This post is part of a series called “Starting a Small Business,” where we look at the steps to start a business and make it big. This installation to the small business series comes to you from Aaron at Clarifinancial. You can find him on Twitter at @clarifinancial or on his website.
When Eric asked me to write something about the business plan, he probably
thought I would write “How to Write a Business Plan.” But there are a few
problems with that:
- It’s boring. (Telling someone what to do is dull. Exploring deep purpose and divining a form – that makes sparks.)
- It’s been done. (If you want to know what to include, ask around or do an online search.)
- It will change. (Depending on what you’re trying to accomplish or the latest business fad, it will be different in the future.)
The reality is the business plan you write will be different for your industry, current trends, and reason for writing it in the first place. If you need guidance about business plan trends, look for cheap or free entrepreneurial resources near you. If you need help with your industry, consider if you have the expertise the business requires.
The big thing that makes writing a business plan different in different situations is the “why” behind it all. Figuring out why you’re writing a business plan and how that impacts it is probably the most important thing of all. Generally, you’re either trying to hash out an idea or explain something, or you’re trying to sell somebody on the idea or get money.
Exploring the Stapleclip
If you just came up with the best type of paperclip ever that combines the benefits of a paperclip and a staple, a “stapleclip” of sorts, you might wonder how you could make money from this invention. Some people believe once they come up with the perfect idea, the rest falls into place, but without a plan of action and (more importantly) action itself, the idea is worthless. Working out a business plan (or two or three) around your invention could help you organize your thoughts and figure out the best method of monetizing the stapleclip.
Should you license the stapleclip or manufacture it? How much are your legal fees at each stage if you license it? Can you afford to and are you willing to defend the patent against established corporations? If you manufacture the stapleclip, who will distribute it? You could discover inventing the stapleclip was the easy part for you, meaning you need outside help – from where, from who, what kind?
In this case, the reason you want to write the business plan is to explore ideas. You’re not ready to firm everything up, but the business plan is a useful way to document your learning, find different pathways, and identify holes in the stapleclip business. Don’t worry about formality here. Just get it down on paper, expand, find problems, fix things, talk to experts, find some research, and clarify. Then you might be ready to move on to another stage – or not, but it’s better to find out on paper first.
Likewise, you might run a large landscaping business and need to explain to your new managers the big idea that makes your horticulture and business methods unique. Formalizing your thoughts in a business plan, even a short one, could be a valuable way to do this.
Now, I know folks in the landscaping business aren’t the bookwormi-est
bunch, but that doesn’t mean they can’t get value out of your plans. Keep
it short, include lots of charts and graphs. And when you think you’re done, the
hard part will start. Cut it in half.
If you’re trying to explain some lofty ideas and convey differentiation and
procedures in a way that people will comprehend easily and not fall asleep during, editing is critical. When in doubt, cut it out. Try to cut the size of your business plan in half. Even if you can’t, the exercise will be good for creating concise ideas with a concrete punch.
We all think our own ideas are the best! But trust me, to people outside your own head, cutting the jungle of words down with the machete of editing will be like a shot of caffeine. Too much chocolate pudding is a bad thing. Make your words like sharks with laser beams on their head and people will pay attention.
Money for Star-Shaped Signs
Okay, but what if you’re writing a business plan to get a business loan or attract investors? Your words will be worth money. Notice you can have a great business idea and a solid sense of execution, but if your words don’t back it up, you won’t get the money you need.
Let’s say you flipped signs on street corners for years and noticed people
really respond well to star-shaped signs better than the old-fashioned arrows. You have a few local businesses signed up for star-shaped sign flipping, but you need to expand to see profitability because the star shape requires more expensive materials. Expect to have to quantify the increased response rate to stars vs. arrows. Independent research would be preferable, but statistically significant raw data would help too (hint: This would also help sell your service to business owners.)
Don’t forget, you have something called a two-sided market in this case: the
people who respond to star-shaped signs and the business owners. Make sure to talk about why both audiences will be attracted to your business, what will keep others from adopting the star shape for their signs, etc. Get specific, and then cut it down to size.
When you are writing the rough draft of your business plan, keep the general layout in mind, but don’t sweat too much about it. What makes your business unique will also dictate an emphasis in certain parts. Only after you have written it out the first time, take note of the specific requirements of the plan design. If your business plan is supposed to be under 15 pages and you wrote 30 the first time around, the good news is it will be information dense. If you are thin in one area, now is the time to do some research and expand on that piece.
Expect to go through at least two edits. When you think you’re done, get
feedback from business coaches, advisors, colleagues in the business, and so on. If they tell you they really like it without making comments, tell them to do you a favor and read it again to help you make it better. Nobody’s perfect out of the gate, and you shouldn’t expect to be either. Just keep improving until you get your money. Then focus on execution, which is different than the world of business plans.
Please read all of the posts in the series: