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“Go a and create a business plan” is usually the first advice received when deciding to start a business. So preparations for a mission statement, company and product description, market analysis and strategy, SWOT and revenues projections begin many times without even having a clear idea of what all this is about. But during this process, is also quite usual to receive feedback from all those successful “doers” who firmly stand for the inefficiency and irrelevancy of business plans. After all, how it is possible to foresee how things are going to be without even having started them yet? What is the point about creating a plan which implementation is going to deviate in many of the cases from the original way?
Well. Business plans are needed in almost every single successful business case. Despite deviations, inexactitudes, and time-investment. Going deep into the Panel Study of Entrepreneurial Dynamics, Clemson University entrepreneurship professor William B. Gartner revealed how writing a plan significantly increased the chances to go into a real business. There is no goal achievement without goal and milestone setting. So yes. Every business has to start with a plan, whether it is a precise mental construction wrote down on the back of an envelope or a visually attractive presentation.
The key issue is not that much if or not to write a business plan but how to write this business plan. There are many ways to potentially address it. Some of these ways are efficient, and some of them are not.
According to Harvard Business School Professor William Sahlman, most business plans tend to focus too much on numbers while forgetting some of the very crucial information that potential investors would be willing to find out. In any case, before starting with an excellent structure for it, two big questions marks need to be reflected on:
What’s your purpose?
What do you want? What is the ultimate purpose of your business plan? Are you merely starting from scratch and looking for an organized way to write down your ideas? Are you in search of funding? Willing to share ownership and profits? Are you pursuing the approval of your upper management line to launch a new business branch?
The primary purpose of your business plan is a pivotal question to be answered before taking any step further. Both the content and format of it will very much depend on the goals that you want to achieve.
Who’s your audience?
To properly frame your message, you need to have a clear idea of who and why will be reading your business plan. It is essential to clearly identify what the requirements, needs, and objectives of your desired audience are.
Once this first job is done, and before actually starting with the details of your business plan, professor, William Sahlman recommends to assess four main factors that are crucial to any new venture:
1. The human element
The people. The team. Those ones that are going to start running the business.
Data shows us that 60% of new ventures fail due to problems with the team. When a new venture is about to start, without empirical indicators that could, in fact, ensure success, the only real parameter that can be evaluated is the quality and suitability of the team. Prior startup experience, product knowledge, industry skills, and soft skills are those elements that yes, can be evaluated from the very beginning. If the team does not have the needed and complementary hard and soft skills required to successfully perform the job, there is directly no way the new venture can succeed.
When addressing the human factor, it is also interesting to include all those outside third parties who will be providing our business with resources. Reliable and well-established parties will absolutely increase the quality and credibility of our plan.
2. The opportunity
Meaning the product, the clients, the prospects of growth in terms of scale and timeframe, and the added value. What are we going to sell and to whom? How are the scalability prospects for the short and medium-term? How is our product addressing a specific need or creating a new one that needs to be provided for? Why and how are we better than our competitors? Why and what is going to make us succeed?
3. The context
The regulatory environment, your market in terms of size, structure, growth prospects, trends and sales/growth potential, the strengths and weaknesses of the competitors within your market, the economic flow, demographic trends. All those elements are essential parts of the big picture with a full range of factors that can not be fully controlled but need to be continuously monitored.
4. The risk and reward
Reviewing all those things that can go wrong and right and how the team will address them both.
Shareholders’ agreements are crucial for successful business development. No business venture should start without it. The relationship between the shareholders and its protection, the management of the company or the ownership of the shares is crucial to ensure trouble-free growth and management of success.
On the other side, and having in mind that there are no risk-free plans, an initial evaluation of the product, market, people, financial and competitive risks is highly recommended. No matter which risks will come, having them foreseen in advance is one of the most efficient ways to adjust and succeed.
So, first thoughts seem to be organized. Now is time for pen and paper!
July 4, 2019 at 11:42AM
Forbes – Entrepreneurs