We all know the value of hard work, especially in one’s own ventures. There’s a slippery slope to avoid with it too, and that’s where hard work becomes more than just something to keep you up at night, it becomes an Art form. I spend a significant amount of time consulting and restructuring business plans to whittle down and refocus clients so they don’t spin their wheels.

One of the first things you can do to prevent yourself from falling into the cycle of never ending roadblocks is to separate what you need to do right now verses what you think you’ll need in the future. It sounds easy enough, but most people zoom from step 1 to step 7 without really considering what step 1 entails.

Say you want to open up your own pub; you’ve got your own recipes that you know people love. You know where you want to open up shop, you know what equipment you need, and you know how many people you need to manage it. You know how long it will take to break even, and how long it will take to become profitable. Now all you need is financing to pay for it all. Stop there. Now can you answer this question with a definitive “yes”: Do you have any beer right now?

If the answer is “no” because your product is contingent on getting the financing to get equipment to brew, then you’ve got to reassess your step 1: Make beer now, immediately. Not thousands of bottles, but enough to put it to a small market. To make your beer, you’ll need to borrow some equipment, preferably with some of your existing contacts in your industry who can lend you some time and space to do so. Yes, you’ll be paying out of your pocket to buy bottles, labels etc. Prove that you can sell your beer, calculate your results and make your business plan from there. At that point, you have proven that your own efforts, capital, and team have produced something that brings revenue. Step 2 then becomes making a plan to borrow your own equipment. Now you’re in a much better position to go through the trenches of capital raising instead of grasping for investors who are angelic enough to believe that the recipe scrawled on a piece of paper in your pocket will return millions of dollars after some theoretical time as passed.

For some people it’s hard to get past the idea that your business plan which you probably spent an inordinate amount of time crafting can’t be funded the way it is. Funding doesn’t happen because you think you can, it happens when you can prove you can. Proving it is your step 1. The feedback you get from your product at this stage becomes the groundwork for the rest of your business plan.

I once knew a person who spent 4 years making a business plan; it was magnificent, detailed and excruciating to review. He had spun his wheels for all those years without addressing the first step: make your product. The craft of planning goes beyond the ideas floating in one’s head, the craft involves execution at every stage. Remove yourself from the bigger picture just for a moment, and look carefully at your first required step. It’s not a chore; the ability to take a step back is an art.

Every business plan should entail a comprehensive overview of your business’ marketplace competition. Any business that provides a similar service or product in the same region may be viewed as a primary or secondary competitor. Identified competitors underscore the impetus of expanding your company’s product or service into the selected market. As such, your business needs to highlight and build upon the weaknesses of its competitors to increase its profitability and market share. The following provides a step-by-step process in creating your competitive analysis.

Identifying competitors: To locate competitors, simply use a Google or Yahoo! map. Enter in your business’ proposed or existing address and search nearby businesses of a similar category. For example, if you’re opening a pizzeria, you can search “pizza shops” or “pizzerias” in the same zip code or city. Through this easy task, you’ve identified potential competitors. If your business operates in a niche industry, the best way to identify competitors is to leverage established contacts and web research.

Understanding your competition: Now that you have identified your top competitors (aim to analyze two to three direct competitors), it is necessary to learn everything about these companies. What do I mean? Visit their website; call the business directly to learn more about the way they operate or what they sell; physically go to the competitor’s place of business; and research customer reviews. The latter step can be implemented by simply typing in “customer reviews of XXX” in your online search bar. Also, these reviews usually are posted on websites such as Yelp.com and CitySearch.com.

Pointing out their weaknesses and strengths (eloquently): Lesson to be learned – no bashing on competitors; it is unprofessional and makes your business look worse. When I say bashing, I mean using expressions such as “they are bad” or “they have no customer assistance.” Every company has some element of customer service, so a statement like that is literally untrue. Now, the competitor may lack quality customer service, and such an observation would be a much more acceptable approach in pointing out a weakness in a business. When I am writing a competitive analysis, I always include one to two strengths and two to three weaknesses of each competitor.

Your competitive advantages: Ah, finally, we’ve reached the point of emphasizing your strengths. Truly use this section to emphasize why you’re a better business in a bulleted format (preferred) and include a few statements in a paragraph form on how you intend to supersede your competition. Examples include greater industry knowledge, lower prices, friendlier and attentive staff, larger inventory of products, and so forth. Your best bet is to underscore your own unique competitive edge that cannot be argued with, and voila, you’ve completed your competitive analysis.

Having written hundreds of business plans, I’ve found that some of our clients insist upon receiving business plan documents of more than thirty pages, not including financial charts.  The end-result is a document with too many pages of additional market research, a lengthy product and/or service description, and other elements such as company history and client background.

To create a solid, streamlined business plan that speaks of the core components needed in a professional document, I have been taught, by experienced mentors and business planning blog writers (such as Guy Kawasaki) that a business plan should rarely exceed 25 pages.

We aim to earn the satisfaction of every client we work with, but emphasize that less is often more.  From my experience, 20-25 pages is frequently the perfect length; if a concept and its market cannot be explained and demonstrated fairly briefly, then either the writer does not properly understand the product or market, or not enough effort is being spent in the pursuit of brevity.

