Trying to get a company off the ground without crafting a business plan would be like setting off on a road trip without a map. As quotable Yankees catcher Yogi Berra once said: “If you don’t know where you’re going, you might not get there.”
In fact, a good business plan is more than just a roadmap. You’ll need it to lock down funding, understand your market, and organize all the big decisions you’re making.
But there’s a world of difference between a business plan that will have you sailing in the fast lane and one that will leave you stalled on the shoulder. Here’s how to write a golden business plan that will have investors seeing green.
Spin a story
Yes, numbers matter. But so does a narrative. Bankers and investors see business plans every day. Make sure yours stands out. “People who loan and invest money see thousands of business plans, mostly created using the same templates,” said Barry Sharp, CEO of Consulting Canada. “Those templates are boring nuts-and-bolts things. Tell a story. You need a compelling story people are going to believe.”
About those nuts and bolts…
No matter how creative and polished your business plan, there are some things you can’t do without. Try the Government of Canada’s checklist. Your business plan should cover strategy, the history, and current state of your business, an operational plan for day-to-day processes, and a human resources plan.
Calculate the cash
Business plans generally involve asking for money, so figure out how much you need. “I always ask one question first and 95 per cent of the time they haven’t thought it through: How much money do you want to raise?” said Wanda Halpert, president of Concord Business Plans. “It’s the single most important thing to consider.”
Super market research
Time for you to get to know your market as intimately as a loved one. “Lack of market research is the biggest problem we see,” Sharp said. “People think they’ve got a great idea, but they haven’t done the research.”
Halpert insists on only using credible sources and the most recent statistics for her research. Yes, that can be time-consuming. “Research can be like looking for a needle in the haystack,” she said.
Are you experienced?
To prospective investors, your first-hand knowledge will be crucial. Halpert recalls a client who dreamed of making a “cool, hip vodka” but had barely ever mixed a drink. “I said, go take a class. Work in a vodka still for a while. Make a few bottles and see if it tastes good.”
Optimism is great, but nothing sets off alarm bells than a business plan that looks too good. “People often invent a number – let’s say $400,000 in revenues – and divide it by 12 for their monthly revenue,” Sharp said. “That invented number is crap. It’s BS.” Instead, Sharp advises to think in terms of the rough number of units or services you can sell and work from there. If you’re opening a shoe store, how many pairs of Nikes can you sell, and for how much?
Consider again the sheer volume of business plans on the desks of bankers and investors; a little polish could raise yours to the top of the pile. “Even the most hardened investment banker, if you show him something that looks nice and is slickly branded, it will go down easier,” Halpert said. “Now, after they see it, you’ve opened the door.”
Swat the SWOT?
A SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) is a staple of business-plan templates. And yet, Halpert isn’t sure you need it. “You have no business telling your investors about your weaknesses and threats,” she said. “Isn’t that something they should figure out?”
Narrow your target
Sharp likes to ask prospective clients to pinpoint their target market. There’s one answer he especially doesn’t like: “everyone.” “My response is: ‘Oh dear, you better have a whole lot of money if your market is everyone – you’ll have to advertise to virtually everybody,” he laughed. “It’s not believable. You need to somehow segment your market down.”
Some unfriendly advice
It’s natural to turn to your social network for feedback, but will any of your best buds really tell you that your dream business is a floundering dud? Before approaching the pros, you need the no-holds-barred criticism of someone who isn’t worried about bruising your feelings. “My number one advice is find someone you can bounce the idea off who’s not a friend,” Sharp said. “Go get some impartial advice – you can get it for free from your bank usually. Friends are really bad at this stuff because they want you to feel good.”