In preparing for battle I have always found that plans are useless, but planning is indispensable. - Dwight D. Eisenhower
This is great advice for anyone operating or developing a business. The good news is that by going through the business planning process you have evaluated the key aspects of your operating plan and strategy. The bad news is that the plan will be obsolete the minute it is complete. So business planning tools are living documents that evolve over time. Rarely will a plan remain static over a period of more than a few weeks or so. So why plan if the plan is constantly changing, or if your assumptions are wrong or not determinable?
The reality is that things will never go accoring to "plan" but having a plan in place will allow you to be far more effective in adpating to the unexpected and working through adversity. It will serve as a roadmap to help you set priorities and maintain focus on the most important value drivers. It will allow you to document, test and measure assumptions over time so that your business can evolve and become stronger.
Each situation is unique, but for an early stage venture, or strategic initiative, you should consider the following for your plan:
Business Plan or Executive Summary
Investor or Pitch Deck
Financial Model
While these are standard planning deliverables for a start-up, these are also useful tools for larger companies considering investments in new product lines or strategic initiatives. I'd like to talk briefly about a few important aspects of each and will perhaps dive into more detail in a future article.
Business Plan or Executive Summary - These days, I think few people take the time to write a full 30 plus page business plan. I would tend to agree with this, but I also think a one or two page Executive Summary does not quite force the depth of thinking on the multitude of important topics that a good plan needs to address. What I propose is that you take each slide from your Investor Deck and build out two to three paragraphs, with supporting graphs and figures, that articulate the key points for that portion of the plan. The net result should be a document of about five to ten pages in length that has the necessary depth, but does not become a product development effort in its own right! Perhaps we can call this an Extended Executive Summary.
Pitch Deck - I am an engineer by training and I love to dive deep into technology, but the reality is that if it's not solving a problem it won't be something you can build a business or product around. In the presentation of your company, product or new idea start with the problem you are trying to solve. This is why people will pay you for your product or service and is the basis for your business. It is also a great way to engage your audience and demonstrate your passion for the task at hand. Effectivley articulate the problem, or need you are addressing, and your presentation will be off to a great start!
Competition, and your assessment of the competitive landscape, is another key component of your pitch. I think people often view the "Competition Slide" as something to add because it is expected. But your competitive assessment can be impactful in a number of ways. First, a strong competitive analysis will show that you have done your industry home work.and understand the dynamics, key players and value drivers for your market. Or at least you have built assumptions around these aspects. The Competition slide is also a great way to really emphasize your Unique Value Proposition, show how your solution is different from other offerings and how it will be able to capture market share. A healthy competitive landscape also demonstrates that a fundamental market exists for your product or service which will de-risk your venture in the eyes of investors.
Financial Model - Excel and other spreadsheet tools are incredibly powerful, but just applying even the basic functions can be indispensible for modeling the economics of your business. For the earliest stage companies top line revenue and unit economics (gross margins etc.) will be the most important aspect to convey the potential scale and viability of your business to investors and other stakeholders, the ability to generate an appropriate return for risk capital. Even if your model and assumptions are completely wrong it is important that you demonstrate the ability to think through these issues. Ultimately, businesses are cash generating machines and you need to think through how your business has the potential to do so, at some point and for someone.
Cash is king and as your model evolves one of the most important things this modeling can do is help you understand your cash needs. A business cannot afford to run out of cash so you need to make sure you hit your key milestones to get to the next round of funding before running out of cash, or even better, begin generating positive cash flows. This is less of an issue for established companies who are already generating positive cash, but even these companies have shareholders and owners competing for dividends.
Conclusion Business planning tools need to be detailed enough to articulate the core strategy for your business, but flexible enough to adapt over time as new information becomes available. An effective plan will communicate to investors and partners that you have thought through the key issues necessary to develop your business, product or initiative. But remember, the most important audience for your business plan is you and your team!
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