This is the third in a series of thoughts and opinions by Graham Edwards and Renée Cormier — click here to read the backstory and inspiration (if only for the entertainment). It should be noted that neither of us have seen or discussed our answers before they are posted, which in our mind makes this all the more interesting.
In this blog series we will attempt to answer ten different questions business owners may need answered, using our individual and unique perspectives and approaches. It is our hope that this series will inspire both action and interaction. Please feel free to comment and ask more questions.
Question #3: Do I need a plan for my business?
Answer: Yes (full stop).
PS: Whenever the discussion of business plans (or any plan for that matter) comes up there is always the same collection of considerations that make their way into the conversation…
i) One day Alice came to a fork in the road and saw a Cheshire cat in a tree. “Which road do I take?” she asked. ”Where do you want to go?” was his response. “I don’t know,” Alice answered. “Then,” said the cat, “it doesn’t matter.” — There is no need for a plan unless you know where you want to go.
ii) Plan format may depend on your audience (and in many cases they will tell you the format they prefer), or you can just download the “best business plan template ever” with a Google search — they all pretty well consist of the same components. The following nine plan components came from Guy Kawasaki of Apple fame and have worked as a nice framework when pitching a business plan to interested parties and investors:
i. The Problem — describe the pain that you are alleviating with a goal of getting the audience to “buy into” the situation. Avoid looking like a solution searching for a problem, and minimize citations from consulting studies about future size of the market.
ii. The Solution — explain how you alleviate this pain, and clearly illustrate what you sell and your value proposition.
iii. The Business Model — explain how you make money and who pays you; what are your channels of distribution and what your gross margins are. Generally, a unique, untested business model is a scary proposition for many so if you truly have a unique revolutionary business model, explain it in terms of familiar ones.
iv. Underlying Magic — describe the technology, “secret sauce”, or magic behind your product or services. Less text and more diagrams, schematics and flow charts work better; referencing white papers and objective proof of concept are helpful.
v. Marketing and Sales — explain how you are going to reach the market and your marketing leverage points. Convince the “audience” that you have an effective go-to-market strategy that will not break the bank.
vi. Competition — provide a complete view of the competitive landscape and never dismiss your competition. Everyone (customers, investors, employees) wants to hear why you’re good, not why the competition is bad.
vii. Management Team — describe the key players of your management team, board of directors and board of advisors, as well as your major investors. Don’t be afraid to present less than a perfect team — what’s important is whether you understand that there are holes and are willing to fix them.
viii. Financial Projections and Key Metrics — provide a five year forecast containing not only dollars but also key metrics such as number of customers and conversion rate. Do a bottom up forecast and take into account long sales cycles and seasonality. Making people understand the underlying assumptions of your assumptions (of your forecast) is just as important as the numbers you have “fabricated”
ix. Current Status — Explain the current status of the business (product and service), what the near future looks like, and your investment/OPEX considerations. Share the details of your positive momentum and traction, and align it with the vision of the business.
iii) “No battle plan survives contact with the enemy” (Helmuth von Moltke) or “Whatever can go wrong, will go wrong” (Murphy) — in other words, no matter how much time and thinking went into your plan, the moment it is implemented (and enters the real world) stuff will happen that wasn’t planned for, anticipated, or simply wasn’t thought of. This is a reminder to anyone formulating a plan (or asked execute it) that it is important to be adaptable, resilient, and have a sense of humour (because the universe sure does).
iv) Point iii) does not negate the need for a plan and its importance (see point i)) because you simply will never build what you want or get the support you need (i.e. investors, employees or customers) if you don’t have one. What is proving out time and time again however is that a top down plan (with all the executable trappings) just falls apart as the real world rushes in — mostly because the people on the front line are expected to follow the original plan when the situation suggests it is no longer the best course of action. More and more leaders are articulating a plan framework with a vision, goals, guiding principles of the business, and then empowering their employees; they are creating an environment that lets people rally their efforts around this framework (instead of a hard plan) and in doing so achieve creative and very successful action.
v) Your plan will most likely come in a number of different forms such as a document, a PowerPoint slide deck, or an elevator pitch. I want to add that you shouldn’t underestimate the importance of a well-rehearsed elevator pitch because when you tear away all of the formality of a plan it simply starts with the question, “So, tell me about your business and the opportunity?”