Wade Armstrong

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Entrepreneurial Tool #2: The Business Plan

Posted Saturday June 17, 2006 in Entrepreneurship

This tool is close to my heart right now because I’m spending most of my time writing one of these for the venture I’m planning to start. My partner, reasonably enough, would like to get on with things now that we’ve written the Feasibility Analysis; but the truth is that the Business Plan is a very different document than the Feasibility Analysis. In simplest terms, the Feasibility Analysis is an internal document, while the Business Plan is an external one.

Really, a Feasibility Analysis is a research document. Its first mission is to ensure that, in jumping into a company, you have not committed the cardinal sin of bullshitting thyself; once you’ve completed your Feasibility Analysis, you understand the industry you’re getting into, how to participate in that industry, and where that industry is going. It’s a document that contains no spinning and no unturned stone; the Business Plan is equal parts step-by-step plan and spin.

The Business Plan’s audience is substantially external — the bank loan officer, the angel investor, the spouse who wants to know “when you’ll get a real job.” You want to prove to these people that you have a real plan, that you know what you’re doing, and a good Business Plan will prove both of these.

Which is not to say that said Business Plan has no internal value — quite the opposite. A Feasibility Analysis does not constitute a specific plan for advancing your business, and a plan is what every entrepreneur needs. What’s your next step? What’s sneaking up on you? How do you destroy your enemies while earning the love of your customers? A good Business Plan answers questions like these.

Now, that’s not to say that a Business Plan is a simple, chronological plan; only parts of it are. However, the Business Plan should show your philosophy, show what you expect and how you’ll deal with it. Even as your business grows, your Business Plan will give you a good benchmark against which you can measure your progress and in comparison with which you can understand what you missed and what has changed.

So what’s in a Business Plan? Well, you can reuse a lot of what you wrote for your Feasibility Analysis, but you’ll need to add on quite a bit. Make sure to include:

• Industry description
• Market description
• Market segmentation
• Distribution channels
• Description of your competition
• Your competitive advantage
• Your initial marketing plan, including your first customer, lead blocker, pricing strategy, and marketing mix
• A detailed description of how your operations will work
• Your mission statement and operational philosophy
• Your supply and distribution channels
• How your organization will work and your org chart
• A detailed financial plan saying when you’ll spend money, when you’ll earn money, and specifying what the triggers for all instances of those two events are
• Specifically what you need to get started

As I said, none of this constitutes a step-by-step plan, but, after reading all of this, you should have a good idea of:

• What exactly you’re planning to do, when, why, and in what order
• What philosophical approaches will define your response to unexpected events

There’s no universal template for a business plan, so just write something that matches your dreams and expresses your plans. Then go for it, because I don’t want to be the only nutcase starting a new company these days!