6 Steps to Preparing a Business Plan with Less Pain

Having read "To Draft a Business Plan or Not" and deciding that there really is value in the process of drafting a business plan, you now find yourself starring at the computer screen or a blank piece of paper wondering: How do I start? What follows is a six step process that will get give you a quick and effective means to start the business planning process.

Step 0: Identify the Opportunity
Before you can even think about drafting a business plan, you have to have identified an potential opportunity. This may be a problem that you experienced, heard about or came across for which an adequate solution does not exist in the marketplace. IKEA arose to provide just-in-time, easy to transport and assemble furniture (some might take issue here) at reasonable prices. It may be an opportunity to use a new technology to provide an improved product or service; Kestrel’s 1986 first all-carbon fibre bicycle frame and Uber’s 2010 internet and smartphone-enabled “taxi” service being examples. If you have yet to identify an opportunity see Opportunity Identification.  

Step 1: Get the Ideas Down
Assuming you have a potentially great opportunity in mind (and this is not a routine activity by any means), you need to write it down. I recommend using a blank sheet of paper, the bigger the better, and just start writing out the idea and its various aspects. Although a computer can be used, paper permits a more free form and spontaneous outpouring of ideas. Write, write write; brainstorm about every aspect of your idea and get it all down. Structure and thoroughness are far less important at this first stage than are creativity and the multitude of connected aspects of the opportunity. It is fun and often helpful to develop a working name for this project at this early stage as it imparts a persona. When ideas are rushing in or I’m not at a desk, I often use the voice memo/dictaphone on my smartphone to ensure I don’t lose anything.

Step 2: Identify the Key Innovations, Resources, Challenges and Unknowns
Having created a page or more describing various aspects of your opportunity, review your scribblings and identify or add the key innovations. A key or value-adding innovation should be novel at least to your industry and difficult for others to copy and implement successfully. See Opportunity Identification for details. Similarly, list the key resources: physical, capital and human, the major challenges, and the major unknowns or questions that come to mind. In the process, list possible solutions or ways and means of addressing them. At this point, you have developed the foundations for your planning efforts.

Step 3: Provide Some Structure
There are many ways to provide some structure and these generally involve employing a computer. Text-based methods include sections of text with headings, outlines with multilevel indentations, and/or tables. Diagrammatic representations or a mix which includes text are preferable. (Remember the saying that "a picture is worth a 1,000 words”). Mindmaps, Venn diagrams, other combinations of geometric shapes and arrows as well as drawings and even storyboards are all examples. Google the images of “Diagram” if you need inspiration. There are three reasons to structure your opportunity: It allows you to see the complete picture so that missing components can be identified and added. It also allows you to identify and correct any inconsistencies such as not including enough resources to accomplish the goals within the desired timeframe. Finally, it provides a framework to share and discuss the opportunity with others.

Step 4: Test the Opportunity
Having developed, built out and structured your idea, it’s now time for the toughest step: testing and validating it. Is it really innovative? Is there some underlying magic? (See No Magic = No Business Opportunity). Does it really deliver significant value to an identifiable customer group? Have you spoken to a number of potential customers and if so, what is their feedback? Do the first cut financials: revenues, costs and resulting profits make sense? If you were an established competitor, what would be your response? These are the types of tough questions that you must ask, answer, seek answers for, or modify your plans as a result; in order to improve your offering. (Again see Opportunity Identification for some guidance). Seek the opinions of others and don’t worry if it’s not perfect or you don’t have all the answers, but on the other hand, don’t proceed unless your gut tells you there is still a viable opportunity.

Step 5: Perform an In-depth Analysis
An in-depth analysis involves two tasks. First, a standard list of questions about the business opportunity should be considered. These can be found in most business planning guides. See my presentation for a list of 72 questions broken down by strategy, technology, commercial, operational, financial and execution(al) aspects - the “Six Tenets of Hexagon Innovating.” Second, develop the financial model. Start with the assumptions: price, costs, volume, growth rate, number of staff, average wage, and timing to build the financials. A well-concieved financial model integrates all of the other aspects of the plan and ensures that they are internally consistent and achievable. It also guides you in ways to test, validate and update the assumptions. 

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Step 6: Prepare a Formal Business Plan
Finally, its time to draft up the formal business plan, however you have already done much of the thinking and structuring so what is left is refinement and the addition of more details. A good way to start is to prepare a detailed table of contents and then a slide deck/Powerpoint version of the plan detailing each section before embarking on the full text version. A number of models and tools can be employed to help guide you, including Ernst & Young’s Business Model, Business Model Generation and Value Proposition Design, Ten Types of Innovation, My presentation, and various offerings on the internet. Don’t forget to include diagrams, tables and graphs in the final version. A project plan outlining how you anticipate executing as well as some contingency plans are useful additions that are not frequently addressed. (More on the formal business plan in a future article).

Here’s wishing you the best in all your entrepreneurial endeavours

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