Too many entrepreneurs still believe the urban legend that you can sketch your idea on a napkin, and investors will throw money at you. Every investor I know is frustrated with the poor quality of the business plans they get. This is sad since “how to write a business plan” is a frequent topic in many business journals and is a common title in the business section of every bookstore.
What is the definition of a good business plan? In simple terms, it is a document that describes all the what, when, where, and how of your business for you, your cohorts, and potential investors. Forcing yourself to prepare a plan is the only way to make sure you understand it yourself. Would you try to build a new house without a blueprint?
Make sure your plan answers every relevant question that you could imagine from your business partners, spouse, and potential investors. That means skipping the jargon and including explanations and examples. A plan that generates more questions than it answers needs more work.
Finally, polish the result into a professional document. Remember that you only get one chance to make a great first impression. Ensure it has a cover page, table of contents, headings, page numbers, and logical organization.
Notice that I didn’t say anywhere that a good business plan has to be at least 20 pages, have ten sections, or include an executive summary. These are good things, but I’ve seen great business plans that are only ten pages or have non-standard formats.
But, if you ask, ten sections is a nice round number and would include the following:
- Executive summary
- Problem and solution
- Company description
- Market opportunity
- Business model
- Competition analysis
- Marketing and sales strategy
- Management team
- Financial projections
- Exit strategy
You need a business plan to guide you even if you aren’t seeking external funding. As a starting point, you can get free downloads of sample business plans from the Internet, and there are thousands of customized samples for sale highlighting every business area.
So what if you know you aren’t a great writer or don’t have the time or patience to write? No problem. That’s why they invented consultants and came up with the concept that you can pay someone else to prepare it. In the grand scheme, it’s a small price to pay for a successful business or the million-dollar investment you hope the plan will attract.
The stricter case is where you don’t fully understand the business you are about to enter, so you don’t know what to write. This is a recipe for failure that most investors and professionals can quickly see so that no investment will be forthcoming, and your startup will likely wither and die.
My advice here is to swallow your pride and find a partner or give it away to someone who has the domain knowledge and business expertise to launch it. Your idea may be great, but it’s worthless if you can’t get it off the ground.
Keep in mind that thoroughness and clarity of the plan are factors that will play critical roles in successfully financing, starting, and operating your business. A great business plan is one that your team can learn from, attracts investors, and will guarantee your species a future. With no plan, I hope you have unlimited personal funds or at least a rich uncle!