From Business Plans to Businesses of Tomorrow

Art by: pictographik.wordpress.com/

Business plans are fairly intense pieces of work; I know this because I have been fully immersed in the creation of one over the last month. From this invaluable experience I have learned so much about what is required and not required in order to navigate through the hurdles that arise when you are trying to take a nebulous concept from your mind and have it make sense when you put it on paper in order to start a business that has any chance of getting funded.

Throughout this process, many things that I thought would be the easiest to implement have turned out to perhaps be the most difficult challenges to overcome. I have battled boredom and frustration on a number of occasions, not because I’m bored with my concept, but because certain things can be downright difficult in the process towards achieving fruition of one’s desires.

Therein lies the biggest challenge for many people, how to carry on through the pain of boredom and into the breakthrough stage which Robert Greene calls “the cycle of accelerated returns”. This stage, which Greene describes in his book “Mastery”, is the point where through vast amounts of trial and error, hard work, and focused effort, a person is able to complete a given task, making it appear to be automatic and easy. For me right now, I’m not at that point yet with my business plan writing skills. I’m not worried about the fact that I find the process of business plan writing challenging and more than a little bit tedious because, from past experience, I know that I’m close to having a breakthrough in the process of learning how to do it well.

In my last post, I described the methods of two experts concerning business plan writing, William Sahlman and Tim Berry. Both offered advice that I have used in conjunction with the advice of my two fantastic course instructors who have guided me throughout the process of writing my own plan. Most significantly, for me, is to keep things as simple and focused as possible.

Any 25+ page document that is detailing the complexities and inner workings of a business startup will be a notably exigent process, but if the overall concept is something that can be boiled down into a succinct phrase that provides a distinct solution to a public point of pain, the entrepreneur has an opportunity within his grasp to receive the funding that they may need. I have found that combining the advice from Sahlman and Berry to be incredibly useful. 

Take Sahlman’s four-element structure and overlay Berry’s four-step process. Sahlman’s “nouns” provide the skeletal structure to Berry’s “adjective and verb” system which provides the movement when you correlate the two…that HAS to be business plan gold.  These two minds together have provided what the body (business plan) takes to move forward (in the funding process) successfully.

Sahlman and Berry aren’t the only ones in the business plan world that seem to have an affinity for the number four either. Akira Hirai of Cayenne Consulting talks about “The Four Cornerstones of Every Business Plan" on the company’s “Hot Sauce! Blog”. According to Hirai’s theory, the opportunity describes the point of pain, the solution is the way your business eases the pain, the execution tells how you plan to do it, and outcomes tells of your vision of the business in the future. Pretty concise method if you ask me I feel like I’m seeing a pattern here.  All of these experts use very simplistic ways to describe what can be an overwhelming process, but when viewed through a simple four-step plan of action, the pressure is relieved a bit and a starting point is far more obvious.

My advice is to breathe, go through the plan in steps, write down ideas, and try to be as organized as possible. Even though these are fantastic four-step methods towards accomplishing a successful business plan write-up, the details can sink the ship before you even leave the harbor. Throughout the entire process make sure you go back and look to make sure you’re keeping on task and within both the structure and process of a well-written business plan as prescribed by Sahlman, Berry, and Hirai…these guys definitely know what they’re talking about. 

Mission_Start: Business Plan Gravity Clarified

There comes a point in any potential entrepreneur’s life where they have to buckle down and take active steps towards the realization of bringing their ideas to the world of form. As one of these individuals myself, there have been years of accelerated business education that has now led me to the point where I must mix all of the various skills and knowledge that I have gained and channel it all into the writing (and execution) of a business plan that can be used externally to attract potential investors to my cause.

But what is a business plan exactly? You can ask 10 different people and get 10 different answers as to what the function of a business plan is, how detailed it should be, even what format the business plan should take. Sure, details can be very important, but according to two very high level minds active in educating individuals on the process of writing business plans, it’s not so much the details that separate the good plans from the bad…it’s the people and ideas behind the plan that can make all the difference.

William A. Sahlman, Dimitri V. d’Arbeloff Professor of Business Administration at Harvard Business School and Senior Associate Dean for External Relations, in his classic Harvard Business Review article “How to Write a Great Business Plan” states in the very first line “Few areas of business attract as much attention as new ventures, and few aspects of new-venture creation attract as much attention as the business plan.” This should automatically alert anyone concerned with beginning a new business to the value of writing a business plan, but by no means is it an indicator of future venture success.

Sahlman states that one of the big issues of business plans, in general, are that they are often based in some utopia world with overly detailed financial projections (including poor capital projection requirements) that literally are just plucked out of the sky to look good on paper; beyond year-one projections the numbers quickly become meaningless. This is common knowledge to experienced investors, and that’s why they look at other factors when critiquing plans for new ventures. The most important point to keep in mind regarding BP financials is to detail the financials that matter, as Salman says, “detail the numbers related to the business model that show the business' key drivers towards success or failure, be they distribution channels, production yield, or anticipated renewal rates.” Show within the business plan when the business hits the break-even point, and when cash flow turns positive, beyond these drivers and projections the rest is fluff that can really turn a potential investor off regarding your proposal.

Sahlman recommends a business plan structure that follows four key concepts to build the plan around:

1.    The People

2.    The Opportunity

3.    The Context

4.    Risk and Reward

In order to get another perspective on writing valuable business plans and to understand what the key objectives should be, I turned to Tim Berry. Tim is a Stanford MBA, and founder of bplans.com, Borland International, and Palo Alto Software, a company he “grew to 70% market share with no outside investment” developing Business Plan Pro and LivePlan business planning software. Tim has authored and co-authored books on business plan writing, and recently launched Eugene Social, a site that works to run business’ social media marketing efforts. In 2010, Tim was included in Business Week’s “top 20 entrepreneurs to follow on twitter”, “number 6 of the top 11 companies to follow on twitter” by the New York Times, and finally, one of Business Insider’s “top 20 entrepreneurs to follow”.

Tim says that the to-be business plan should follow a process that seems, to me, remarkably like a S.M.A.R.T. Goal model (Specific, Measurable, Attainable, Realistic, Timely). He says the plan should be Simple, Specific, Realistic, and Complete. The process Tim prescribes looks like this:

To enhance further understanding of Tim's business plan theory, be sure to watch this 5 part video series Webinar delivered by Tim for Global Entrepreneur Week. In it he covers the fundamentals of business plans.

While the plans are certainly one the best exercises for discovery regarding how your business will operate and an exhibit for attaining capital for development and growth, perhaps their most important function is in how they guide the company throughout the lifetime of the business. Business plans MUST be considered as a living document, dynamic in nature, anything that tends to be unbending in this world tends to break. This is a concept that stems from my long history of martial arts, and it is one that makes sense in many instances. The business plan must be bending to the existing market conditions like water in a river conforms to its banks or obstacles in its path, but like the water in a gushing river…stay true to your course, a business plan should operate in the same manner.