To answer an e-mail I received tonight.
Here’s a backbone you should use everytime you write a business plan. I’ve seen and written many. Many less than professionals of the entrepreneurial industry (angels, VCs, serial entrepreneurs, entrepreneurship or finance academics, etc.), but probably many more than the ‘rest of the world’ folks.
Two major pieces of advice first:
1) if you’re an entrepreneur, write business plans yourself. It’s a strategic responsibility. Don’t you ever outsource business planning! Writing a business plan directly helps you reflect on your business case. You’ll end up formalizing what was foggy in your mind. If you want your business to succeed, I beg you, stick to my words: having written your business plan yourself, you’ll be able to assess your capacity to abide – or not, by your forecasts. And since learning by doing – ie measuring the discrepancy between what you thought your business would be like and your actual performance – is by far the best MBA…
2) This is sort of less critical, but try your best to avoid business planning software – especially if you know already what business plans are like (dummies are excused: software provide a framework) and you plan to raise money somewhere. Investors see too many of these ready-to-throw-to-the-bin, software-wrapped business plans. Furthermore, this is especially true if you’re a creative person, the (often very relevant) frameworks these software provide will constrain your originality. So try to avoid business planning software (just repeating to make sure you got it). Use MS Word and Powerpoint, or OpenOffice, or even LaTeX or MS Dos 5 + Lotus 1.2.3., but do your best to avoid business planning software.
Allright. There you go with a ready-to-MODIFY (there’s no structure that fits all projects, you’ll have to make the following backbone evolve with the needs of your project) 20-page-long-max business plan structure:
- Cover page with contact details, name of the project or company, recap of what it’s all about (raising funds or recruiting someone) – state ’strictly confidential’ on the footer of every single page (it doesn’t cost so much to add it)
- Opportunity: where did it all came from? Make sure you have a story
- Our concept / solution: how it fills in the gap
- Our business model (textually)
- Our business model (graphically, to avoid questions on your business model at the end of the presentation. These questions, when coming first, actually mean the people haven’t listened to you because you didn’t show them how your business would be such a cash cow. In other words, you won’t get a penny from them. The solution for you is to INSIST on the way(s) you’ll make money for you and them)
- Competition [don't make the same mistake as everybody: think 'competitive universe', not just direct competitors. Most dangerours situations happen in the dark]
- Value added of your solution vs. competitors (USP, stands for Unique Selling Point; if you’re still at school, use ‘Our competitive advantage’ – will make people smile)
- The Team (all the team, not just the founders; I mean it)
- Key figures from the market survey (attach the actual market survey to the miscellaneous back-up pages)
- Pricing (how you did come up with your figures: benchmarking? taking a slice of the ROI generated for your clients? etc.)
- Financials (a 5-year P&L statement will do, make it fit on one page; if you’re knowledgeable in finance, add the B/S in the misc. section)
- Valuation (discount the forecasted free cash flows generated during these five years; take a rate of 10% (lousy markets &/or mature businesses) to 70% (very risky seed projects in trendy industries). State clearly that you’re well aware that discounting cash flows on the business plan of a company that yet doesn’t exist means nothing. It’s like planning your dating schedule with Diana Krall, Norah Jones & Cindy Crawford even though you never met and obviously don’t have any phone number to even think of making this happen. However, the valuation reveals how ambitious you are – something that may appeal to potential investors, and, if you’re really desperate for financing, will at least attract the fools.
- Financing plan: what are the next steps?
- Risk analysis [put 3 to 5 relevant risks you can think of. For instance: business plan risk, environmental risk, financial risk, reputational risk, market risk, political risk, etc. Whatever the business, both IDEA (or market) & EXECUTION (or operational) risks should be mentioned]
- SWOT analysis (compulsory for techies, just to pretend you understand business; MBA-like bullshitters like me will add the SWOT to the miscellaneous back-up pages)
- Where we’re standing (what you have achieved, and haven’t done so far)
- Operational Plan (usually takes a few pages to explain HOW you’ll respect the above-mentioned financial figures; very few people write good operational plans because it’s very TOUGH no to get one of the guys in front of you waking up and say: “wait, I know this industry, you’re just talking non-sense’. Elaborating on the actual business operations, not just your dream or strategic vision, will force you show how your experience will constantly benefit the business, and if not, how common sense will help you achieve your goals. A 2/3-year horizon makes sense as far as the Operational Plan in concerned. Go far into the details of the 1st year in business. To restate things clearly, an operational plan is a road map aimed at showing that you know what it takes to execute perfectly)
- So what? What’s in it for you (again, if you’re talking to potential investors, state things clearly: what you want from them, what you’re giving them, how you’ll get married, under which conditions, how you’ll separate (this time will come), in which circumstances; if you’re pitching a high flyer you want on your Executive Committee, do exactly the same)
- Recap & contact details again
You’re welcome Philip. I should pay you for the post idea.
