According to Celtic myths, there were once magical vessels that ” satisfied the tastes and needs of all who ate and drank from them.” These myths gave rise to the legend of the Holy Grail. The modern equivalent of the Holy Grail is a business plan.
It should also satisfy everyone (investors, Directors, founders, and managers) and have a magical effect on everyone who gets a taste of it — in particular, cause an irresistible desire to write a check or approve a project.
But, like the Holy Grail, a business plan is a largely mythical and unattainable object. Most experts here disagree with me, but a business plan is not particularly practical for a startup company, since entrepreneurs usually build it on assumptions, hypotheses, and other unknown quantities.
As for internal business, the practical application of the business plan is very limited. For any external or internal startup, the best guide to the daily functioning of the company will be the VRZ system (milestones, calculations, tasks).
However, many investors, newly hired employees, potential Board members, and internal decision-makers insist on writing a business plan and refuse to move forward without it. Plus, there is a certain benefit in the process of writing a business plan: it unites the team, forcing it to formalize its intentions together. So write a business plan — a good business plan — but don’t look at it as the Holy Grail. Companies achieve success by implementing their plans correctly, rather than using smart plans.
Start with the right messages
Paradoxically, for most entrepreneurs, a business plan as a document is one of the least important factors in obtaining capital.
If the investor is inclined to a positive decision, then a good business plan will be an additional argument for it; but it is not the plan itself that is the reason for this decision.
If the investor is inclined to a negative decision, it is unlikely that the business plan will be able to convince him. In this case, the investor will probably not even read this plan until the end.
Unfortunately, naive entrepreneurs believe that a business plan can cause the investor to be thrilled and awed with an immediate request: “please Tell me where to transfer the money.”
Well, it’s not bad to dream. The correct and realistic motivation for writing a plan should be this: the company downplayed in the first euphoria — for example, the customer service policy.
Finally, the plan identifies gaps in the founding team. If, after looking around the office, you realize that there is no one who can implement some key element of the plan, then there is someone missing from the team.
All midnight, romantic, abstract dreams of changing the world become quite material and disputable, it is only necessary to transfer them to paper. Thus, this document is not as important as the process leading to its creation. Even if you don’t want to raise capital, you should still write a business plan.
Present first, then plan
Many entrepreneurs try to perfect their business plan first, and then extract the” extract ” from it — slides for presentation. They see the business plan as the Foundation of everything, and the presentation as a concentrated version of this great document.
In reality, the opposite is true. Not a presentation-the quintessence of a business plan, but a good business plan — a detailed version of the presentation. If you have made a presentation correctly, then you will have a competent plan. The opposite is not true. The correct procedure is as follows:
At the next stage of seducing the investor-the audit stage of the company-the investor will ask you to show him the business plan. These are the rules of the game — the business plan must be ready.
The very process of writing a plan forces the team to work together. Proper implementation of the project will create a strong, well-coordinated team. And possibly to identify the employees that you do not want to work.
The process of writing a plan also gives the team an opportunity to address issues that they have overlooked or value
Quickly compile a draft of the presentation from the 10 slides described in the previous master class.
Try it on one of your mentors, colleagues, relatives, benefactors* and investors. Do this 10 times.
Gather your entire team in one room and share your observations and conclusions.
Bring your presentation to mind.
Start writing a business plan.
* In the original — angel. In the business environment, there is a “business angel”. The translator and I use the words “benefactor” and “patron”in this sense. — Primas’. ed.
Why is this the best approach to writing a plan?
The presentation is more important than the business plan, since it determines the investor’s further interest. Few experienced investors will start by reading a business plan.
It is easier to edit a presentation because it contains less text.
The business plan does not require a response. Frankly, it may not even be read. You will get an immediate response to the presentation.
If you are lucky, you will be able to get the money before it comes to writing a business plan. (But I would still write it — for the sake of the process itself.)
Focus on your resume
Let me remind you-here are 10 slides that must be present in a good presentation for investors:
4. Business model.
5. Secret of success.
6. Marketing and sales.
8. Management team.
9. Financial projections and key performance indicators.
10. Current status, current achievements, schedule, and use of funds.
The same 10 points make up the framework of your business plan. Instead of the “Title” slide, there should be a summary — the most important part of the plan. A good resume is a concise and clear description of the problem being solved, the solution method, the business model, and the secret to the success of your product or service. It should take about four paragraphs.
