Please remove the confusion

When it comes to deciding on business plan layout or business plan structure, I estimate that around 80% fall into a frustrating and misleading trap.

The consequences of this can be disastrous. Let me explain:

I assume that you are looking on the Internet for useful information on deciding the structure or layout of your Business Plan.

Now here’s the trap that you need to know about. Most Internet based information is related to the structure, or layout of type “B” business plans.

If it’s a type “A” business plan you need, this information could be very misleading and confusing. So what’s the difference?

Get Smart Quick
The first thing you need to know is what’s a type “A” business plan and what’s a type “B” business plan. You can then make smart choices on what you need for your success pathway.

You will also understand why the business plan structure and business plan layout of each type needs to be completely different.

A Type “A” Business Plan is about Achieving Success
The purpose of a type “A” business plan is to get you and your team organised so that you can achieve business success.

It’s about clarity of thinking and clarity of implementation.

Type “A” business plans are frequently referred to as Strategic Business Plans or Internal Business Plans.

The desired outcome of a plan of this type is an inspired team with a clear understanding of what needs to be done to achieve business success. Soon we will cover the appropriate layout and structure.

A Type “B” Business Plan is about Getting Money

The purpose of a type “B” business plan is to convince some person or some organisation to provide funds for business development.

A type “B” business plan is essentially a selling or proposal document. Its job is to persuade or convince people on the merits of your business proposition.

If your intention is to create a business plan for the sole purpose of securing money, it’s a type “B” plan you need.

The terms Funding Plan or Information Memorandum are other names that are used for type “B” business Plans.

The desired outcome of a plan of this type is an agreement to provide funds or other forms of assistance – with terms that suit your requirements.

Now let’s talk about business plan structure and business plan layout.

Structure and Layout Suggestions

In general, type “A” and type “B” business plans should have a structure and layout to suit the particular application. Who the audience is, and what their needs are, should be key considerations.

As a guideline, here are two designs I have used frequently.

Type “A” Business Plan Structure and Layout An example Business Plan Layout for a Type “A” Business Plan

Typpe "A" Business Plan Layout Example- Internal or Strategic Business Plan

Remember, the purpose of a type “A” business plan is to answer the question: “How do we intend to achieve business success?”

1. The first section of this plan or document should be about why the business exists and what the business seeks to achieve in the short, medium and longer term. In the layout, this may be called Vision & Goals.

2. Marketing will normally be an early and important part of your business success plan. Where the business chooses to position itself – and the marketing strategies that will be used, are described here. This will be your Marketing Plan. Depending on your definition of marketing, you may wish to call this the Sales & Marketing Plan.

3. Most businesses exit to provide products or services – or a combination of both. A section of your plan will likely be needed to develop or describe your strategies on how this will be done – or how you will improve your current methods. Typically, I call this the Delivery Plan. Other titles could be Operations Plan or Customer Service Plan.

4. The Finance Plan. To succeed in business, good financial management is critical. A Finance Plan will typically look after the management of cash-flow, expense control and profitability. Depending on the type of business, capital expenditure planning may also be covered in this section of your plan. You could also use the term Financial Management Plan to name this section of your plan layout.

5. To make all of this happen, you will need people – good people. For a large organization, your plan layout should include a Human Resources Plan. In a smaller business, the name Team Plan may be more suitable.

6. For a business to be able to grow, a systems approach is desirable or essential. Typically 80% to 95% of administration and general business activities can be systemised. The portion of your business plan layout that deals with this is simply the Systems Plan.

7. If your business does or will require expensive plant or machinery or specialised facilities, a portion of your business plan structure should be dedicated to covering how you will manage in this area. Your accountant might call this the Asset Management Plan. Other names are Plant & Equipment Plan or Working Environment Plan. In the graphic above I have named this Equipment Plan.

Type “B” Business Plan Structure and Layout

Type "B" Business Plan Structure example - for Funding or Information Memorandum

An example Type “B” Business Plan structure

When I assist my clients in the preparation of a Funding Plan or an Information Memorandum, I usually do some research first.

What I’m looking to find out is what sort of information the funder wants – and what style do they want it presented in. In other words, I want to know what turns them ‘on’ – and what turns them ‘off’.

In the image above, I have illustrated the typical business plan structure or plan layout when the prime purpose is to secure funding of a business or important project.

Here are some notes on my approach to documenting this business plan layout or structure.

Part 1:

Although the Executive Summary is usually located at the front, I frequently do it last. A ‘Business Angle’ client of mine told me that he eliminates over 80% of funding proposals by the content of the Executive Summary. So I like to do this section carefully.

After the balance of the document has been constructed, you will likely be in a better position to better construct and concise and Executive Summary for your business plan.

Because the Executive Summary is so important, here are some quick tips.

In your Executive Summary, there are three issues you need to get across in a very concise way:

(1) What is the essence of the business – including key points of difference. If you have a good Elevator Speech or Elevator Pitch, you may be able to incorporate it into your Executive Summary.

(2) What’s in it for them (i.e. Why should they risk their money and reputation to back you?)

(3) What are you asking for (from them), in this plan/proposal. Is it just money, or do you need business expertise etc.