Well, we’re even, aren’t we?
Comment by Jeremy Fain — January 16, 2007 @ 11:56
Excellent
J’ai bien envie de l’adapter en francais sur mon blog celui là, vraiment bien.
Comment by Jean-carl — January 16, 2007 @ 12:36
Thanks Jean-Carl. Go ahead, be my guest. FrogVenture is an excellent blog (French only unfortunately).
Comment by Jeremy Fain — January 16, 2007 @ 12:46
Very cool, Jeremy. I’ll definitely re-check this post, when it’s time for my next businessplan!
Comment by Vincent van Wylick — January 16, 2007 @ 15:53
That’s precisely why this post’s been written for Vincent.
Comment by Jeremy Fain — January 16, 2007 @ 16:41
Matrice pour un business plan
Trackback by Frog Venture — January 25, 2007 @ 21:42
Your comments are excellent as far as writing your own business plan. I would like to add that for those who have never had any business training it also helps them learn the nuts and bolts of actually owning a business. By writing your own business plan you learn what will work and not work for your business. It helps you define your business and how you are going to conduct it. Once your are in business it gives you a look back on how you are doing, what has actually worked, what you need to change that isn’t working. It also helps you plan for the future because you learn the skills of doing market research and pricing. The marketing plan section also is the most valuable because if done correctly can give you insight into where you have been, where you are now and where you need to go in your marketing efforts. Do I sound enthusiastic about this subject or what?
Comment by Elizabeth — February 11, 2007 @ 13:27
I disagree on the business planning software. As with any other software, good business planning software has been designed to make what you do more efficient. I’d like you to test our product PlanHQ (www.planhq.com) which doesn’t try to force you into a template but makes business planning simple and succinct and allows entrepreneurs to focus on what they do best – strategic thinking – not trying to be a wordsmith. I think traditional business planning software leaves a lot to be desired, but PlanHQ was designed to change that. I’d love to hear if it changes your mind at all!
Comment by Natalie Ferguson — May 3, 2007 @ 23:40
I LOVE your comment Nathalie. That’s what blogging is about. I see PlanHQ is a business planning SaaS, and that I may give it a try for 1 month for free.
I promise you I’ll give it a go as soon as I have time and let you know.
Just for you to know: in order for PlanHQ to help me change my mind about business planning software, it doesn’t have to be really good: it has to be..groundbreaking!
Comment by Jeremy Fain — May 4, 2007 @ 00:57
So, has anybody tried PlanHQ yet? Any feedback?
Comment by Thorwald Westmaas — June 3, 2007 @ 01:47
I haven’t had time yet but it’s on my to-do list.
Comment by Jeremy Fain — June 3, 2007 @ 03:17
I definitely do not agree. I’ve seen some business planning software that:
a. will clearly show you what to include and how,
b. has most things written which make it easy for those of use don’t write very eloquently,
c. ever tried to do financial projections for 3 or 5 years by hand? Have fun!
Rather, give me a well automated financial workbook – preferably in Excel- anytime.
greetz
Villo
Comment by Villo — September 10, 2007 @ 18:37
a) I just did
b) so that VCs see exactly the same sentences in all business plans they see coming in? Great. Go for it.
c) Allright, we seem to agree: one can perfectly manage with Excel here.
Actually, I had given PlanHQ a go for a few days and I have to say I liked it a lot: simple to use, and yet not simplistic in terms of flexibility / presentation. Good adherence of business plan principles in the software. Good job PlanHQ!
Comment by Jeremy Fain — September 11, 2007 @ 00:27
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