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by Larry Mandelberg

July 5, 2007-Requests are posted all over the internet by people asking for help writing or rewriting their business plan

With Amazon.com posting more than 32,000 resources to do just that, let alone the numerous tomes on the subject lining the shelves in book stores, one would think the difficulty level formulating a business plan was one step short of putting an astronaut on Mars.

In reality, it can be quite simple if broken down by its basic elements.

So just what needs to be included to make a business plan good?

All too often, the business plan is conceived as an opening exercise to doing business.

By definition, a good business plan is one that is frequently consulted just as you would with a good road map. The idea is to maintain focus on the goals and actions the plan was created to help execute and avoid running the business by the seat of management’s pants.

In general terms, a good business plan is ‘must read’ by all members of the company.

For those of you that have a business plan, it was probably created in an environment of clarity before you were swamped with the day-to-day pressures of unexpected diversions and challenges.

For those who don’t, you either never made the time or found that clarity.

1. Get it Out of your Head

The mere act of putting one’s thoughts down in writing changes them, giving ideas life, reality and authority.

Have you ever said something you were asked to repeat only to struggle to remember exactly what you said? Putting the details in writing improves your thinking and provides a clearer perspective.

The point of a business plan is to maintain course without being sidetracked, or worse yet, being pushed into unfamiliar territory where emotion, interest and intrigue can affect decision-making before you have had the opportunity to think the details through carefully.

Having your plan down on paper also gives your staff confidence in your leadership – knowing you took the time to plan ahead.

2. Speak to Your Audience

A common misconception about creating a business plan – a realization job seekers and resume writers find out very quickly – is you cannot write a resume that works for every prospective employer; neither can you write a business plan that works for every person that has an interest, desire or need to read it.

The three most common audiences are your banker, your investors and your staff – the people charged with executing it. Each of these individuals has their own specific concerns. For example, investors tend to be most concerned about the management team, whereas bankers focus on cash flow and the ability to grow profitably.

The number of different plans a company needs is driven by the audiences the company wishes to reach and what you need from them.

3. Know Your Marketplace

You cannot craft strategy or create plans to execute it until you have a clear understanding of your market.

There are 3 components to that research: need, competition and size. Omitting any of these areas will doom a company to failure.

One classic example of this is a story about the BMW mechanic who opened a repair shop near his home. The mechanic printed postcards, bought a mailing list and sent them to every household within a five-mile radius promoting his services with an offer no BMW owner could refuse. Indeed, every BMW owner within that radius responded – both of them.

This simple story highlights the critical importance of thorough and accurate market research. It often is the difference between opening your doors to hordes of eager customers and struggling for years to break even.

4. Build Your Strategy around Facts – not Wishes or Assumptions

When it comes time to craft your strategy, be careful not to ignore weaknesses or overemphasize strengths. Be realistic and honest in this process. Not doing so would be like the card player who cheats at Solitaire. Who do you think you’re fooling?

Ask for input from others and don’t make assumptions or depend on wishful thinking that deals with ‘what ifs. ‘

• Identify the milestones the company needs to achieve and the steps that will need to be taken to achieve them.

• Recognize when you reach each milestone and celebrate your progress.

• Ask yourself what will be different tomorrow, after you reach your milestone, from what it is today.

• Don’t start executing until you have objective measures for each milestone.

Never say your company is without competition. Even if true, it is very difficult to prove and likely to be short-lived, especially if your idea is a good one.

5. Make the Numbers Real

The financial projections you create will be viewed through many different looking glasses. They are approached by viewers marinated in the juices of their personal experience and seasoned with skepticism.

The more realistic (read: accurate) the financials, the easier it will be for you to defend them.

If indeed you have been thorough in your market research, this will be easy. If not, you are playing a very expensive game that is most often lost. Over-reaching revenues and under-estimating costs never benefits anyone. Worse yet, it makes you look incompetent and places the rest of your plan into question. It is always better to underestimate income and overestimate costs. If your idea still looks profitable – you have created some room for error.

If you implement the necessary elements as outlined above into your business plan, it will be one of the most valuable documents in your organization – so important to your company’s success it will demand everyone in your organization be familiar with it.

