In my work over the years, I have seen a lot of PowerPoint pitches, but I have also read an awful lot of business plans. The PowerPoint pitches have driven me nuts for sure (see my blog on THAT!), but the business plans explain my recent need for reading glasses.
One of the goals of my articles on this website is to reduce these external factors that are driving me nuts, so this article is all about the art of business plans.
Only write for all the right reasons
Most people and companies write business plans almost exclusively to attract investors, and while this is indeed necessary to raise money, most venture capitalists I know have made a “gut feeling” yes/no decision during the PowerPoint pitch before they even touch the Business Plan.
Getting (and maybe even possibly reading…) the business plan is a physical step in everyone’s due diligence.
The more relevant and hugely important reason to write your business plan, whether you are looking for funding or not, is to force the management team to solidify the objectives (the what), strategies (the how), and tactics (the when, the where, the who) of the core business.
Even if you have all the funding in the world, every single business should still write their own business plan. Indeed, in this case ESPECIALLY if you have all the funding in the world because too much capital can worse than too little…
Make it a singular lonely effort
The creation of your company’s business plan will be a big group effort involving all the principal players in the company, and probably at least an outside consultant, and maybe a diverse Board, the actual physical writing of your business plan–literally sitting down at a computer and typing out the document – just has to be a solo effort. It is not a team joint document shared ona network and written amongst a team of writers.
In the perfect world, the CEO should do it because she will be the ONE person who needs to know the plan by heart in her sleep. Take it from me (who writes quite a lot), for writing to be clear and consistent, there has to be only one writer. It is extremely difficult to cut-copy-and-paste several team member’s contirbutions and come out with a reasonable, let alone a great plan.
Most people create a business plan, and it’s a piece of rubbish: fifty pages long, thirty-page appendix, full of this year’s buzzwords, acronyms, and superficialities like, “We only need one percent of this market.”
Then they go ahead and create a PowerPoint pitch presentation from it.
It is no surprise why the plans are crap when they are based on lousy pitches? In our experience the best sequence is to perfect a pitch, and then write the business plan from it.
Guy Kawasaki’s 10/20/30 Rule of PowerPoint
- a PowerPoint presentation should have ten slides
- last no more than twenty minutes
- contain no font smaller than thirty points
A good business plan is simply an elaboration of a good pitch;
a good pitch is not the summary of a good business plan.
Why? Because it’s much easier to revise a pitch than to revise a plan. Give the pitch a few times, see what works and what doesn’t, change the pitch, and then write the plan. Think of your pitch as your outline, and your plan as the full text. How many people write the full text and then write the outline?
Simply put in the right stuff
There are some basic rules that everyone is ready to see in a business plan in reailty. What a business plan should address? Here’s the simple list with the number of slides/pages for each one:
- Executive Summary (1)
- Problem (1)
- Solution (1)
- Business Model (1)
- What is your Magic Ingredient(1)
- Marketing and Sales (1)
- Competition (1)
- Team (1)
- Projections (1)
- Status and Timeline (1)
- Conclusion (1)
Basically, this is the same list of topics as is in a PowerPoint pitch. Those numbers in brackets are the ideal lengths for each section; note that they add up to eleven. As you’ll see below, we think that the perfect length of the ideal business plan is twenty pages, so w’ve given you those extra nine pages to play with.
Always focus on the executive summary
One of the myths of business plans is that the most important part of a business plan is the management team part.
The executive summary, yes all one page of it, is by far THE most important part of your business plan. If it isn’t just fabulous, attention grabbing, heart poundingly fantastic, you are completely out of luck; no one will read beyond it to find out who’s on the management team, what is your business model, and why your product is magically different and revolutionary in its field.
You should spend at least 80% of all your writing effort on getting a fantastic executive summary. Most people spend 80% of their effort on putting together that enormous Excel spreadsheet with all the dreamed up financial figures that in relaity no one believes.
Keep it concise and clear
The ideal length of a business plan is twenty pages or less, and this includes the appendix. For every ten pages over twenty pages, you decrease the likelihood that the plan will be read, much less funded, by twenty-five percent. When it comes to business plans, less is more. Many people believe that the purpose of a business plan is to create such shock and awe that investors are begging for wiring instructions; the reality is that the purpose of a a business plan is to get to the next step: continued due diligence with activities such as checking personal and customer references. The tighter the thinking, the shorter the plan; the shorter the plan, the faster it will get read.
Have a simple 1 page financial projection
A lot of business plans contain 5 year projections with a $10 million top line and such tiny levels of detail that the budget for coffee is a line item. Every funder and business executive who reads it knows that you’re making these numbers up and making them large enough to be interesting (you hope), but not so huge as to render sanity testing…
Do us all a big favour and reduce your Excel dream sheets down to one page and provide a simple forecast of the key business metrics (KBM’s) of your business e.g. the projected number of paying customers. These KBM’s provide a lot of insight into your assumptions. e.g. if you assumed that you’ll get 30% of ANY serous market to buy your product in the first year, I would suggest checking your ego at the door.
Have the reader imagine the market size
Don’t include quotes of some consulting firm’s paid for validation of your market. For example, “Saturn Research states that the market for bird watching software like we have will be $12 billion by 2014.” None os us ever believes these “validations” because the last business plan we saw said this about USB thumb drives; the next one will say this about online cat toy sales, and the next one etc etc etc.
What you want to do is Have the reader imagine the market size: i.e. enable the reader to make her own mental calculation on the spot that this market is just huge! “Every hotel client would use this would buy this–Wow, this is a huge market!”
Write deliberately, be flexible and nimble
When you write your company business plan, you write as if you know exactly what you’re going to do. You are deliberate. You’re probably wrong, but you take your best shot. using the information you CURRENTLY have.
However, writing deliberate does not mean that you stick to the plan in the face of new info and for sure not when new opportunities come along. As you act out and complete the plan, you act flexibly and stay nimble on your feet i.e. you are quick witted and fast moving: changing as you learn more and more about your market.
The plan, after all, is YOUR plan to do with as you want, however the plan should not take on a life of its own…