It is common for new entrepreneurs to hear that they need to work on their business plans right away. This is not necessarily correct. Let’s first look at what a business plan is.
A business plan is a document that outlines the how and why a new business is created. The business plan underlies the strategies that will be adopted to reach organizational goals, identify challenges and devise solutions.
Startups trying to attract investors and employees will use business plan to express the potential profitability of the business venture.
Why use a business plan
Feasibility – It is of vital importance to check the product market fit before committing resources to the venture. Having tested the market via a minimum viable product, having carried out a proof of concept are validation of the business beyond the idea of the founders.
Focus – By writing a business plan, the management will formulate a concrete plan of action, will help organize the conduct of business and reduce the possibility of losses due to uncalculated risk. A business plan can be used as a reference tool and benchmark for management and investors.
Foresight – The process of preparing a business plan can create unintended positive results. It may shed light on a variety of perspectives, hurdles and challenges that, though not explicit, will have a positive effect on creating a future plan of action.
Fundraising – The level of expertise and time used in preparing the business plan gives professional credibility to the entrepreneurs. The document helps to analyze and predict the chances of success of the venture.
The business plan is a dynamic document, it can grow from a short one pager that starts setting down the basis of the business, to a lean plan, which in 3 to 10 pages starts delving into the various aspects of the business, to a full-fledged one which can span from 15 to 90 pages and entails an in-depth analysis of all aspects of the venture.
There are elements that must be included in a business plan, and others that vary depending on the sector and stage of development of the company.
All business plans must have:
- Executive Summary
- Company description
- Organization and management
- Market analysis and research
- Strategy and financial projections
When is it the right time to start working on a business plan? As soon as the ideation stage is finished, a minimum viable product has been tested with your target audience via landing pages and pitch decks, and when the proof of concept has been established.
The business plan will have details about the business model and the go to market strategy, which are essential elements to have some numbers to work with.
My advice is not to be lured into writing a business plan at the idea stage, it is premature, will have you incur useless costs that you will have to incur again at a later stage. Focus first on the idea validation, the MVP and the PoC, then you will have the data you need to draw up your business plan.
Investors know how to read a business plan, they will immediately know if it has been prepared prematurely, and it is almost never the basis on which an investment is bestowed.
Do the work in the right order, it will save you time, effort and money. Mostly it will help you reach the success you deserve.
