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.
The Future Of The Business Plan
When things get rocky, what will keep you on point and on mission? What can you refer to, ensuring you aren’t straying from your original vision? The right business plan can go a long way.
Business plans are a lot like maps and GPSes. If the organisational journey is proceeding smoothly, you may believe you don’t need one. Indeed, there’s a school of thought — backed by certain research — that says starting out with a formal plan is no predictor of success and it’s better to get out there and test your concept in a real-world environment.
These naysayers argue that most business plans are theoretical, unrealistic and go out the window the first time the entrepreneur encounters an unforeseen hurdle.
Refer to the original vision
But the pro-business plan lobby argues that, when market conditions unexpectedly change and you’re thrown into disarray, it’s important to refer to the original vision and belief system that you started out with. These will help to keep you grounded and avoid going off at tangents every time you hit an obstacle.
A plan also helps to prioritise your daily activities. Without it, everything becomes urgent and the resulting chaos will destroy your work/life balance and leave you feeling overwhelmed. If you are more than a one-person operation, a business plan enables company teams to align their activities to the overall vision and to work congruently to achieve the same goals.
William B. Gartner, an entrepreneurship professor at Clemson University in the US, believes business plans are essential. After analysing data from a survey of more than 800 people starting businesses, he found that writing a plan greatly increased the chances of actually going into business.
“You’re two-and-a-half times more likely to get into business,” he observes. “That’s powerful.”
Alyssa Gregory, an entrepreneur and writer for the likes of Forbes and the New York Times, says the process of putting together a business plan can help with new ideas, different approaches and fresh perspectives.
“An effective business plan is a flexible, growing and dynamic tool that can help you think creatively and come up with new solutions for some of your toughest business challenges,” she says.
Related: Business Plan Format Guide
Keep the plan simple
However, the thinking around the required depth and complexity of a business plan has changed. A decade or two ago, management gurus advocated elaborate 40-page plans with detailed sections covering objectives, mission, organisational structure, target market, customer behaviour, competitive advantage, marketing strategy, sales forecasts and financial projections.
These days, unless you’re seeking outside investors or looking for a bank loan that requires a detailed risk analysis, the move is towards shorter and simpler documents of no more than a page. The reasons for this change are many. A lengthy document is likely to be unread — particularly by younger-generation employees with short attention spans. Even if it is read, it’s unlikely to be remembered in detail because of its complexity.
So, opt for a one-page business plan that’s easily digestible and lists only the important things like mission, vision, etc. Cut the fluff and keep the essence. If you’ve spent time preparing a longer plan, that’s okay. Turn the key elements that will keep you focused on your goals and the bigger picture into short bullet points that will become your go-to business plan for regular use.
What should be in your one-pager? South Africa-based digital marketing and content strategist, Casandra Visser, suggests:
- Vision – What are you building
- Mission Statement – What you do, what your product/service is and who your customers are
- Objectives – Your business goals for the next week, month or year
- Strategies – How you plan to achieve your objectives
- Action Plan – Steps you will take to action your strategies, including dates/deadlines.
Finally, remember that your plan is a living, breathing document that needs to be meaningful in a constantly changing business environment. So, break up your annual plan into quarterly plans that take into account micro and macro changes in your specific operating environment.
Keep it relevant, keep it simple — and your business plan will be an invaluable asset in navigating your business journey.
Questions To Consider While Testing The Success Rate Of Your Business Plan
Here are four ways to test your plan’s success rate or you may instead take these as questions to validate your business idea’s credibility.
So you’re finally ready to craft your business ideas out of your head and wondering if the plans you have made are worth hitting the success road or not. Well, this is something that stands as a matter of concern for every budding entrepreneur. Also, checking the viability of your business plan is necessary. For this reason, the online evaluations are turning out to be handy.
Creating tests online to assess your business plan has become a norm these days. You may find several testing tools with ready-to-use quizzes/tests to help entrepreneurs in interpreting results for developing a successful business plan. So before you take the plunge and give your business a shoot, here are four ways to test your plan’s success rate or you may instead take these as questions to validate your business idea’s credibility.
Answer these 4 Questions to test your business plan’s success:
1. Did you assess your target audience/market?
A crucial element of a successful business plan is making an appropriate market analysis and identifying your target customers.
- Whom are you selling your product/service to?
- What are their demands and requirements?
- How big is the market you shall step in?
- What can you do to launch your business in the market?
An open interaction with your target audience in the form of social media polls, surveys, etc., can help you find answers to the above questions. If your business plan includes all of these necessities, then you have successfully crossed the first milestone.
Related: Business Plan Format Guide
2. Have you made a check of your funding?
What do you need to kick-start your business? Idea, passion, and more importantly ‘MONEY.’ Your business plan should help you identify potential funding sources for your start-up. These sources may include spending your savings, taking loans or sometimes a combination of both. Studies by the University of Oregon say that businesses with a proper plan are more likely to get funded. Therefore, consider making an effective business plan to enhance the chances of getting funds.
3. Did you roll your eyes on the competition in the market?
Analysing your competitors and making a note of their strategies is something that will help you nurture your business. This doesn’t mean that you spend all of your time and energy in eyeing the competition. You need to gather all the tricks implemented by successful entrepreneurs and keep an eye on the factors that lead to failed startups. If your business plan structures key points you take from the competitive market around you, then you have bagged the next milestone in this journey.
