“From the Bottom to the Top”
When building a business, you have to view it like an architect views an up and coming project, the foundation goes first, the bottom, the first step.
Well we are not construction workers, so what is our translation for foundation? Our foundation is the most important part of our business, our plan or idea. Though many businesses have been started without the benefit of a formal plan, it can be an essential factor in the birth and growth of your company. A good business plan will help you obtain financing, arrange strategic alliances, attract key employees, and boost your confidence. A business plan sells your company to the world and gives you direction as the world answers back.
You’ve probably heard all the academic and formal definitions of a business plan- something to the effect that it’s a document describing your company’s goals and means of achieving them in the next five years. However it’s phrased, though, the definitions are usually abstract and uninformative. It makes a business plan sound dry and theoretical- and mysterious- which is not.
Here’s how I define a business plan: It’s a document that convincingly demonstrates that your business can sell enough of its product or service to make a satisfactory profit and be attractive to potential backers of your business, from bankers to investors to partners to employees.
When viewed as a selling document, the business plan takes on a new meaning. This view provides four compelling reasons for writing a business plan:
1. A business plan, first and foremost, should sell you on the business.
If you do all the things you’re supposed to do in writing a business plan, you may decide at some point in the writing process that the business doesn’t make as much sense as you had anticipated. The market is not growing as fast as you had thought or the gross margins are not as high as you had expected. And you may decide not to pursue the business. In that event, the business plan has done you a favor-it has saved you the expense and grief of pursuing a business that was not really viable.
Conversely, you may discover in the course of researching and writing the plan that the business opportunities is not exactly what you had expected, but that if you alter your focus slightly, the opportunities are even greater than you had realized. You may change your approach to take the new realities into account, making the business more exciting than before.
A manager of a small wholesaler of cut flowers wrote a business plan in response to a demand for one from its chief investor, who was concerned about the company’s eroding profits. In doing the research to write a plan, the manager discovered that competitors were devising ways to sell the freshest and prettiest flowers as special premium brands-fetching higher prices than usual. The manager decided to propose to the investor a plan for creating a special inspection and grading system so that interested customers could ensure they were getting the best of the bunch. The investor liked the idea well enough to authorize funding for the project. The new premium-brand project enables the company to raise its prices to some customers and to attract new ones. Over the next few years,
profitability improved significantly, thanks to the effort made in putting together a business plan.
2. A business plan sells others on the business:
When someone asks you for a business plan, they are really saying,” Sell me on this business. Turn me on”
In that sense, a business plan is not unlike the marketing materials your company produces. The advertising, direct mail, public relations, and other promotional copy your company puts together is meant to sell your company to potential customers.
A business plan is meant to sell your company as well, but to those we might call “stakeholders.” These are individuals and companies considering providing support of some kind, be it funding, time, expertise, or whatever. Usually, they are the bankers, investors, executives, suppliers, significant customers, and so on.
3. A business plan gives you confidence:
Going through this planning process for your business, you think, “what a great feeling it is to complete a written business plan!” Suddenly, you feel more in control of your business. That feeling of control is one of confidence. You will know where your business stands and where it is going. It is good feeling.
4. A business plan improves your chances for success:
In an AT&T study, all the entrepreneurs were asked to rate their overall success. Those 42% who had written a business plan rated themselves more successful than the 58% who had not written business plans. In other words, planning paid off.