Building a business plan – and using it to pitch your idea to others – is one of the most fundamental building blocks for establishing a new business. Although some people get lucky and succeed without developing a plan, for most entrepreneurs the process of building a business plan and presenting it to others is among the most meaningful and important learning experiences that they will engage in.
It’s what helps them make their new venture a success. Recently, some of the MBA students from the Gordon Institute of Business Science (GIBS) participated in a business plan competition in which they needed to prepare a full-blown business plan for a new business venture and then present it to an independent panel of judges.
As an exercise, the GIBS business plan competition served as an intense learning experience for those involved, which in turn has generated key insights for other entrepreneurs to learn from. Michael Bean, one of the GIBS Entrepreneurship MBA students, reflected on his experience as follows:
“Developing a business plan is a far more complex and challenging task than I realised.Even if you ‘think’ you know the industry, the rigour of doing a proper evaluation of the market, working out a value proposition, actively developing an entry strategy and ironing out the financial model behind what you are trying to do will reveal nuances that you may otherwise have missed completely.I firmly believe that the effort taken to do this, and being forced to put it in a format which can be readily understood by a lay person, not only provides a basis for sourcing investment but also helps you to understand the message you ultimately wish to convey to the market.”
At the end of the exercise, I asked those who did well in the competition to share what they learnt. My instruction to them was:
“Assume that your brother-in-law wants to start a new venture and he needs to prepare and present a business plan. What would you tell him to do based on your experience in the competition?”
After carefully analysing and categorising their insights, I arrived at six critical activities that an entrepreneur needs to do well to be successful in the business planning process. Three of these activities relate to developing the business plan and three relate to presenting the plan to others.
To make these activities easy to remember, I linked them with the first six letters of the alphabet: A, B, C, D, E, and F. Although I developed the framework for this article, the content comes directly from the students who participated in the competition. Their comments create a unique opportunity for you, the reader, to benefit directly from their learnings.
Delivering the business plan
Assess the context
The starting point for developing a successful business plan is to truly understand the industry, the opportunity and the environment. Understanding the context in which you plan to operate can result in direct business benefits, as described by one of the students.
“An in-depth and rigorous investigation of the competitive landscape was useful as it helped me understand what we were and, importantly, what we were not offering (some of it has gone directly into our marketing material). It also highlighted some features that our competitors were offering which we are now adding to our own product line, as well as markets that we had not thought of entering.”
So how can you assess the context? Here are some of the best ways.
- Read: Do as much research into your proposed area of business. It’s amazing what you can learn from just spending time reading.
- Have broad discussions: Speak to as many people as possible in that industry… there are always ‘unwritten’ rules that you can learn from those who are in the industry… “Preparing to write the business plan motivated my business partner and I to speak to many different people in the market to clarify certain components. These conversations led to one amazing opportunity after another.”
- Look for partnerships: The biggest learning from the business plan competition was ‘the value of partnerships’. A huge strength of some of the business plans was how they leveraged partnerships. In a sense, the entrepreneurs focused on how they could strategically take existing products to market. Instead of trying to recreate the wheel (being both the engineer and the entrepreneur) they were able to bring their specialities to the table and work in a team. This is an ingenious use of resources. It has broadened the participants’ views on opportunity scanning and screening.
Build the business model
A business is made up of many parts and it is critical to understand how those parts fit together to create value. In order to fully appreciate and understand how your business creates value you need to build a business model that fully incorporates the marketing, financial and operational elements of the business. As one participant reflected: “Make sure that your business model tells an integrated story… your concept must match your assumptions, which must fill a real customer ‘need’… and link back into your financial projections.”
So what do you focus on when building the business model?
- Understand your uniqueness: “Identify your competitors, identify why your product is unique, and validate that the product or service cannot be copied or adapted by competitors.”
- Deal with the detail: Pay very, very close attention to detail. Even the smallest thing will trip you up when you’re explaining your plan to investors. They’ve done this many more times than you have. If you have small doubts, address them before they become big doubts (and they will probably become big doubts when you’re presenting your plan and you don’t have a satisfactory answer to a tough question).
- Know your numbers: Proper financial forecasting helps clarify the bottom line questions. It has shown us better ways of approaching our pricing and the revenue models in servicing particular client segments profitably. Further, it has highlighted the key performance areas we need to track to drive performance for our operations going forward.
- Be real: Be realistic about what you hope to achieve. Don’t over-inflate the numbers.
- Explain how you will get things done: Ideas are nothing – it’s all in the execution. If you don’t have a concrete explanation of how you’re going to achieve what you want to achieve, don’t bother. Dream big, but dream real.
Capture the essence
Ultimately you need to take all the hard work that you have done in assessing the context and building a business model and translate it into a written business plan that captures the essence of what you are trying to do. The act of writing your plan in a formal document can seem like a laborious waste of time and yet the discipline and focus that this engenders can be the difference between success and failure in a new business.
