The second article in a series on the steps to starting a venture.
You’ve got your idea; that’s Where It All Begins. After deciding to move forward with your idea and turn it into a business, you have to do two things: find a business partner and write a business plan. VentureStart will discuss finding a business partner in a future post.
The business plan, if done right, will not only effectively communicate your idea to potential investors, but will help the entrepreneur focus his/her own thoughts and provide direction for progressing forward.
The contents of your business plan will differ slightly based on what industry you’re entering, but the basics will be the same. Every business plan should have an executive summary, a business description, a market analysis, an organization and management section, a marketing and sales plan, and a financials section. Descriptions of the contents for each of those sections can be found all over the internet including here. Some “experts” will tell you that using good grammar and avoiding spelling mistakes is important in a business plan. They’re right, but only up to a point. Some “experts” will tell you that having a cohesive vision for how to take your idea from a concept to a funded, market leading company is important. They’re not wrong, but they’re not right either.
The real purpose of a business plan isn’t to pitch investors or map out turn by turn GPS directions for getting from idea stage to fortune 500 company. Those are things the business plan does, not the purpose for creating it. The true purpose of a business plan is to provide an internal guiding light that helps the entrepreneur maintain focus on why the company was started, what the company’s all about, and how to accomplish the company’s goals with the style, personality, and flair unique to that specific company. It acts as a foundation, essentially like the US Constitution provides a foundation for a country’s legal system, not every single law. Just like the US Constitution, the business plan can be amended later as growth and changes in the company necessitate changes in the business plan. Most companies go through multiple versions of the business plan as they grow in their first few years.
#SteveJobs took the concept of a business plan, or a foundation for guiding the company, to the next level when he created Apple University, designed to teach Apple executives to think like Steve Jobs. Apple realized that the best way to preserve the thinking and decision-making process that guides their company and makes them unique in the market place is not to write it down on a piece of paper, but to create a digital library that demonstrates that thinking for future employees.
There are many places to find outlines and sample business plans if you need help getting started. In addition to your local library, the Federal Small Business Administration (SBA), www.bplans.com and entrepreneur.com are good resources for avoiding writers block. That said, resources are only useful to up to a point. Your business plan should reflect your ideas, your company’s style, and your personality. One of the most important keys to a new business is the entrepreneur, his/her instincts, creativity, vision, and personality. Your business plan should reflect those qualities just as much as your business does. If the business plan sounds like you took it off a dusty shelf at a large box store, your business is likely to feel cookie-cutter rather than fresh and original.
Once you have the business plan written, do yourself a favor: throw it out.
Start over from scratch and write a new business plan for the same idea from a different approach. A few of the many topics to consider when taking a different angle is: using a different type of business, using a different business model, and targeting a different market segment or customer type. Then compare the two and take the best parts from each plan.
Once you’ve rewritten the business plan, share it with a few select people whom you trust. These people might be family, close friends, or both. They should be people who have one of two things, either a strong knowledge of the industry that you’re entering, built up from years of experience, or a lot of experience in working with start-ups and managing their headaches. Basically, you want to show your business plan to someone who’s worked in the industry for a long time, a serial entrepreneur, or a financial professional, such as an analyst at a venture capital or private equity firm or even an experienced angel investor. Again, only show your business plan to someone you trust because it’s very easy for someone less than ethical to take your idea and use it for their own gain. When you have feedback from your trusted, experienced source, make any adjustments they suggested and you think are appropriate and then get ready to create your investor pitch.