This article is an extract from Uncle Ralph's, "The Complete Do-It-Yourself Guide to Business Plans". Read the book.
Recycle your Business Plan. Continuously
My constant theme in working with entrepreneurs on their Business Plans is “It’s about the process, not the product.” So what is the process? It’s continuous recycling, rethinking, reviewing and rewriting.
Most of the advice on preparing a Business Plan is very uninspiring: Unconvincing reasons for doing one and entirely discouraging in describing the elaborate process of documentation and financial analysis. Not likely to persuade busy, results-oriented, document-challenged entrepreneurs that it's a good idea and that they can do it themselves.
So I started to describe my own approach as recycling your Business Plan. That best describes the process I recommend: Start with a very simple document, then continuously review, revise and expand the plan to deal with more issues and answer more questions.
I'm reminded of the "million dollar napkin" that one entrepreneur boasts he used to start his business simply by responding to the challenge to put it all on a restaurant napkin. And there are the thousands of successful businesses that were launched "on the back of an envelope". It's a good way to start your business plan – describe it in a few words on one page.
Here are the steps that I recommend to recycle your business plan. Each step is a version of your Business Plan that becomes more solid and detailed at each recycling:
- Describe the market opportunity, your concept, business strategy, company name and marketing slogan and explain the reasons it will succeed – on one page (or napkin, or envelope).
- Confirm that your personal objectives are consistent with your business objectives and that you have the all the skills, knowledge, experience and contacts required to get started (or explain how you will acquire them).
- Collect and analyse data on your market, customers and competitors that confirm both the business opportunity and your ability to meet customer needs against competitive alternatives.
- Do a business feasibility test at your estimated sales volumes, pricing and operating costs to determine profitability. Calculate the break-even sales level and compare it to your forecast sales.
- Document in more detail your business concept and strategy and all the operating plans for facilities, organisation, operations, marketing and sales. Add a section on the risks considered and your planned response to anything that may not go according to plan.
- Expand the financial analysis to include start-up costs, working capital required and the cash flow consequences to determine the financing required. How much, required when, and how will it be recovered? Test alternative scenarios to ensure that potential variations in sales forecasts and cost estimates will still lead to profitability and that financing will be adequate.
- Complete the business plan document and a full set of financial projections against a checklist of the requirements for your intended audience - management team, lenders, investors, or strategic partners. Add relevant supporting appendices.
- Then recycle the essential elements to capture your Business Plan in a two-to-three page Executive Summary, in a 2-minute elevator pitch, and in a 10-20 slide PowerPoint presentation for alternate forms of brief introduction to your plan.
- The final recycling step for your Business Plan is to continuously refer to it against your future operating results. After review, check whether the plan and objectives are still valid and then revise either your plans or your performance to achieve the objectives.
These few simple steps will take you from a good idea to a well-developed and fully documented Business Plan that will serve as a guide to management and will persuade others to invest in your plan.
Remember the objective is to arrive at a useful communications document that confirms the business opportunity, describes your strategy and operating plans and presents the supporting research and financial projections to prove that it will be a profitable and successful business.
Recycling is good.
Your Uncle Ralph, Del Chatterson
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