Setting time aside to pen a business plan might seem a bit old school – and even worse, a time-sink – but the most disruptive businesses are actually the most likely to have a convincing, well-articulated vision
Benjamin Franklin’s claim that ‘by failing to prepare, you are preparing to fail’ is routinely hijacked by sports coaches. But new research into the impact of business plans, from the University of Edinburgh Business School and RWTH Aachen University, reveals that the leaders of new launches who plan for success are 16% more likely to achieve it – so follow RISING’s five steps to take your plan to the next level...
1. Successful Entrepreneurs Just Make It Look Easy Dragon’s Den debutants and successful startup leaders may give the impression of being gung-ho mavericks, making a mockery of the market and winging it through sheer spontaneous inventiveness – but in reality, the most successful ones are working to well-crafted scripts. In the University of Edinburgh study of over 1,000 business leaders, the high-growth oriented entrepreneurs – those who see big returns early on as well as going forward – are 7% more likely to have a solid business plan in place. Even those whose disruptive ideas are deemed possibly too innovative for their time – but still succeed – are 4% more likely to plan than their peers.
The University of Edinburgh study lead researcher, Professor Francis Greene, says: ‘The riskier the venture, the more likely it is to succeed if there’s an attractive plan involved too. In some entrepreneurship circles, it is fashionable to act, improvise, and pivot rather than to waste time on a plan that won’t survive first contact with the customer’. But Greene’s research reveals that a plan helps detail the opportunity to be seized, what success looks like, and what resources are needed. ‘A plan builds legitimacy and confidence – if an entrepreneur wants to raise money and grow quickly, they’ll want to write a plan.’
2. If It’s Your Business Make The Plan About You ‘It’s crucial to communicate the story around your business and you as an entrepreneur,’ says Henry Oakes, serial entrepreneur and Imperial College Business School MBA. ‘Why are you passionate about solving the problem? What’s driving you to make this a viable business? Ultimately, what’s memorable about you beyond the business itself.’
According to a well-reported study – from the Kauffman Center for Entrepreneurial Leadership – firms with a written business plan grow 50% faster and chalk up gross profit margins that are 12% higher than those without one. But a business plan isn’t just a structured begging letter for entrepreneurs seeking out banks, investors or potential business partners. It’s your statement of intent, your route-map to success, designed for you – to see how you plan your business to grow. It’s about you!
3. Step Away From The Desk There’s an old soccer analogy about a football team which ‘looks good on paper’. But they don’t play on paper, they play on grass. Don’t solely trust trends and data when drawing up a plan. You need to know people are crying out for what you have to offer. ‘When forming a business strategy, it’s important to consider the size of the market you’re looking to explore,’ Dave Stallon, Commercial Director at the UK’s Federation of Small Businesses, tells RISING. ‘Ask yourself – are there enough customers for my startup to be viable? It may sound simple, but consumer demand is often overlooked.’ And don't be limited to looking in your local area only during your quest for prospective customers. ‘Small businesses that explore the wider market and start exporting early in their life tend to show higher levels of growth.’
4. Picture Yourself Beside The Pool Toasting Your Success It may sound a bit presumptuous when you’re only at the flat-planning stage of world domination, but a 2016 study of 500 small business owners in the US by TD Bank found that those who use vision boards as part of their planning – picturing their business goals and how they will achieve them – were much more likely to succeed.
By having an in-your-face business plan to refer back to, those entrepreneurs were twice as confident that they’d achieve their goals, than those who didn’t visualise them in the same way. More crucially, 82% of small business owners who use vision boards from the planning stage onwards report that they accomplish more than half the goals included on that board. ‘The design, style, layout and overall aesthetic appeal of your business plan plays a big part in the reader’s ability to digest and more importantly get excited about your business,’ adds Oakes. Before you start writing, plan the design template of your business plan – what colour scheme, text, graphics, headers and footers will you use? ‘Not only will this look better, it will make you feel good about the document before you’ve written a single word.’
5. Keep Your Business Plan Alive Jotting down your key company values, targets, break-even forecasts, costings and key performance indicators – plus those visualised goals – in an attractive package for the bank manager or crowd of funders to admire is one thing, but don’t abandon the plan when the investment starts coming in, because life suddenly gets too busy. Your business plan needs to be a ‘live’ document – adapted as your firm grows and referred to through regular updates. ‘It’ll help you make the decisions you need to make to see that your startup stays on course,’ says Stallon. It becomes a reference point when those ever-changing elements of commerce, such as advertising and marketing your wares, come up for discussion. ‘For a truly effective business plan, be sure to include a comprehensive marketing section detailing how you will market your business to your target audiences; include aspects such as selling methods, pricing, distribution channels and promotion,’ insists Stallon. And big it up at every stage.
While serving as your own template for success, a business plan is also designed to win over potential backers, possibly investors and prospective partners and employees. ‘So flag up all your formative research, financial forecasts, projected cash flow, profit and loss accounts and balances for at least the coming three years,’ insists Stallon. Supporters will want to see that you know exactly how this is going to take off. ‘Make sure your cash flow forecast is a true reflection of what you really need, as opposed to what you “want”. Keep your sales projections believable, achievable and include details of expert advice that you’ve taken too.’
WHAT NEXT? Read up on the latest ideas for winning plans including those of business plan blogger Guy Kawasaki. And enlist some help to formulate your plan. ‘Seek support from your local business organisation,’ advises Stallon. Talk to your peers and get help and advice from others who have faced the same challenges and written their own business plans to overcome them. Invest in a professional Market Entry Report – useful, comprehensive insight into a specific business sector. ‘It’ll show you what qualifications and skills you may need to enter the market you’re looking to crack – plus common pitfalls and legislation to be aware of.’