Write a Business Plan That Gets Attention and Drives Buy In
The term can ring a little dull at first, but an effective business plan should be anything but ho-hum. It’s meant to be a catalyst that motivates investors to put their money behind a startup; gets a bank to greenlight a loan; causes a senior executive to commit people, space and funds to a new initiative; or excites your team about bringing a new project to fruition.
The key elements of a business plan are pretty straight forward, but too often those writing them focus on product virtues rather than creating a vision that gets others to buy in — with investment or other forms of support.
First, do no harm
The Small Business Development Center at the University of Rhode Island on their website points to common business plan mistakes. Number one is actually not writing a plan at all. Without a well-thought-out plan, you risk spending your limited time, energy and resources on low-priority tasks.
They also commonly see financial projections made through rose-colored glasses. “Your business plan can’t represent the best-case scenario or the way you hope things go; it has to grapple with the reality of the marketplace, financial truths, and the entrepreneurial landscape,” they say. That includes accurate financial projections, a fair assessment of existing and potential competition, and a realistic idea of potential customers. Another problem they see is business plans that are too long, lack a compelling summary or use too much jargon.
Focus on your reader, highlight the user
As a business owner, you are understandably excited about your product or service. As a corporate leader, you may have a great idea for a new project. All well and good, except your reader is a would-be investor, bank, business accelerator or executive with the authority to fund your initiative and what they care about is performance in the marketplace and financial return.
You must answer how this product/service/initiative is likely to be received by its intended users and how you will generate revenue, profit or savings. “Write your business plans by looking outward to your key constituencies rather than by looking inward to what suits you best,” advise Stanley Rich, cofounder of the MIT Enterprise Forum and David Gumpert, cofounder with Rich of Venture Resource Associates, in Harvard Business Review. They suggest focusing on these critical areas:
- Show the user’s benefit. Although this principle seems basic, it’s easy to get drawn into product features. Discipline yourself to be as succinct as possible in terms of what your product or initiative is and spend most of your time (in writing or in a presentation) on how users actually benefit. Key benefits tend to revolve around saving time or money, increased convenience and ease of use, better results, or users being able to do something they couldn’t otherwise achieve and how that helps them.
- Gauge the market’s interest. This can require a little creativity if your product or service doesn’t fully exist in the marketplace yet. You might create a prototype for people to try and document their feedback. You could offer a trial at a reduced rate in exchange for detailed input. For an existing business you want to grow, your strongest case will be the references of customers, even if you only have a few right now.
If none of these options are available, you can turn to existing research on the need for your kind of product or service or conduct your own research asking people how likely they would be to use it. This could take the form of a focus group among people who fit the profile of likely users.
- Document with data. A realistic business plan needs to specify the number of potential customers, the size of the opportunity, and what types of customers, or size and type of business in the B2B space, will be most appropriate to the offered products or services, Rich and Gumpert say. All of these figures must be carefully vetted. For example, if your service can really only be utilized by companies with 1,000 full-time employees or fewer, home in on that sweet spot and make sure it represents a large enough target. Similarly, if your product or program will save time or costs, match them to organizations that care about savings at that level. A $10,000 annual savings may appeal to a small family concern, but be of little interest to a big company. If you will sell directly to consumers, get granular about who they are and their purchase capacity.
- Take the investor’s view. Once you have made the case for the market impact of your concept, address the unique needs of investors. Be careful about creating overly-optimistic financials. Rich and Gumpert surveyed five major venture capital firms who said they apply a “projection discount factor” because they know from experience that business plans tend to be too optimistic.
You must also be ready to address not only how investors get in, but how they can get out. Investors in tech startups, for example, will often want to sell their interest in the business quickly hoping to profit from rapid growth, a public offering or the company being sold to a larger organization, according to Rich and Gumpert.
Writing a business plan is critical for any new venture. Invest the time and research to make it comprehensive, concise and laser-focused on what motivates your audience.