This part of the business plan is most important because it determines whether everyone else will read it. If it was successful, you will be invited to an interview. If not, the game is over before it starts, and no one will read your business plan further.
Thus, of all the effort that you will spend on a business plan, 80% should be invested in a resume. These are the most important paragraphs in the entire history of your company.
Print out your business plan. Set aside all pages, starting with the third one. Reread the first two pages — do they make you want to read the rest of the document?
Brevity, simplicity, clarity-delete all unnecessary
In addition to writing a cool resume, you can improve the effectiveness of the business plan as a whole by making it concise, simple, and clear:
Don’t write more than 20 pages. You probably think that this principle applies to everyone but you, and your breakthrough and revolutionary enterprise is definitely an exception to the rule. Mistake. The shorter the plan, the more likely it is to be read.
Someone has to write. A business plan is the wisdom of the entire team, expressed in one voice. The plan should not seem like a patchwork quilt made from pieces of heterogeneous text.
Fasten the sheets with a regular paper clip. Leather-bound volumes with gold lettering will undoubtedly give you a reputation — the reputation of a sucker. Especially since investors are likely to ask for an electronic copy of the document-in .doc or .pdf.
Reduce your financial plans to 2 pages. Investors don’t care — and you can’t know for sure — how much you’ll spend on pencils in the 11th month of year 4. The most important forecast is your cash flow analysis for the first five years. (For more information, see the next section.)
Specify key metrics, such as the number of customers, points of sale, and Resellers. Often these figures give a clearer picture of the company’s plans than financial forecasts. You can predict anything — for example, that in the first year you will already sell a product to 250 companies from the Fortune 500 list.
Give the calculations on which your forecasts are based. It is clear to everyone that you have chosen a revenue figure that, in your opinion, favorably characterizes your business and at the same time does not look like the fruit of hallucinations. The calculations on which your forecast is based are much more informative and more important than the forecast itself.
Enter significant numbers
Don’t think that investors are putting their business plans on the table and choosing who to give their money to based solely on financial forecasts. Most business plans that come to the table of venture capitalists have more similarities than differences. In particular, they all talk about sales of 25 or 50 million dollars for the 4th or 5th year. Anyone who knows how to use Excel can easily achieve these results in theory.
However, the financial forecasts that investors require are an important part of the business plan. Typically, an investor wants to see your 5-year forecasts to better understand the scale of your business, determine how much money you will need, and consider the prospects for your business model. Here’s how four leading venture capitalists describe what they expect to find in financial plans.
HEIDI ROIZEN (MOBIUS VENTURE CAPITAL): “I want to see a detailed monthly forecast of total capital turnover for the first year, then a quarterly forecast for the next year, and then a yearly forecast based on expected profitability. I understand that all these figures are taken from the ceiling, but I need to know what approximate calculations are guided by the entrepreneur, predicting the total volume of the market, its share in it and how much money it will take to achieve this.”
MIKE MORITZ (SEQUOIA CAPITAL): “no forecasts come true anyway, so entrepreneurs may not even bother to compile a complete table of accurate calculations. In fact, it is only important for a start-up investor to estimate approximately how much money will be required for the company before it can Finance itself. We always pay special attention to the first 18-24 months, based on the assumption that if the company survives this period, it will be better in the future. We expect that we will be provided with several well-thought-out forecasts (quarterly-for the first 2 years and for years-for the 3rd, 4th and 5th years) for income and losses, the balance sheet and the cash flow forecast.”
GARY SCHAFFER (MORGENTHALER VENTURES): “Five years is a standard business planning period, despite reliability falling with increasing deadlines. A narrower time frame, such as three years, is suitable for” raw ” startups. In practice, investors usually expect to see a forecast for as many years as it takes for a business to start generating tangible revenue. And if the term exceeds 5 years, this may also suit the investor. As long as this information helps you determine how much money you will need to invest in a company to achieve profitability, this is the main thing that investors always want to have at least a rough idea about.”
