The Art of the Business Plan, Part I

People ask the me how to write a business plan. I feel compelled to share this knowledge in hopes that more of YOU can be successful launching a new business or reviving your current going concern. I also believe that a good entrepreneur and CMO must be able to write one of these. You must be able to blend the art of the vision and the science of the business case. If your CMO cannot write a business plan (or has never written one), you may have to look for someone that can… (All of you McGyver’s that never write a business plan and can create value with a napkin, you are amazing).

WAIT: Why do we pray? We pray not to change God’s heart, but to change OUR heart. Why write a business plan? It organizes your thoughts and makes you ready to speak like an expert. DO IT!

The best business plan tells a story that is backed up by great research and believable financials. The writer must be able to tell a story, research, find the data and put all of it into a plan that both the financiers and the visionaries can get behind.

Today’s post is not about the art of managing change but tactically how to actually write a business plan (what are the guts of the plan). If you want to read high-level guidelines on what business plan should look like, read Tim Berry’s post entitled: 8 Factors that Make a Good Business Plan. If you are interested in understanding the art of managing change, read Tim Berry’s book The Plan-as-You-Go Business Plan. In my opinion, if you spend too much time trying to figure out the change, you will miss it. Yes, I am a Ready-FIRE-Aim Entrepreneur, but I will never move forward without a good business plan. It is like running a marathon, if you do not train, if you do not set goals, you will not be successful. If all you do is set goals, you never have time to actually run. Point dead.

Question: Dear Emily Post, how do I start a business plan? Well, mr. or ms. confused imagineer, you need to start with a great template. There are many out there, but I recommend Palo Alto’s software called BusinessPlanPro. This has been by far the most user friendly, packed with resources tool that I have every used. Signed, your friend, Emily Post (friend of the Chief Outsider). Thank you Emily. I would add that you must put this tool in the hands of an expert. Without it, you may run it into a wall. A template is only a tool. Palo Alto, my template or others on the market will help guide you; however, if you have never written one, consult with a friend or send an email to the Chief Outsider for resources.

Here are the key categories of any good business plan (for a template of a completed business plan that was funded, launched, and acquired, please email me for your copy):

  1. I. Executive Summary
  2. II. Company Summary
  3. III. Market Analysis
  4. IV. Management Summary
  5. V. Operating Strategies
  6. VI. Milestones
  7. VII. Financial Plan
  8. VIII. Key Investment Considerations and Risks
  9. IX. Appendices

The Executive Summary is a 1-3 page summary of the entire business plan. You should not write the summary until you have completed every other section. Otherwise, it is not a summary.

The Company Summary is your chance to explain the vision of the company and why it should exist. This section includes the following key items: Defining and Refining your mission and key objectives, Describing the market place needs and benefits, Understanding market entry strategies and barriers, Branding and positioning key services and products, and Defining future product and services roadmaps.

The Market Analysis section is your chance to tell the readers (and yourself) why NOW is the best time to launch into this brave new world. You will include all of your data from your research including: Researching and understanding key target customers, Researching and reporting key industry and market trends, Researching the competition and creating necessary go to market strategies, Defining best strategies to gain valuable research for new company and/or product launches.

The Management Summary is the section that discusses why YOU and YOUR TEAM is the right team to move this idea forward. Many of the bankers behind your idea will be most interested in this section, so make it GOOD. Venture Capitalists continue to tell the Chief Marketing Outsider that they would rather invest in an A level management team with a B idea than a B level management team with an A level idea. One of the top reasons a company and/or product fails is due to the management team not agreeing on the same strategy (SIDENOTE: we have been working on insightful research showing this exact trend from management teams running companies between $5M – $100M. More on this soon). Discuss who the players are and why the bring value to the team. Discuss your past as a team. Have you worked well together before? Discuss where you have shortcomings and how you are going to fix your gaps.

