’). This section of the plan will be in addition to a full financial rundown.

3. Increased importance of your Board:

Your non-profit’s Board of Directors is not only an advisory body, but a group that is legally responsible for the activities of the non-profit. Therefore, your plan must demonstrate that the organization either has a diverse, skilled, independent and well-connected Board or that you have a specific plan for how to develop one. The early recruitment of qualified and active Board members can also provide invaluable feedback on the plan itself.

4. Your non-profit business plan will need customization for each audience:

Foundations and government agencies all have their own specific proposal templates and application forms, requiring you to customize your non-profit’s basic business plan. For-profit funders, on the other hand, will often accept the standard format business plan. This doesn’t mean it isn’t important to create a strong and well-structured non-profit plan to begin with – it just means that you must be prepared to cut, paste, and revise pieces of that plan to meet each funder’s requirements.

Remember to launch your non-profit with the seriousness of a business, while understanding how your plan must differ from that of a business. If you do, your chances of success will improve significantly.