STEVE JARVETSON (DRAPER, FISHER, JURVETSON): “Any business plan includes financial forecasts that start with very modest numbers, but then, by the third year, soar to absurd heights of profit. As a rule, we do not take such calculations seriously, but the forecast itself is useful because it demonstrates entrepreneurial optimism and growth potential. But even more important than the forecast itself is the entrepreneur’s reasoning, based on which he made conclusions about the business model, market size, pricing, distribution channels, and, as a result, about gross profit and capital intensity. The main thing is that we want to invest in companies that want to change the world, and a half-page of financial forecasts for 5 years, combined with a thoughtful discussion of key development factors, is enough to start the conversation.”
Write thoughtfully, act spontaneously
In their book “Solving the problem of business innovation,” Clayton Christensen and Michael Raynor explain the difference between “balanced” and “spontaneous” strategy development. The first option involves a” meaningful “process of carefully analyzing past data, technological development plans, and reviewing competitors’ policies. It is useful for Mature companies with experience.
Spontaneous strategy development, on the contrary, is the result of the influence of everyday events that occur with middle managers and employees “at the forefront”. This method is more flexible, allowing you to quickly respond to emerging problems and opportunities. It is good to use it in situations where the future is uncertain and it is difficult to develop a reliable strategy*. It is more suitable for startups — both independent and within Mature companies.
Here’s a little secret of a successful startup business plan: you should write it in a “balanced” manner, but at the same time think and act “spontaneously”. Investors want to see fundamental business plans, as they prefer to invest in companies that supposedly know what they are doing. And most investors will not be satisfied with the principle of “we will react quickly” as a strategy.
You and I know that you don’t know when your product will go on the market, who will buy it, how much they will pay, and whether they will re — order it-but you can’t say that in the business plan. So write as if you know exactly what the day ahead holds for you; but when confronted with reality, react opportunistically.
I can assure you that many successful companies have changed their business model along the way. This means that you need to save money so that you have enough money to survive the upcoming changes (for more information, see master class # 5 on bootstrapping), and be ready to alter your plans depending on the circumstances.
The biggest mistake is to write a well-thought-out plan and then follow it stupidly just because it’s a “plan”. If you are successful, no one will judge you for not following the plan. If, following the plan, you failed-shame on you and shame.
Q: won’t my business plan be too similar to everyone else’s?
A: Depending on what you mean by “too similar to everyone else”. In a sense, it should look like all the other plans-that is, answer the most important questions listed in this master class. In addition, it should not stand out in any way in structure, design or binding — and certainly no color portraits on the cover. Arial for headlines and Times New Roman for the main text are suitable fonts.
Q: So how do I get my plan noticed?
A: there are four ways to do this. First, include a link to an authoritative source that will attract the reader’s attention. Second, add a list of customers that the reader can call and ask them about how much they need your product or service — or, better yet, how actively they are already using your product or service. Third, make sure that your plan demonstrates your real knowledge and experience in the market. Fourth, include graphs and diagrams to explain complex points.
Q: Maybe you should hire a consultant to write a plan — or at least to build a financial model?
A: The entire plan, including the financial model, should be written by you-in collaboration with the team. As I said, the main goal of writing a business plan is to unite the team. Putting even part of the process on someone else’s shoulders is a big mistake. Write the plan yourself, and then you can hire a consultant to edit your work.
Q: How often should the business plan be revised?
A: the Value of a business plan drops sharply after the first six months. Initially, the business plan rallies the team, allows new employees to catch up with others, and helps raise funds.
However, starting in the second year, you will stop writing “spontaneous” plans. At this stage, your business plan will become “balanced” and will focus on budgeting and forecasting, with a brief summary of goals (what) and strategies (how).
Christensen K., Raynor M. Solving the problem of business innovation: how to create a growing business and successfully support its growth. Moscow: Alpina Business Books, 2004.
Traut Dzh. The power of simplicity: a guide to successful business strategies. SPb.: Peter, 2008.
J. Nesheim High tech startup: the complete handbook for creating successful new high tech companies. New York: Free Press, 2000 (John. Nesheim. High-tech start-up: a guide to creating new successful high-tech companies).
* For more information, see the book.: Christensen K., Raynor M. Solving the problem of business innovation: how to create a growing business and successfully support its growth.It uses the terms “controlled” and “uncontrolled” [strategy development]. — editor
Chapter from the book ” Startup: 11 master classes from ex – Apple Evangelist and Silicon valley’s most audacious venture capitalist»
The publishing house “Alpina Business books/United press»