Recently I was talking to an old friend who was putting together a digital startup and looking for some entrepreneurship tips and strategies. During the course of our conversation, he told me a story about how he had worked all night on a business plan to present to an investor. When I asked him how it went, he could only shake his head in dismay.
My next question, of course, was why had he been up all night? Didn’t he already have a plan prepared? What he said to me was interesting. He told me that, yes, he did have a plan, but the investors that he was meeting were “real sharks,” as he described it. And he felt like he had to beef up what he already had. He panicked, in other words.
So, I said, you stayed up all night adding a bunch of unnecessary information and then didn’t have the energy left over to even make an effective presentation?
More or less, he had to admit.
This got my wheels turning. I started thinking about some advice for entrepreneurs on how to effectively draft business plans. Specifically, what size is right to still be effective, even if you are presenting it to some real sharks.
In the end, I came up with 4 business plan tips for startups that I think will really keep you on track for finding the right size to fit your specific needs:
- Size: Bigger is not always better, it can actually be worse
- Pages: Don’t get hung up on a specific number
- Cut the fluff: A skilled investor will see unnecessary information as either insecurity or interpret it as lack of a clear concept
- Play to your strengths: Create a business plan that you will be comfortable presenting
Let’s take a closer look.
The purpose of a business plan
Business plans are important. Specifically, they play two extremely vital roles in the success of your company.
- They clarify your vision of your company to yourself
- They communicate your vision of your company to others
And being aware of both of these aspects during the entire course of drafting your plan is a great entrepreneurship tip.
Clarifying Your Vision to Yourself: To begin with, an effective business plan will help you to focus and define the overall concept of your company. In fact, you may be surprised to find that once you start formulating your plan, you begin to see your company in a much different light than how you originally conceived it.
This is a good thing. Many times just putting things down will open your eyes to new possibilities that you had not considered before. Some of these possibilities might even be new ways you can generate revenue using your business model. Other times, you will see potential problems that you can be addressed early on before they become major concerns.
Communicating Your Vision to Others: The second purpose of an effective business plan is that it demonstrates to potential investors, or even prospective team members, that you have a roadmap to success. The plan gives a realistic forecast of what your business model can accomplish. And it shows that a realistic return on investment can be expected.
Presenting your business plan
This word demonstrate that I mentioned above is key.
Like my friend who was looking for entrepreneur tips and strategies, it may be the case that you have an excellent business model. It may even be the case that your business can effectively exploit an untapped niche and realize huge profits. Even further, you may have all of the experience and technical know-how necessary to bring this business to life.
But if your business plan cannot demonstrate that, and if you cannot effectively present that, then it is all going to be for naught. And often a BIG issue with this inability to express your vision is the fact that your business plan itself is just unnecessarily BIG.
Finding the right size for your business plan
Okay, so we’ve covered the idea that your business plan doesn’t need to be bulked up, or overdone just because you might be grappling with startup insecurity. That still doesn’t answer the questions of how big is too big, or how small is too small. These are important too.
Here is the answer: Your business plan needs to be long enough to accurately convey your vision, model, and give detailed forecasts, with no added fluff.
That may sound vague upon first reading, I know. But it is actually a very good guideline, and also quite liberating. However, you need to consider carefully what is being said.
It means that there is no one “correct” way to communicate your business plan. Because your concept is unique, it has never been articulated before. Therefore, there is no specific formula. It can be expressed in any number of ways, some of which happen to be more (or less) space consuming than others.
Determine your strengths as a communicator and proceed from there.
For example, if you are highly skilled at relating information using images, or you have a real ninja in the graphics department, then play to that strength. It might mean that you have a higher page number, as images tend to eat up space. But it will also mean that you will really be in your comfort zone when it comes time to present your business plan to potential investors.
On the other hand, maybe you are highly skilled at boiling down complex and technical subjects into engaging and pithy language. If that’s the case, then let that talent shine through. Your business plan may be shorter, but it will also pack a very powerful punch. Also, seasoned investors will note that you possess a very important attribute of a great salesperson, in that you can express difficult topics in simple language.
Whatever your strength is, let it guide your business plan and its overall composition.
If you want something a little more concrete, I’ll offer you this. Palo Alto Software, the maker of Business Plan Pro, regularly holds business plan competitions. Over the past four years, none of their finalists have had a plan that was less than 20 pages, or more than 50. That is a pretty good range, but I think it also shows that the plan for your startup does not need to be a massive document.
So there you have it. Some important entrepreneurship tips and strategies when it comes to business plans. Just remember, if you express your vision clearly and concisely, then your business plan will be exactly the right size.