Most entrepreneurs think that business plans are only good for communicating with potential investors and lenders. Not true!
Business plans are a very effective way for management teams to communicate with each other, their Boards of Directors, and other stakeholders.
For example, consider one of our recent assignments in which the client is headquartered in a different city and, in one instance, a different country than the members of the Board and one of the senior managers.
In a very brief period of time, the business plan project enabled us to discover conflicting assumptions and ideas among the stakeholders.
For example:
- Several members of the Board believe that new leadership will be required next year as the company moves to a new phase in its growth. No one else knew about this.
- The senior manager responsible for business development intends to offer a new 5-year warranty for the company’s principal product. The financial people, having learned about this detail through a reading of the first draft of the plan, thinks this is financial suicide.
- There is total disagreement over the way gross revenue should be forecast.
- There is even a disagreement over who should be the primary point of contact with investors.
Now, none of these issues are so contentious that they cannot be resolved peacefully, and yet, isn’t it interesting that a group of talented individuals who are all on the same team are not “on the same page.” Thankfully, the process of developing a new business plan has brought these issues and differences to light.
So, what is the most effective process for ensuring that as many of these issues as possible are brought out in the open so they can be resolved? Here are some good ideas:
- Early in the business planning process, key participants and other important stakeholders should be interviewed individually.
- At the conclusion of the interviews, appoint someone on the team to be the point person throughout the process. This is an important step whether the plan is being prepared internally or externally by a professional business plan consultant.
- Prepare a first draft of the business plan and distribute it to the entire team and ask for individual feedback. By the way, do not even attempt to begin your financial forecast until there is consensus on the content for the obvious reasons stated above.
- Once the individual feedback is received, prepare a second draft, distribute it to the team and then ask only the point person to provide feedback once he/she has gathered comments from the other team members. I promise, this will surface any outstanding disagreements and get all participants moving in the same direction.
- Now that the content of the plan has been developed and agreed to, you can begin building your financial model based on the direction laid out in the plan.
For additional ideas on team building and improving internal communication, you may be interested in a few of our earlier blog posts:
- How to Make Remote Teams Work for Your Startup
- 10 Strategies for Entrepreneurs to Improve Relationships
This article was originally published in 2012 and updated in July 2022. Since the 2022 update, we found an interesting use for a business plan. Our client knew when he hired us to assist with his business plan preparation that there were two specific investors that he wanted to attract. What did he do? He put them on the business plan preparation team. Risky? Possibly. Very cool? Absolutely.
In summary, don’t just think of your business plan as a tool to communicate with investors and lenders. Your business plan can have many other uses, including improving communications within your team.