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|Your Business Plan: Short, Focused & Confident|
|Published Thursday, December 21, 2017|
The business plan has an image problem. Buffeted by business illuminati, some of whom think business plans are no longer needed, and the increasingly fractured attention spans of small business owners and entrepreneurs, the humble business plan can appear to be a relic, an outdated vestige of the past, gone the way of Ebenezer Scrooge and his counting house.
But, the truth is that the business plan is as strong, vibrant and essential as ever. In this time of rapid market shifts, it is essential that every small business owner have a cohesive story to communicate with investors, customers and one’s own internal staff.
Who Will Read the Plan?
To craft an effective and fundable plan, a business owner must know to whom he/she is speaking. A little research about the intended audience before starting to write can save time and energy later. A plan for a bank will look different from a plan designed to appeal to angel investors or for another financial vehicle. In fact, different lending institutions or angel groups may have their own proprietary guidelines. If guidelines and interests aren’t clear from an organization’s website or marketing materials, ask your point of contact.
The well-laid business plan starts with a strong executive summary, which an author should write last, once he or she has full command over the information in the entire document. The executive summary is crucial because it makes the reader decide whether he or she wishes to read further.
It is also important to make “the ask” up front and to be confident in that ask by being rooted in sound financial estimates and having a deep understanding of the market, as well as a realistic trajectory. Many people make investors hunt for the ask, leaving it for the end of the plan, which can make potential investors wonder, in the words of Sally Holder, Lakes Region adviser for the NH Small Business Development Center (SBDC), “whether they are embarrassed by the need for funds, or whether the entrepreneur just hasn’t done the work to know what they need.”
The next most critical component is the financial projections, typically the projected statements of cash flow, profit and loss, and balance sheets. These can be daunting to prepare for even financially savvy business owners, and as such, they are often the focus of the SBDC’s work with clients.
Financial projections must be realistic, and, importantly, not just based on “gut feel,” or loose estimates. “Providing some supporting documentation from an independent benchmark source can provide justification for the numbers,” says Jeff Seligman, NH SBDC’s business advisor in the Seacoast.
The numbers should tell a story, which is why most of the SBDC’s business planning interactions begin with the numbers in mind. The Monadnock Region and Grafton County business advisers note that any business planning conversation, where the purpose of the plan is to seek capital, starts with a focus on the viability of the business owner’s initial assumptions through projections.
Beyond just preparing and providing
financial statements and projections, it is critical for small business owners to be conversant about their statements. SBDC Seacoast Regional Director Warren Daniel, who has been advising for more than 15 years, says that not knowing one’s own financial statements inside and out when meeting with a potential funder is “a very big mistake.”
The structure of the business plan has changed dramatically in recent years. Julie Glosner, a SBDC adviser who works along the Interstate 93 corridor, explains that this is an area where business owners now have more latitude than in the past. She cites an example of a client who prepared a slide deck as a complement to the written plan, which can enhance the professionalism of a meeting with a funder.
Several SBDC advisers commonly work with clients using a tool called the “Business Model Canvas,” which starts from a visual and conceptual framework rather than an itemized written template. There is nothing wrong with a standard document template, but it is incumbent upon both the adviser and the business owner to find an approach that works best for the owner.
Keep the plan short and focused. There is no absolute standard length, but you can typically explain your business and your case for funding in less than 10 pages, and it could certainly be even shorter. The well-prepared pitch or bank meeting will include additional facts, graphs and information at the ready but keep the kitchen sink out of the plan.
Other Essential Elements
This article has focused on finance, but there are many other complementary elements essential to a fundable plan. Business owners should include ample information about their management team, their local market and competition (or at a regional, national or global scale, depending on the business), their own financial contribution to the business, and their marketing strategy. All of these elements demonstrate to a funder that the business owner is in tune with leading the entire business, not just the finance side.
Write the Executive Summary Last
The executive summary demonstrates your mastery of the overall plan. It should tell a story, and clearly and succinctly articulate a few key things: who you are, what you want to do, the amount and purpose of the funding you are seeking and the benefits of the plan (to the author, to the business, to the community). “Having read the Executive Summary, the reader knows enough to make an informed decision if he or she wants to continue reading the balance of the plan,” says Stewart Gates, SBDC’s North Country business adviser.
Rich Grogan is state director of the NH Small Business Development Center, which provides in-person advising and e-learning options to business owners at no cost. For more information, visit nhsbdc.org.
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