MADBUSINESS: A STEP-BY-STEP GUIDE TO BEGIN YOUR OWN MADINNOVATOR
The absolute key basic in a business of 1-person or 100,000-people is a business plan. How else is anyone going to know if the plan is on track or going terribly awry? And if that seems a boring financially driven reason, then that’s partly true, for how else will the owner know if the money being invested is working? Remember, the money invested can be time; you could be spending that same time doing something else that earns money. And once the owner has other investors (who put real money into the project) you can bet your last fill they will want to know what’s going on in the business.
So a business plan is the essential foundation upon which a business is built. Without it, like a villa built on sand, it will fall over and hurt someone.
Even if you jot down a paragraph on the back of an envelope describing your dream, you’ve started to make a plan. That said, don’t take that envelope to an investor as you may get no further than the security desk. It will need a lot of background work to get to the next stage.
You’ll need to spend a lot of time doing your homework gathering the information you need to create a deeper plan, and here’s a tip – your initial plan on the back of an envelope will like very different when you’ve finished with a proper planning document.
Michelangelo was indeed one of the most gifted artists in human history, but he didn’t paint the Sistine Chapel with a couple of paint brushes and a few cans of paint. He had a plan, and it changed over the years it took him to achieve an achingly beautiful piece of art. It also took a team, money and backers who believed in the plan.
If the Sistine Chapel seems a stretch, think about Facebook or Google or Apple. All these companies started with a dream, but none were possible without a plan, people and money. So whilst your dreams may be global, artistic or simply to provide a better future for your next generation, have a plan!
The next section of this MADBlog describes in detail the essential seven sections of a business plan: what you should include, what you shouldn’t, how to work the numbers and additional resources you can turn to for help.
With that in mind, jump right in.
The first section is the ‘Executive Summary’ of your business which summarises the overall outline of the business plan. The summary should tell the reader what you want to achieve.
This is very important as the central proposal can be buried on page eight of the financial forecasts. Clearly state what you’re asking for in the summary.
The second section describes your business, and this usually begins with a short description of the sector in which you’re looking to operate. When describing the sector discuss the present outlook plus future possibilities as you see them, which might include technology developments. You should also provide information on all the various sectors within your industry, including any new products that will help or adversely affect your business. Seek to provide background overviews to support the assertions made, but leave the full documents used for these overviews in the appendices of the plan.
Always the result of a thorough market analysis this forces the entrepreneur to become familiar with all aspects of the market to define the target market set out how the company can be positioned to garner its share of sales. Follow this with your competitive research or analysis; a service that seems to have no competitors is rarely a service that gathers investment money. Most businesses are standing on the shoulders of giants, so although yours may look and feel different, the competitive analysis is required to test the innovator’s views as much as supporting the investor proposal.
The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, the strategies that provide you with a distinct advantage, the barriers that can be developed to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle.
OPERATIONS AND MANAGEMENT
Designed to describe how the business will function and grow. The operations plan highlights the logistics of the organisation such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
This supports the growth of the business and needs numbers and strategy.
It provides investors with a description of the product’s design, chart its development within the context of production, marketing and the company itself, and creates a development budget enabling the company to reach its goals.
Big dreams are never about money. We think they are, but they’re not. Money can be a motivator of course, and a massive one, but truly moving dreams are about making a difference and standing tall in the world, achieving something good with the right motivation and giving ourselves some self-esteem whilst, at the same time, building something useful for others.
You have to be Jerry McGuire about this; “Show me the money” is the mantra and the most important section of any business plan. Financial data is always at the back of the business plan, but that doesn’t mean it’s any less important than up-front material such as the business concept and the management team.
Many people don’t think about this, but they’re wrong. It causes pain delivering a business plan. So why are you doing this? What are you seeking to achieve? When are you seeking to exit the business? How do you think that will work? Is it enough to state that I “just want my business to grow by 10% a year”?
Not for investors, and if that’s the goal it surely won’t work.
But asking investors to share in an exit plan for their investment is as important and vital as asking the pilot to tell you when the plane will land. No-one expects to fly on at 35,000ft for ever, so plan the landing. It may be to buy out the investors, to run an IPO, to make a trade sale or to pass along the business to the next generation; but it needs a plan. Without a plan investors will not invest. But importantly you will have proven your dream is just that – a dream.
So whilst my Grandfather grew up in a different world, and experienced a different life from me, he understood the need to react to change. He embraced it and understood that sometimes the simple truths are the same as they have always been.