The Operating Strategies section is your deep-dive into how you are going to run the company. This is the section that most people assume is the CMO’s job. This is only part of it. This section should include Distribution Strategies. This is where you will review and define the Marketing Mix including (known as the 4 P’s): Product (Customer Solution), Place (Convenience including Channels, Coverage, Assortments, Locations, Inventory, Transport), Price (Customer Cost), and Promotion (Sales Promotion, Advertising, Sales Force, PR, Online, Other). This section will also cover the best sales strategies to Fill the Pipeline, Follow Up with Prospects, Getting Presentations and Closing Sales. Finally, this section should cover strategic alliances that are necessary to move forward.

The Milestones section is your chance to outline the key next steps and milestones that you need to complete with dates. YOur milestones should be SMART (Specific, Measurable, Achievable, Realistic, Timed).

The Financial Plan is where the meat and potatoes reside. This is where most of your financiers will look first. What do the financials look like. You will need to have a 5 year (some recommend 3 but I like 5) financials for your Profit & Loss Statement, Balance Sheet, and Cash Flow Statement. I use a hybrid Cash Flow Statement that I like to call a POMS (Peace of Mind Schedule). This is a cash flow model that I have used to manage cash flow on a weekly basis. I first read about the concept while reading Inc. Magazine. Here is a great article on the subject written by Philip Campbell entitled The Secret to Formatting Cash Flow Projections. To download your free copy of the POMS, send me an EMAIL. If you want my version of the POMS on a WEEKLY basis and formatted to be pretty (I am a Maximizer), send me a note WEEKLY POMS Schedule Download PLEASE. Now that you have created the 5 year financials, you also need to include your startup costs worksheet. After you have all of this, you will need to include a funding plan and capitalization table. If you need a template of a Capitalization Table, please send me an email. A capitalization table is the document that shows who owns the company and what they paid to attain that ownership. In other words this is a table showing the total amount of the various securities issued by a firm. This typically includes the amount of investment obtained from each source and the securities distributed — e.g. common and preferred shares, options, warrants, etc. — and respective capitalization ratios. The table will also show how as you raise more money at different times, how the ownership structure will change. (While many turn to the CFO to do this work, I will still argue that the CMO must have the financial acumen to produce and own this process).

The final section of your plan is your Key Investment Considerations and Risks. As Seth Godin clearly outlined in his book Permission Marketing, I believe you must make it very clear to all potential investors, partners, (stakeholders) that any new idea has risks. This section should outline and forewarn your audience of what you are trying to do. You want people that know what they are getting into PRIOR to the head nod. Do not miss this!

For all of the great documents that you have collected during this process, keep them. Put the most important documents in an Appendix so that your audience can reference them. At a minimum, you must include all of the financials, the startup costs, the cap table, key research and the management team bios (resume and/or CV will do).

This Chief Marketing Outsider Blog on this topic is only PART 1. I will follow it up someday soon with more insight and barks.

Please send me a note with questions. I love this stuff!!!

CHEERS

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Comments

  1. Great article. I am the CMO of a digital agency and a VC consultant. I completely agree with most of your article. A point that many fail to consider is that a business plan must be dynamic in nature. By this I mean it must be it is one that allows for market variables and cultural nuances that may change the set upon course and direction of your plan. The trick is to find the balance between blending these variables with the general direction and vision of the company agreed from the beginning. I have seen too many companies that changed their focus as soon as the whisper of the next paradigm shift came along when they hadn’t seen the long tail of their efforts from what they started out as. Keep up the good work.- Robert Urban

    • Robert, thank you for your post. I agree about the dynamic nature of a business plan. It is actually a pain to write a plan due to changing it on the fly as research and customers respond. For every business plan that I write, the final “go to market” version is usually at version 35 or higher. As the plan becomes more clear, it is the external research and feedback that moves a plan into final mode (like a body builder losing the final 5lbs before a competition). As to your comment on shifting paradigms, I find that this is a result of not having a true vision or value proposition in the first place and thus anything behind this is futile. Thoughts?

Trackbacks

  1. [...] This post was mentioned on Twitter by Timberry, bplans.com and Joshua Johnson, Noah Parsons. Noah Parsons said: RT @bplans: Garage Sale MBA on the Art of the Business Plan: http://bit.ly/gnaznj [...]

  2. [...] the CMO posted in The Art of the Business Plan, Part I, one of the first reasons CMO’s fail is that they are unqualified. A CMO must be able to [...]

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