Writing a Business Plan

Since I started working on AllForLocal a few years ago, there has never been a spare moment where nothing needed to be done. No matter the situation of our business, there was always one looming task on hand. The Business Plan (BP). For those of you who do not know, a business BP is an extremely dynamic document of every strategy, competitor, market, component of your business in a written form (by dynamic I mean that it should be revisited once a month in order to add updates accordingly; it is as dynamic as your business).

Depending on your business' situation, the purpose of this document may vary. It may be created to give to potential investors. It may be created to enter a BP competition. Or you may create it for the purpose of having it. Whatever the reason, this document is necessary, and beneficial even if it has no immediate purpose. Why? Well, forcing yourself to structure your business in such a document not only allows you to get your idea into its most concise form, but it also creates an excuse to cut out ideas that are unprofitable, or useless to your overall goal (let's call the BP a screen shot of your business' future).

One big question that always gets asked by BP writers is what the standard length of this document should be. The answer to this question varies by source, by business (or type of technology), and by the writer. That is to say that anywhere this question is answered, there is variance. The actual business type may require a shorter business plan depending. The writer may not be a professional writer so their words may be less concise than others. I like to say that a BP should be no longer than 30 pages including the financial forecasts and other appendices. This is the form of this document that would be given out to potential investors. That is how long my plan is. Some competitions require this document to be 15 pages. Others 20. It varies greatly, similar to pumpkin sizes (Halloween is coming soon!).

Also, each business should have two versions of this document, one that has an indefinite length for internal purposes, and one that has been slimmed down for external use. The internal document should detail all potential revenue sources, all competitors big and small, everything that has been discussed and ironed out by the founders. This form of your BP should also come first. That is important because then you can cut and paste the most important content for the external version. This advice is not new, Google it and you will see similar answers.

I am writing about this because it is such a critical component of any business. People will take you more seriously if they know you have a BP. Some may even not work with you if this document isn't available to them.

One more point I would like to get across involves the actual resources available for writing BPs. The structure of the plan varies similarly to the size. It varies by source, by business (or type of technology), and by writer.

Some things that are required by ALL BP guides:
1) Executive Summary -- This should be between 1 and 3 pages in length, and summarize your whole plan. Some investors may ask for this document separately before asking for the plan. This is the most important component of your plan because it is the first part read, and some will throw out the plan if they are not satisfied with it.
2) Business Summary -- This is a description of your product, where in the life cycle your product is, where your business is (is it incorporated, who possesses the majority shares etc.), and any other relevant background information about the business. This is an important component because if your don't describe your business well enough, the investor/reader may be confused. Take as many pages as necessary.
3) The Management Team -- The five key components of a BP (or investor pitch for that matter) from an investors perspective are the team, the team, the team, the revenue model, and the product. Make sure to list any key players on your board of advisors (if you have one) and the experiences of your management team. Include resumes in the appendix because investors care about this greatly. I called this section "Personnel" in my BP because I also spoke about the personnel required to build our business. Take as much space as necessary.
4) Market Analysis -- This section should highlight the major market you are entering. You should discuss the size of this market, the demographics, and the potential for profit. This section is relatively important and necessary to show market potential (is this product feasible in this market).
5) Marketing Analysis (Different than Market Analysis) -- The Marketing Analysis is very important for my business sector - The Internet. How will we market our product and get it popular in our target market. This section may not be as important if you have a product such as green insulation because that market pretty much sells itself. A website needs to be marketed well else nobody will use it.
6) Competitor Analysis -- I used to hold the misconception that the Competition section was important. This section really exists so investors/readers see that you did your research on your market thoroughly. I recommend about two pages on this subject but no more (may vary with sector).
7) Financial Modeling -- The Financials. Arguably the most important part of your BP. This section should go into great detail about your pricing and revenue models. This section will have charts and graphs and many numbers. Some investors are known to skip all content with the exception of 1, 2 and this section. Make sure to research this section greatly before writing it. Find a guide or ask your government organizations for help. Integral to your BP.

That is how I would sum up a business plan. Some guides include strategy plans, financing needs, business structure/organization, and many others. These may be necessary depending on your business, but it is YOUR job to find what your target market needs. It will be extremely difficult to write a plan when you have so many different components, some of which are completely unnecessary.

Let me give you an example: Through a guide that my business used from The Economist, it required us to write a strategic plan that went way beyond the ordinary; SWOT charts, strategic planning (what happens if a meteor hits the server with your website on it for example), and many unnecessarily stupid pieces. Well, we wrote 20 pages here alone, and when it came time to cut and paste, guess how many pages found their way onto the final plan....0. I am not saying this information wasn't important, just that everything else was MORE important. We wasted countless hours writing this section only to end up throwing it out (although we saved it just in case). The only benefit derived is that we learned from our mistake, and potentially ironed out a few ideas by doing it.

Here are a few tools that make writing the business plan easier and more organized.
Google Docs: This is a Google product (clearly). It is free. Unfortunately it is not ironed out, there were still bugs when we used it a year or so ago. The purpose of this is to allow two (or more) people to edit one document at the same time. This was a good approach at first, because it made collaboration easy. Keep in mind there are terms of use, so the potential that Google can take intellectual property is a negative. But otherwise it is a cool tool.
Dropbox: Dropbox is a free product that allows users to store documents on a remote server so it can be accessed from any place on the earth with internet access. This is probably the most useful piece of software I have ever used. There is a 2 gb maximum for storage on the free version, but for $10 per month you can upgrade to 50 gb. The key to using this software intelligently is to create a structure to the documents you put inside the "box." Split your business plan into different documents so you can edit the pieces separately and not step on your partner's toes. Awesome software.
Paint.net: Paint.net is paint only developed better than Microsoft, and it is open source (free). The reason I bring this software up is because some can't afford Photoshop/Illustrator and want to insert pictures or diagrams into their BP (recommended, think about a textbook without pictures). This piece of software is great for editing quick pictures or other files.

I have some great templates given to me by a member of the Small Business Development Center for writing BPs. They are concise and I like that. They also gave me Financial Forecast Excel spreadsheets which I would be happy to send you as well. Drop me an email (joe@allforlocal.com) or comment and request these documents. I hope some of these resources are helpful to those entrepreneurs out there. If you aren't good at writing or don't feel like spending the time on a BP, DO IT. It will get ideas flowing, and allow you to potentially improve your business/revenue models. Thanks again for reading, I will post Tasty Thursdays either very early tomorrow or very late, so stay tuned!