As Valentine’s Day approaches, I’ve decided to publicly declare my love for the… business plan! Here’s why I am, and always will be, it’s secret admirer!
We are in the era of the lean start-up, which in itself suggests that there is no more room for business plans, especially in the initial steps of starting a business. However, omitting the business plan isn’t the right way to go about. On the contrary, a business plan has never been more important in the entrepreneurial process—as the competitive landscape is constantly going through mutations, and the possibilities for strategic positioning keep multiplying. As such, the entrepreneur needs a compass to find his way, and what’s the best guide for an entrepreneur who is starting out? A business plan!
A business plan is a tool that will allow for an entrepreneur to have readily available comprehensive overviews of their market, their industry, and their project, hence allowing them to take the best business decisions possible. Believe it or not, the most recent researches in entrepreneurship show, that without a doubt, the impacts of adequate planning while in the start phases of a business are numerous and positive. In other words, entrepreneurs who go through the process of making a business plan are more successful.
In an evolving, and saturated competitive environment, there are many questions that are left unanswered. What roads are the most important to go down? How must the market be approached? What will be your initial business offer? Who should you contact first? What partnership will be profitable for your business? Those are only a few of the many questions that a business plan can help answer.
If writing a business plan is often dismissed in this day and age by many entrepreneurs, it’s due to its wrongful association to a more inert, and siloed process. A common error, made by many, is to believe that a business plan is conflicting with lean approaches and methods – which unfortunately isn’t the case. A business plan requires collaboration, fieldwork, validation, industry experience, as well as tangible strategic alliance efforts – all of which are require the opposite of working in silos.
If there is one thing that’s essential when starting out, it is to know your industry. No entrepreneur can succeed in an industry with which he isn’t familiar. That being said, how does one quantify the minimal level of knowledge needed in order to succeed within a certain industry? Would five years for example be sufficient to develop the right level of understanding?
The answer isn’t black and white – an entrepreneur will have a great understanding of their industry once they have evaluated all the issues within it and determined its key players. Global and systemic comprehension of your industry can be reached by the completion of a business plan.
A business plan makes it possible to gather all the factual elements related to an industry and then allows for one to connect them, to analyse them, and to draw conclusions from them. It’s a fantastic exercise for any entrepreneur! It allows for an entrepreneur to make a clear decision regarding their project and to take the best business decisions overall.
Some people are good at writing and others less so. A business plan is not so much of a literary exercise, but more an exercise on its own, which also happens to involve writing. Writing things down helps an entrepreneur to sort out their ideas, to understand what’s possible and what isn’t, and more importantly, to find the reasons behind it all. Ultimately, what matters isn’t the grammatical correctness of the written text, but rather the writing exercise in itself. This is where the entrepreneur attempts to explain their project in as much detail as possible, including at the macro and micro levels, which allows for an entrepreneur to better understand their business reality and to anticipate anything coming its way within the market.
As the entrepreneur’s ideas are organized, the business plan will change as well, and some sections will end up having to be rewritten. This isn’t a setback, in fact, it’s a great sign! This means that the writing exercise is helping you think differently about your project – which is the ultimate objective of writing a business plan.
An entrepreneur is, first and foremost, someone who is passionate, creative and full of ideas. Often, when an entrepreneur tells me about their business project, they omit details that are essential strategic elements. Although the entrepreneur will have most likely already thought through these important details, they simply might have forgotten to mention them to me.
Having a first draft of the business plan on hand will thus make it much easier for me to evaluate the entrepreneur’s project since key details are brought to light. As an adviser, I need at least a minimum amount of documentation in order to make the right diagnosis, and a business plan makes that possible. A business plan is an amazing tool in the context where objective and factual elements are presented, thus making it possible for me to give more accurate and knowledgeable advice.
Let’s be clear, a business plan that exceeds ten pages is probably too long! A good business plan allows for clear and straightforward communication of the business opportunity that will be satisfied by the current project at hand. The main role of an entrepreneur is to clearly describe their project’s objective. For that reason, a business plan becomes the first tool to be used. The writing exercise not only helps the entrepreneur learn to better communicate the strategic aspects of their project, but it also gives the entrepreneur the opportunity to elaborate the best possible wording needed when speaking with potential investors and strategic partners. In other words, a business plan helps the entrepreneur to play his or her original role by being a good communicator.
Even though the business plan is mostly intended to present the project to investors, it’s also the foundation of the marketing plan. A business plan allows for the entrepreneur to identify the messages that their business will communicate and how they will do so. In other words, a business plan makes it possible to identify what marketing methods will be used, how they will be used and to what end. This is what we call a communication or marketing plan. The business plan allows for entrepreneurs to develop their marketing strategy, which ultimately makes them more effective when seeking out customers.
Risk is the bread and butter of any entrepreneur, and it is nearly impossible to eliminate it from the entrepreneurial reality – we could even say that risk ultimately defines the entrepreneurial reality. Without risk, the very notion of a business project doesn’t make sense anymore seeing as a business project always includes unknown, uncertain and unpredictable elements.
That being said, the entrepreneur can control the level of risk he or she is willing to take. One cannot eliminate risk completely, but rather one can minimize it as much as they can. The business plan exercise provides access to information, studies and findings that otherwise wouldn’t have been brought to light.
What does “managing risk” mean? It’s simply about questioning yourself and anticipating what’s coming next. That’s precisely what a business plan allows you to do. Hence, entrepreneurs who go through the business plan exercise are better at managing the risks concerning their business.
There are major arguments to justify the use of a business plan when starting a business. I use it in my activities as an adviser, because it’s proven to be an effective tool in many ways.
That being said, it’s essential to stay away from the unproductive war between the business plan proponents and those that prefer the business model canvas or other iterative models. The tool is never an end in itself! Each tool has only one vocation: to support strategic thinking during the process of starting a business.
When I give my training courses, I always tell entrepreneurs that my only goal is to help them better understand the thought process surrounding the start of a business. Once they understand that approach, the business plan writes itself.
The role of an adviser is to use all the tools that have proven their effectiveness, in order to provide the best support possible. I want to offer the most objective and effective support to my clients, rather than promoting one tool instead of another, and I praise the business plan only because it has proven to be effective.
That being said, I publicly declare my love for the business plan, because it helps entrepreneurs to reach their objectives. I also publicly declare my love for the business plan, because it contributes to the success of my clients!
Written by: Jean-Philippe L’Écuyer, Entrepreneur in Residence at Futurpreneur Canada, firstname.lastname@example.org