4. Have you made a marketing strategy?
Would you like your business to stay stagnated? Obviously not! How you market your product/service to reach your target audience must be included in your business plan. If your business plan gives you a clear picture of when and how you will advertise your product through social media, websites, etc., then you ultimately succeed in creating a full-fledged business plan.
The online test maker software these days has made it extremely convenient to create tests judging the success rate of a business plan. According to a recent study, businesses with an adequately devised plan tend to grow 30% faster. Looking at this number, we can precisely estimate the importance of having a full-proof business plan that includes all of the points as mentioned above. So don’t forget to test your plan before you take the huge leap.
Why Your Business Beliefs Are More Important Than Your Business Plan
Your business plan will change. Your business beliefs should lead you to long-term success.
Do not spend more time working on your business plan than you do actually working on your business. A business plan is important, and you should take the time to make one. Just know that your beliefs about business will have a much greater impact on your success than what you put on paper.
I know this because I’ve coached dozens of entrepreneurs and business owners from the very beginnings of their businesses. I’ve watched some of them grow their businesses all the way to six-, seven- and even eight-figure earnings, even when their initial idea looked shaky on paper.
I’ve watched others struggle for years before giving up, even though their ideas looked foolproof on paper.
The short explanation here is that what you put on paper for a business plan will never match reality. Never. As soon as you start selling to and working with real people, things change. There’s a certain amount of chaos. However, there is a way to harness that chaos and use it to build your empire, which is what I’m here to show you today.
Innovation is moving faster than ever before
In the next five to 10 years, most of the jobs that exist today will be replaced by AI. For entrepreneurs, that means your business operations will be cheaper and more reliable than ever before. However, it also means that your daily operations will look completely different than what they look like today.
Plus, many of these technologies will have unintended consequences. They’re going to create problems that we’ve never had to deal with before (such as high unemployment).
I don’t say any of that to scare you. In fact, I’m extremely optimistic about the future, and you should be, too. My point is that none of us can afford to get stuck on how we do business today.
If your idea of success is to find the next “hack” or “quick fix,” then you’re going to be sorely disappointed. Those hacks and quick fixes are going to become outdated almost as soon as they appear.
So, here’s what you need to do instead: Become obsessed with the principles of wealth and success, not just the delivery system. Study the entrepreneurs and the businesses you admire most and look for the principles that guided their decisions.
Focus on principles, not quick hacks
The most successful entrepreneurs on the planet are the ones that put in decades of hard work to build their empires. That means that they kept their businesses growing even in times of massive uncertainty, loss and change. How?
It comes back to their business beliefs, which is another way of saying principles. If your business beliefs are solid, you will quickly find a way to create new solutions when the old systems for doing business break down. For a great example of this, look at Ray Dalio. He’s been listed as one of the 100 wealthiest people in the world, and he even wrote a book called Principles.
He’s also the founder of the investment firm Bridgewater Associates, which has a fund called the Pure Alpha fund that only lost money three times in the last 20 years. Keep in mind, that includes the 2008 housing crisis, which was the worst economic downturn in recent history. When most people were suffering financial disaster, Dalio and others like him kept their empires growing.
Again, it goes back to beliefs, aka principles. One of Dalio’s core beliefs was that he could design an investment portfolio that would remain safe and keep growing under any economic season. Through years of researching and testing, he created the All Seasons portfolio and accomplished just that. And he accomplished that because he was looking for the principles that would keep his money growing over the long term instead of get-rich-quick tricks and hacks.
Another great example is Google. Google’s mission statement is “Organize the world’s information and make it universally accessible and useful.” That’s not a hack or a get-rich-quick scheme.
That’s a guiding belief in what’s possible. It’s a huge idea that serves the needs of people all over the world. That’s what has allowed Google to create billion-dollar solutions and rewrite how much of the world operates today.
Beliefs can make you mentally strong — or weak
Let’s bring this back down to a personal level. If you believe that you have the creativity, focus and discipline to solve any problem that comes up in your business, then that will come true. On the other hand, if you believe there’s no room left for your ideas, or that you’ll never be able to lead other people toward your vision, that will also come true.
With that in mind, let me offer you a set of beliefs that have helped me succeed in business. These are not beliefs I pulled out of thin air. These are beliefs I’ve seen in action with dozens of other successful entrepreneurs.
I’ve tested them out in my own life and found that they each helped my businesses grow faster. I encourage you to read these aloud to yourself until they become habits in your own thinking.
- Money is attracted to decisiveness, action-taking and speed.
- I can learn whatever new skills I need to succeed and keep my business on the cutting edge.
- I can earn the respect and cooperation of anyone whose help I need.
Now, you might be wondering if I’m preaching some kind of woo-woo, “law of attraction” stuff here. I’m not. If you read those beliefs again carefully, you’ll see that they emphasize taking action. They emphasize going above and beyond what most people are willing to do.
The whole point of this is to prime yourself to want to take these actions even when they are uncomfortable. You will do this because you believe that the rewards will come. No, the rewards will not come immediately. Yes, the reality will be a long and difficult road.
Related: The Power of Dominant Thought
That’s precisely why you need deeply held, empowering beliefs to push you forward even when your plan falls apart. Focus on developing your core beliefs, and you will have the power to overcome any challenge on the path to empire.
This article was originally posted here on Entrepreneur.com.
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