"I don't have one" was Carl's response when I asked to see his business plan for his new company.
You may think this is normal for a first time entrepreneurial adventure. But what if I told you that Carl has started many companies in his 20-year tenure as an entrepreneur?
And with all the companies Carl started, none of them have ever exceeded revenues of a million dollars. Many of them failed and Carl was forced to shut them down within the first year of business.
Does this mean Carl is a terrible businessman?
What it means is Carl did not understand the purpose and the value in creating a business plan. And unfortunately this is pretty typical of many entrepreneurs.
They think flying by the seat of their pants and relying on their street smarts and intuition is the spirit behind entrepreneurship. This could not be further from the truth.
If you don't plan for growth . . .
Now I know what you are thinking. You are thinking that you and other entrepreneurs you know have never developed a business plan and you are doing "ok" - right?
Well, here is the big secret - you can always do better. I know for me -- "ok" simply is not good enough!
And if you don't plan for growth you may grow, but chances are good you will not be able to sustain it. Planning for growth is essential. According to Price-Waterhouse-Coopers, two-thirds of CEO's of fast growth organizations develop some type of business plan.
It is actually the exercise of drafting the business plan that is important -- sometimes more important than the plan itself.
Writing a business plan forces you to focus on the important and essential elements of your business. It makes you think through your next steps and specific strategies and tactics.
But most importantly it forces you to face the facts. Because the most important element in success is this:
A good entrepreneur/executive has the ability to face the facts!
This does not mean when the facts suit you -- it means all the facts all the time.
I know so many entrepreneurs and business owners who make excuses for all the failures within their business. Sadly so many of those failures could have been avoided with the construction of a business plan.
The Eight Key Elements Of A Business Plan
1) Executive Summary: Within the overall outline of the business plan, the executive summary will follow the title page. The summary should tell the reader what you want. This is very important. Clearly state what you're asking for in the summary.
The statement should be kept short and businesslike. It should be kept to a ½ of a page to 1 full-page depending on how complicated the use of funds may be. Within that space, you'll need to provide a synopsis of your entire business plan.
2) Market Analysis: This section should illustrate your knowledge about the particular industry your business is in.
A market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to collect its share of sales. A market analysis also enables the entrepreneur to establish pricing, distribution and marketing strategies that will allow the company to become profitable within a competitive environment. In addition, it gives one an indication of the growth potential within the industry, and this will allow you to develop your own estimates for the future.
Begin your market analysis by defining the market in terms of size, structure, growth prospects, trends and sales potential.
3) Company Description: This section should include a high level look at how all of the different elements of your business fit together. The company description should include information about the nature of your business as well as the crucial factors that you believe will make your business a success.
4) Organization and Management: This section includes your company's organizational structure, details about the ownership of your company, descriptions of your management team and qualifications of your panel of experts or board of directors.
5) Marketing and Sales Strategies: This is the lifeblood of your business. Marketing creates customers and customers generate sales. In this section, define your marketing strategies. Start with strategies, tactics and channels that you have used to create your greatest successes. Next, branch out to others that may be working for your competitors. Remember that this section will be constantly updated based on your results.
6) Service and/or Product Line: In this section describe your service and product. What is it that you are actually selling? Make sure to emphasize the benefits (not the features). Establish your unique selling proposition. This means you have to show not only how your product is different but also why it is better.
7) Funding Requirements: In this section state the amount of funding you will need to start or expand your business. Include best and worst case scenarios. Be realistic.
8) Financials: Develop the financials AFTER you have analyzed the market and set clear objectives. You should include three to five years of historical data.
A good business plan is never meant to be written once. And a good businessperson understands that this plan evolves as your business evolves and as your environment changes, as marketing campaigns exceed expectations or fail to meet your assumptions.
Re-visit your plan at least quarterly, monthly is best.
And remember you do not have to go through it alone. Bring your plan to lunch with a mentor or colleague. Ask questions and present data accurately.
Once you start this process you will find yourself looking forward to reviewing and updating your plan.