Your business plan will become the map for what your company does and how the company and everyone in it operates. A thoughtfully executed business plan will provide clarity to everyone involved as to their individual purpose and role in the success of your company.

In short, if you do your job, the business plan will do its job, and you will be well on your way to a more professional, profitable business.

Put passion into your business plan for investors

The First Rule of Thumb

There are certain types of business that don’t fit into traditional roles and have difficulty raising money from traditional sources such as banks. If you find yourself in one of those businesses and need funding from non-traditional sources such as family, friends, and angel or venture capital investors, you need to come to grips with one simple truth: Those investors are only interested in investing in one thing – you.

Of course you have to have a good idea and be able to make some money, but be clear on this one point - they won’t invest in your idea until they are comfortable investing in you.

Have you ever lent money to someone? Did you do it because you thought they would pay you lots of interest or you’d get a windfall profit on some idea they had? Did you do it because you had more money than you knew what to do with? Have you ever invested in someone you didn’t trust? Of course not!

Nontraditional investors invest in people first, ideas second. When someone gives you their hard earned money, or even someone else’s hard earned money, they must be convinced you are an honest, ethical and competent business person.

What Are They Thinking?

Before you build your business plan to help make a compelling argument to a prospective investor, it helps to have some insights into how they think. According to Roger Akers, Managing Partner of Akers Capital, LLC in Fair Oaks , a key factor is the passion you have for your business. “Don't forget to project your passion and the fun you are going to have building the company,” he advises. Akers is speaking of the importance of being true to yourself and making the investor feel comfortable with you. They want to see your passion, so show it to them.

Once trust is developed, other concerns begin to surface. Akers recognizes that good ideas have short lives and recommends creating a sense of urgency. "Make the investor feel as if the train is leaving the station and that they had better get on, " he said.

Some other key thoughts investors sort through in their minds include:

• Are the company goals really congruent with the founder’s personal goals?

• What values will the company incorporate into its culture?

• What other successful companies is this one modeling itself after?

• Who is on your Advisory Board and why?

• Will the management team be able to evolve as the business changes?

Components of the Plan

Begin with an executive summary with a high level overview of who you are, what you sell, why it’s valuable and what you need money for – just a page or two – and give them your vision. Begin planting those first seeds of passion.

Start the body of your plan with your Management Team. Credibility is critical, and once they know and trust you, they want to know who else will be working with their money. Put it out there right up front, and use it to let them know the missing components as well. Understand the positions you will need to fill and provide detailed information about the kind of people you want to fill them.

And don’t ignore your investor; they have many people they can call on to help with a wide variety of skills.

The next components are relatively straight forward and include:

• Products and services – an overview with history & benefits.

• Target markets and their size or potential.

• Competition – and be honest here. There is no such thing as ‘no competition’. If you think you don’t have any, you are being naïve and you will loose all credibility. There is always an option to what you are offering, and there will always be competition. Besides, competition is a good thing. It gives you something to be compared to that will make you look good.

• Sales and marketing strategy– include high level information about current sales and key clients.

• Milestones and timelines – be specific and make sure they are measurable.

• Financials – of course sales are important, but your balance sheet is the key. Make sure it covers an appropriate amount of time – typically three years – and include just enough detail to be clear without being confusing. The red flag here? Assumptions. You will make many, so be sure to include them in your financial reports. Any set of financials should be considered incomplete without a list of all assumptions clearly outlined and explained.

A red flag for any investor is unrealistic expectations or lack of accuracy. "Experienced early stage investors dissect plans for a living. Make accurate statements, know your numbers, never lie, don't be too unique and be very clear as to what the team wants to accomplish," Akers said.

One size does not fit all when talking about a business plan. It must be written for its audience, just as a resume must be written for a particular job. 

Have fun with the process, be proud of what you have accomplished and enjoy the experience. It will be one of your richest memories when you look back on it after you have reached your goals.

Larry founded Beyond Point B to help organizations leverage the leadership potential of their top executives and teams. To each engagement, he brings 30 years of executive experience as President or CEO. Working with seven companies, each in a distinct marketplace, he launched five successful startup companies, concluded a merger, and directed a turnaround. Larry can be contacted at Beyond Point B at lmandelberg@beyondpointb.com

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