So what can you do to succeed as you capture the essence of your business idea in a written document?
- Give yourself time: Preparing a business plan requires time and cannot be rushed, especially if you plan to present the business to an investor panel. Being thorough will save you embarrassment when your plan comes under scrutiny and when you are expected to field questions.
- Keep it simple: Find a simple way to explain how your solution works – the MBA lingo is not essential in a business plan, as it must be clear and easy to understand for a potential investor.
- Get a review: Get a few people to read through your plan. Their comments and criticism can be very helpful.
Delivering the pitch
Develop a pitch
Writing the plan is only half the story; the other half involves presenting the idea. Often the presentation of a business plan will carry far more weight than the written document. A good written document creates the appropriate foundation for a good presentation, but in addition to writing a good plan you need to prepare a knock out presentation to appeal to investors.
So what should you do when preparing to present your business plan?
- Give yourself time to prepare: Set aside more than enough time to prepare the presentation. It always takes longer than you think and proper preparation pays huge dividends.
- Assume ignorance: Assume investors have not read through your business plan. Plan to explain every aspect of the business. Even if they have read the plan, they will want to hear you describe the idea.
- Practice: Make sure you know the contents of your presentation backwards… so practice, practice, practice! Steve Jobs is as good as he is because he practices. Also, try to deliver your presentation to your peers and friends first so you can get some pointers and comments. This can be very helpful in helping to control your nerves when you finally need to deliver the presentation to investors.
- Constructive Criticism: It really helps to get constructive criticism prior to the actual presentation. While you may believe you are able to play devil’s advocate to your own idea, it is advisable to get the opinion of an objective expert before the real deal.
- Know who you are talking to: Research the background of the people to whom you are presenting to understand their frame of reference… Google them if you need to; this can help when you want to create rapport with your audience.
Execute the delivery
Ultimately, it comes down to what you say and how you say it. Standing up in front of a panel of investors is intimidating, but your ability to embrace the stress of the situation and translate it into positive energy can create the breakthrough you might need to get your business off the ground.
So what can you do to give yourself the best chance of effectively executing your delivery of the presentation?
- Have conviction: Having the confidence that your product or service will work translates directly into how you talk about it. If you think your venture will be successful, you automatically display the passion for it that investors seem to love.
- Sell the model: Spend enough time upfront to describe the business model as simply as possible, especially when presenting to investors who are unfamiliar with your industry. If investors fail to understand the business model, any supporting evidence you may use to convince them of the business’s viability will be lost.
- Bring in emotion: Add an emotional angle to your presentation. After all, you will be presenting to ‘people’. I’ve found that the emotional bits are what capture the attention of the people that you will be presenting to. All the other information then also becomes a bit more interesting to them.
- Simplicity: Keep it short, keep it simple and keep them smiling.
Follow up on feedback
The actual business plan presentation is a catalyst for further discussion. This discussion may happen immediately after the presentation, as the audience asks questions and provides feedback based on the presentation. It may also happen in follow-up meetings or via ongoing referrals.
To truly benefit from the business planning process you need to be ready to receive the feedback and be proactive about following up after the presentation. As one student pointed out: “The feedback from the judges was great – we are already using some of it. It is very helpful to have a critical and experienced eye looking over your business without an agenda or bias.
“We all have blind spots. The positive feedback is also great as it provides reassurance that you are not crazy and you might really be onto something.”
So what can you do to make the most of the feedback and follow up process?
- Remove emotion: Do not be emotionally defensive of your plan when questions arise. Welcome the questions and refer to facts in your business plan to support your response. If there’s nothing in your plan to refer to… you weren’t thorough enough.
- Listen: Use all negative comments from people in the audience to your benefit. See the positive aspects in what they are saying and they might even co-create or refine your proposal, without even noticing it!
- Anticipate different reactions: Appreciate that you might get vastly different reactions from different groups of investors to the exact same business presentation. Appreciate where they are coming from, listen to what they say but don’t let a dissenting minority kill your idea.
- Provide a mechanism for follow up: Bring business cards, put your contact details on all material and get business cards from those investors who show an interest. Seek to build a longer term relationship with those investors with whom you get along. You will be amazed by how they might open doors for you.
Building and presenting a business plan is definitely not as simple as learning your ABCs. Business planning is an intricate and complex process. But there are a number of subtle, even understated, steps you can take to make a big difference as you engage in this process.
I recommend that you apply these unique, first-hand insights into the subtleties of business plan development and examination to your own business plans. Although the process may appear complex, understanding the simple steps outlined here will help you cut through the complexity to make you more effective in achieving positive outcomes as you prepare and present your own idea for a new business.