A well-written business plan is one that captures the thought process of the entrepreneur and the company’s founders, to tell a convincing story to third parties who may have no preconceived ideas about your plan. In particular, it is the only way to convince potential investors to look at your company, to decide whether or not to invest with you. Mr Inderjit Singh – The Art and Science of Entrepreneurship.
The business plan is the most important document that captures the essence of your business, plans, strategies, goals, and the people behind the company. It is also a document for the company to use and follow for execution of the plan.
Not only is the business plan important as a communications tool to third parties, it is also equally important for the entrepreneur, the founders, and the company’s management team, because it acts as a guiding light as to how the company is to be operated and how plans are to be executed.
It is important to know the two roles of the business plan.
1. To help the company and the team, get organized and act as a roadmap of the activities planned.
2. To help tell the story of the company to third parties i.e. investors and other stake holders.
The Living Document
The business plan should be treated as a living document to be constantly updated as new information becomes available, according to the company’s changing situation.
We should understand that businesses are not rigid, instead they should be treated as flexible beings. This will be especially true for startups, who need to experiment on the aspects of the business, seeing which model works best for them. As such the business plan will be constantly changing and should be updated accordingly. It is best to keep updating with new copies, in case you need to track back to previous versions of your business plan. A rigid business plan that cannot withstand the stress of many changes will be considered a weak plan. The flexibility of the business plan should therefore be an important factor, which has to be built into the document during its preparation.
The business plan is very useful for the entrepreneurs and the stakeholders to measure the success of the company. Some would even consider it to be their battle plan, in which case (actually in all cases) it should be kept confidential and should never get into the hands of a competitor.
A key aspect of a good business plan would be how unique your plan and company are. What differentiates your company from the many others? Have you been careful about the details and is your plan realistic? These must come out clearly in a good business plan. The financial plan and the assumptions behind each number quoted in the plan will be scrutinized by the third party reader, so the entrepreneur should get someone who has a good handle of the financial aspects of a business to be involved in preparing the financial plan. Most of the time, investors quickly zoom in to this part of the plan because it provides the best objective measure of how the company will emerge and how successful the company is expected to be.
The business plan is the document that helps put the creative strategies and ideas into an organized platform. It helps entrepreneurs execute their ideas properly and helps investors and stakeholders understand the story of the business properly. A well-made business plan shows a clear thought process of the entrepreneur and their team. This reflects in the execution capability of the team, which investors are very keen to see.
In the next few weeks we will go through the sections of the business plan in detail, so that we can understand each aspect better.