Using Modern Technology
Recently, I have been experimenting with short videos as a tool to quickly inform business funders. A link to YouTube.com may not be suitable for all Executive Summaries, but it is being done. It’s certainly a different approach – and it does get noticed.

Part 2:

The next section of your type “B” business plan is about you and your team. In my illustration, I’ve labelled this Background Information.

Generally, your most important job will be to convince the reader (or funder) that the people behind this proposal have a strong passion, know their stuff and can be trusted.

Start with your business success vision. This is where you get to tell your story – concisely. What passion, knowledge and talent are you bringing to this business proposition? How do you work together as a team? What are the values and principles that will drive this business?

Part 3:

Products (or Services) are covered next. Here you describe the value you can or propose to deliver. This may be in the form or products or services, or some combination. In this section of your business plan layout, you should also address the problems or issues that you will need to manage to be able to deliver your products or services. This may cover manufacturing, importing or affiliate relationships etc.

Part 4:

The Marketing and Strategy section of your plan may well be your greatest challenge. Your job here is to convince your audience that you understand and have workable strategies for the following:

1. Who or whom is your target market?

2. What is the problem or need they have, that you can satisfy?

3. How will you engage their attention and convince them to buy your product or service?

4. How will you make a profit from these transactions? I.E. Your business model…

5. What is your plan for long term sustainability?

Part 5:

The Team. If an individual or organisation is considering your viability and credibility, they will want to know about your team. So part of your business plan layout will need to do a good and honest selling job in this area. Typical items you may need to deal with are leadership, specialised skills and the team’s culture. How you plan to acquire and retain key people may be an important requirement if you need to prove sustainability.

Part 6:

Financial Projections must be included in your business plan structure. Both commercial and non-profit organisations must be able to demonstrate understanding and capability in this area. If this is a new business start-up, or a significant business expansion (for an existing business), careful consideration should be given. The inclusion of best case, likely case and worst case scenarios, can be indicative of good financial management.

Part 7:

People and organisations with money did not get that way by accident. Risks and Rewards are a part of their everyday thinking. In your business plan layout you will need to address both of these factors. This may be in a separate section – as shown in my visual, or you may choose to structure this information into all of the above parts of your plan.

If you have any question or suggestions, please use the comments section. I’m happy to follow up on these.

Andrew Smith

The Business Plan Guy

To explain how this works, let’s look at a couple of simple diagrams.

In the above diagram there is a box on the left marked “A”. Let this represent your current situation – it’s where you are now.

Next, let the larger circle on the right represent your desired situation – or the goal you wish to achieve.

So the purpose of your business plan is to answer the question “How do I/we get from “A” to “B”?

However, in reality your road is not a clear pathway. It’s likely that you have obstacles or barriers to growth that are slowing you down or maybe completely blocking your pathway and progress.

This is represented in the diagram below:

Based on this way of illustrating the problem, the purpose of your business plan is to devise a way of overcoming theses obstacles or finding an alternative pathway.

 Then my answer is very simple.

 DON’T!

 If your mindset is about how to write a business plan, then it likely you will suffer a double whammy – one, writer block and two, the fundamental error of trying to describe something that you don’t understand.

 So what’s the solution?

 My recommendation is that you think in terms of “DESIGNING” your business plan.

 Let me explain this in common sense terms that we all understand.

 If you were going to build a new house, you would never consider writing the house plan – you or your architect would design the plan.

 The Visual Factor
The term design implies a visual factor. When you can see and understand the big picture, detailing is simpler.

 If it’s a house or a business or whatever, the common sense rule is that if you can’t picture in clearly in your mind – beware!

 Avoid This Error
Making decisions and taking action when you don’t understand, is a common cause of business failure.

 If you have designed something well, then the process of turning and idea or desire into reality has a reasonable chance of success.

 If the solution design is poor (or missing), then failure is a strong possibility.

 A Better Question
A better question is “How to Design a Business Plan“. In my experience there are three options or approaches:

1.  The “What needs fixing” approach
2. The “Vision driven” method
3. The “What do we tell the investors” method

 Many entrepreneurs get off to a bad start by starting with the “what do we tell the investors” (or “what do we tell the bank”) option, because they desperately need the money.

 Typically this type of Business Plan will contain sales and profitability numbers that are not substantiated.

Most investors and lenders are not stupid. They know how to read between the lines and pick up what you are not saying. If your plan has no or low credibility, it is quickly dismissed.

 So What’s The Answer?

My suggestion is that you get clear in your own head how your business can succeed before you to try and influence investors or lenders (or family and friends).

 There are two parts to this:
Part One: Use the “What needs fixing” approach or the “Vision driven” method to design and detail a ‘How-We-Will-Succeed’ style Business Action Plan. This is sometimes referred to as a Strategic Business Plan.

Part Two: Practice the skills that will enable you to:

1. Effectively communicate what it is the you seek to a achieve – and why it’s important
2. Effectively describe how to intend to achieve this success
3. Honestly describe the range of financial performance figures that your plan is based on
4. Persuasively describe the business case that you asking investors or lenders to get involved with.

 In follow up articles, I will go over the how-to steps for Part One and Part Two described above.

 Andrew Smith
The Business Plan Guy