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How to Write a Business Plan
By Andrew Smith | September 30, 2009
If the question is How to Write a Business Plan?
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:
- The “What needs fixing” approach
- The “Vision driven” method
- 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:
- Effectively communicate what it is the you seek to a achieve – and why it’s important
- Effectively describe how to intend to achieve this success
- Honestly describe the range of financial performance figures that your plan is based on
- 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
Topics: How to Write a Business Plan | 8 Comments »
October 12th, 2009 at 3:05 pm
Andrew, good point about the visual aspect of business planning. I always say “Imagine your vision – What do you want your business to do? What kind of income do you want? What does success look like?” Once you can visualize what you want, you can start planning for it from the ground up.
Thank you, Suzanne
October 23rd, 2009 at 1:01 pm
This is great advice indeed and should be drilled into the head of anyone considering starting a business. Not visioneering a plan is one of the biggest mistakes in my industry (professional photography). Thanks for sharing.
November 30th, 2009 at 7:38 am
I enjoyed that, thanks. I thought the ‘Visual Factor’ was very good, and so true. Everything is much easier when you have a mental PICTURE of your goal.
May 10th, 2010 at 11:16 pm
As you write your business plan, you should also consider the budget. Be aware on how the proposal works into its finances and how they can make the investment worthwhile with the budget they are willing to distribute to the project. Budget business plan is a basic and essential process that allows businesses to attain many goals in one course of action.
May 26th, 2010 at 8:56 am
Good post, indeed. Thank you for explaining all about business plan writing
October 7th, 2010 at 4:37 pm
Along with determining the budget for the business, you should also do the sensitivity analysis of your return on investment. It is true that you need to visualize your business plan, but number crunching is equally important as it will give a target to work for and you can review you quarter on quarter performance by analyzing your business plan number and numbers achieved
October 28th, 2010 at 2:09 pm
Thanks for the post, what I always advise when I’m asked, regarding a business start up is to know what you want, regardless if you can put it down on paper for the sake of lawyers. Envision what your business will be in 5 or 10 years and you will better understand how to relate you plans to others.
Thanks again.
March 31st, 2011 at 11:36 pm
Business plan is the initial plan and structure of your business that will greatly affect toward a strategic plan and marketing plan.