Major sections of a business plan, excluding financial charts and tables, should include a tailored, non-template executive summary (one page in length, no more), products and services description, a vision or mission statement, market analysis and industry overview, a branding and advertising strategy, ownership and operations, and competition in the marketplace.

Remember: pages and pages of market research only hide what the actual product or service is; thus, if it is needed in the marketplace, a 10-page market analysis is only making the business plan more jumbled and confusing to the reader.  If the product or service is needed, 10 pages of research should not be necessary.

Business plans are the homework that just won’t end. Imagine being in school and being given an assignment to write a term paper. You have an outline of what’s required, a recommended format that you should use, and a timeline in which completing it would be advised. Here’s the rub: what if that assignment is never done. The due date comes and goes and it constantly has to be redone and revised and updated.

The importance of updating a business plan is simple: it creates a long-term strategy for your business, while alleviating the stress and headaches of operating a business if action is continually implemented. There are important factors to consider when revising and updating a business plan. The following outlines the necessary steps in perfecting that business plan you filed away months – or even years ago.

Reminisce: Remember to look back at your initial business plan at least once a year. Perhaps your business’ target market has changed. Maybe your customers are purchasing one particular product or service more than others. And, of course, one must always look at new industry trends – this in itself can have a positive or even devastating effect on a business. Small business owners must continually refresh their business plan by focusing on the aforementioned elements when reevaluating the business plan’s content.

Financial Updates: A financial analysis should be updated monthly. Entrepreneur.com eloquently puts it: “Have a monthly review of the difference between planned results and actual results for your sales, profits, balance and cash.” A solid, well thought out business plans should have monthly milestones, assumptions, and tasks.

Another reason to update a business plan: every small business could use more money at some point. An outdated plan will not convince any borrower – or potential investor – to fund your business. It makes you, as the entrepreneur seem unprepared and unmotivated in staying current with new market trends, financial projections, and customer feedback. Notably, changes to the management team and competition are just as significant. Believe it or not, a business’ competition will at some point increase, decrease, or elevate depending on the climate of the market. Fully evaluating and analyzing competitors is essential to understanding the market and what is needed stay ahead of competition.

Evolution: Finally, if your business is changing, evolving, or adding to its line of services or products, it is absolutely essential to renew the product and services description section of the business plan. With the constant fluctuation of the market, small businesses are adding or taking away products and services in order to meet the needs of their intended market segment.

As the company’s vision continues to evolve, the business plan becomes a reflection of the business’ personnel, mission, and philosophy. However, in order to properly convey a company’s new fangled identity, management team, or other core values, the business plan itself must evolve as the business’ does. Both go hand-in-hand.

Tools: It’s a poor carpenter that blames their tools. Not everyone can feel truly qualified when it comes to writing up their own business plan. There are a few options here to make sure that you’re not going in blind to the formatting, requirements, and structure that may be demanded of your document. Some seek the help of mentors who have written their fair share of business plans to review and advise on the plan that the entrepreneur is writing. Some outsource the entire endeavor to third party firms or even MBA students off of CraigList.org who are looking for a few bucks. The happy medium can sometimes come in the form of tools from companies that offer software solutions.

Business plan updating has become so pertinent to a business’ long-term success that colleges and trade schools are offering courses in this particular subject. Entrepreneurs must recognize that paying close attention – as well as constantly altering and updating the content and past performance or projected financials of a business plan – is vital to not only the company’s future, but ultimately its sustainability and growth in the marketplace.

Over my next posts, I’m going to share with you some important things that I’ve learned over 26 years of business experience from some of the most successful investors, investment and venture capital firms in the world about how they read business plans and what they look for in them.

First some basic advice: With business plans, size does not matter.

Let me say that again.

Size does not matter.

Never lard up a business plan just to make it a hefty read, thinking to “wow” people based on its bulk. That does not impress experienced business people, knowledgeable investors and funding sources.

Experienced and successful business professionals know this and focus their business plan to make it concise and succinct; one that hits all the “hot buttons” but does not say more than it should.

If you use a template to create your business plan, use it as a guide only and modify extensively to give it its own distinct identity. Strip out and replace any “boiler-plate” language that is not necessary and put in only the important things you need to convey (read on to learn what that consists of).

If you hire a business plan writer (who may write well but does not have a great deal of business experience), be sure not to just accept what they give you as being the best for you. Make sure it answers the five most important things (we’re getting to them shortly) that investors and funding sources look for … no more … no less.

What to leave out of your business plan is just as important as what to put in!

• With business plans, telling them you graduated from John Smith high school, love cats and your hobbies are snorkeling and bear wrestling do not matter.
• Telling about your dream to own your own business does not matter.
• Telling them any thing not directly related to the business or your capability to run that business, does not matter – leave it out. Let that simple rule govern what you put into your plan.

You get the idea without me having to add more bullet points (see … less is more!).

What does matter?

I’ll get to that in my next post, because if your business plan does not have what matters most – and you’ve filled it with things that don’t – you have wasted your time and more importantly someone else’s time (and from the all important point of attracting an investor or funding source that is a death blow).

You get one shot at a first impression. Don’t blow it!

Be sure to watch for:

The 5 Most Important Things Your Business Plan Should Contain (that investors want to read about)

Until then best wishes and good fortune to you (and fortune favors the prepared),

Dennis Lowery
Adducent, Inc.