Writing a business plan can be tricky and time consuming, but it’s a crucial step if you’re starting a new business.
Not only is a business plan helpful if you’re looking for investors, but it can also be a great structural resource to help guide you and remind you of your business goals. So how do you create an efficient business plan that meets your needs? Here are five expert tips.
Make sure your business is viable
Before you start writing your business plan, you need to make sure your business idea or product is actually desirable to your intended customer base.
“Many entrepreneurs come up with a great idea without stopping to think if they are solving an actual problem for a group of people,” said Jenny Leonard, CEO of digital agency Never North Labs. “You don’t want to spend months or even a year working on developing a business or product idea only to find out nobody cares or even wants it.”
Leonard said you should spend some time researching your customer base by actually speaking to people your product or business idea would target.
“You’ll quickly find out just by talking to a few dozen people if your business idea or product is a hit or a miss,” Leonard said. “It may be a little extra work early on, but it will save you potentially hundreds of hours in the future by doing this work first.After doing this bit of research, you’ll have the clarity you need to write your business plan.”
Consider your audience
So what’s the first step in actually writing your business plan? Startup consultant Kristi Klemm said the first thing you should do is ask yourself, “Who am I making this plan for?” There are usually two answers to this question, Klemm said: You’re writing it to fit your own needs, or you’re writing it for investors or partners.
“It’s important to recognize when someone wants a business plan for their own needs,” Klemm said. “This indicates the person usually desires structure, and getting their motivations for starting a business on paper or [on a] screen is an important step for them in order to begin working [and] to acknowledge the business is really happening.”
This type of plan tends to be less reliant on outside data, functioning mostly to set into motion the actions needed to get the business off paper, and operating, Klemm said.
“It’s more of an expansive-yet-broad to-do list for the next 12-24 months,” Klemm said.
If you’re making your business plan for investors or partners, it should be very analytical, and include a lot of competitive and market research, with money-asks clearly defined and term sheets as detailed as possible, Klemm said.
“You’re already convinced the business is going to work. Now you need someone else to believe in you,” Klemm said.
Make it visual
A great way to simplify your business plan, both for yourself and your investors, is to make it more visual. Zack Pennington, chief operating officer at online music instruction resource Collabra Music, said you shouldn’t be afraid to use charts in place of long text paragraphs.
“Sometimes, people get too hung up on trying to explain their business model or cost assumptions in words, when a simple table, pie chart or flow chart can do wonders,” Pennington said. “Investors spend countless hours reading business plans, and if you use a chart that makes it simple and easy for them to understand what you do, you’re significantly more likely to hear from them.”
Pennington also noted a change in the way many business plans are being created.
“It’s OK for your business plan to look more and more like a slide deck, since that’s where most business plans are heading,” Pennington said.
Think about timing
When you’re creating your business plan, you also have to think about the time it will take you to reach your goals. Lora Ivanova, co-founder and chief marketing officer of at-home STD testing company myLAB Box, said that it’s key to ask yourself about your time line or personal runway.
For example, “How long can you and the people on your team — co-founders and anyone investing sweat equity — commit yourselves [to] full-time [work] or any meaningful capacity [dedicated] to your business?” Ivanova said.
Once you have that time frame, Ivanova said that the second most important question is, “Is that enough time, conservatively, to get your business to a place where it can sustain your ongoing commitment?” Or, in other words, “At what point in time can your business provide enough income for you to keep working on it?”
From there, you can figure out what goals you need to achieve and how to achieve them.
“Depending on any gap between your runway and revenue, your business plan’s primary goal will be to bridge that gap with tangible solutions,” Ivanova said.
She also suggested creating a business plan for your best- and worst-case scenarios.
“Looking at them side by side is a great reality check,” Ivanova said. “At the end of the day, any business plan is irrelevant if you, the founder [that the business’s] success hangs on, cannot sustain your livelihood to keep building.”