Preparing a business plan is like outlining an itinerary for a road trip. You'll want to have a clear, objective map that you can follow step by step while developing your business.
"A business plan is absolutely vital as it navigates your business on the road to success," said Joel Klein, founder and producer of BizTank and the B-Tank platforms. "Only by setting a plan that outlines where you want to go, along with a plan of action on how you are going to get there, will a business owner know if they are heading in the right direction and how far they are from their final destination."
Your business plan should guide you throughout the startup process, available as help for any problem that may arise. Based on advice from our expert sources, here are a few specific dos and don'ts to consider while formulating your plan.
Do test your idea – don't jump into it.
It's tempting to dive into your business after reading success stories of similar companies. However, if you're going to take a leap, make sure you first test the water.
"Don't get mesmerized by the attractive macro data you can find on the web," said Dr. John Mullins, associate professor at London Business School and author of “The New Business Road Test: What Entrepreneurs and Investors Should Do Before Launching a Lean Start-up, 5th ed." (FT Publishing, 2017). "Before your start writing … talk with prospective customers, suppliers and others in your industry."
Even after you embark on your business endeavour, you want to ensure you're attracting and retaining customers before asking for capital, Mullins added.
"Raising money too soon is a distraction, and has big downsides … not the least of which is eventually losing control," he said.
Do study your market – don't go in blind
As with any business project, research is critical to a solid business plan.
"Research is one of the big value-adds of writing a business plan," said Joseph Ferriolo, director of Wise Business Plans. "Research forces companies to learn what they can expect to make and what the industry trends are."
Mullins advises asking yourself how large and attractive your market is, how quickly it's growing, and if there are any trends that will make it grow in the future. Pay close attention to the "five forces" – threat of entry, threat of substitutes, supplier power, buyer power and competitive rivalry.
Additionally, research critical success factors, or important areas to focus on when investing in a project. Some examples are finding the right location, competing with like companies and retaining efficient employees. Discuss your CSFs with your team to guarantee they are onboard with your goals, said Mullins.
Do share your plan – don't keep it to yourself.
If you want your company to succeed, then all employees should understand the business plan's dynamics. It is not a document that you should lock away.
"The business plan keeps an organization focused, [and] it needs to be shared," said Brian S. Cohen, an operating partner at Altamont Capital Partners and member of board of directors of Access Insurance Company. "Too many companies treat it as a confidential document to be kept away from the 'prying eyes' of the rank-and-file employees. I believe the business plan should be shared, discussed and amended where appropriate, through an open loop of feedback and insights."
The more people who are involved, the more ideas you can circulate around the company, Cohen said. It is important to consider every worker's input to ensure that the outcome is something that's pleasant to all.
Do be clear and concise – don't go overboard.
You don't need to have an over-the-top, elaborate document with fancy formatting or flashy decor. However, what's written should be specific enough to cover all areas of concern.
Cohen advised starting your plan, with a SWOT analysis, which stands for strengths, weaknesses, opportunities and threats. Create an executive summary describing the industry you wish to succeed in, and how and why you intend on doing so. Then, list your company's strengths and weaknesses, opportunities for growth, and any threats that might hinder the achievement of those goals.
Klein stated that the document doesn't need pages and pages of text; rather, it can include images, infographics and specifics "so that it can be used as a point of reference at any point in time to ensure that the business is on the right path and is meeting its goals."
Do put it to use – don't file it away.
Your plan is there for a reason. Don't be afraid to refer to it as much as possible — think of it as checking the map when you've made a wrong turn. There is nothing wrong with using your plan to get back on track or to make sure you're still on course.
"The biggest mistake people make is [that] they prepare the document, and then put it in a drawer and never look at it again. That's self-defeating," Cohen said.
Finally, remember that you should revisit your business plan as your company grows.
Templates and resources
Additional templates and resources are available at the following sites:
Additional reporting by Elizabeth Peterson and Katherine Arline. Some source interviews were conducted for a previous version of this article.