In Hackerteen, Volume 1: Internet Blackout, the money problems that Yago’s father faced at his bakery could have been avoided with a good business plan. What do I mean by “business plan,” and why is it useful to know what it is?
A business plan is sort of map--a description of what a company is, what it does or sells, and how it will survive or become lucrative. Writing a business plan is a great exercise even for a young person, and even for someone who doesn't plan to start a business, as we'll see later.
If Yago’s father had looked for an investor, and showed him his business plan, maybe he wouldn’t have needed a loan. He could have gotten the money for the new equipment from the investor, who in exchange would have become a business partner and get part of the bakery’s profits.
Furthermore, were Yago to expand his business significantly and sell stock or bonds to the public, the business plan would help indicate how much of the company to put on the market. Investors, shareholders, and banks, before giving the company their money, want to see a business plan so they can look behind the marketing hype and see how the company will operate over a long period of time. Marketing can tell them what products or services the company offers, but they need the business plan to know how it will actually make a profit, how it will evolve, and how it will deal with competition and other important aspects of the environment in which it is operating.
As an example, to look back at Hackerteen, Volume 1, Yago's father worries that a new supermarket will become his competition and take away his customers. A business plan could explain that the supermarket is not really competition because it doesn't have the fresh baked goods its customers want. Instead, according to the business plan, the supermarket could be the bakery's best customer. And the business plan would estimate how much fresh bread people buy in that neighborhood, in order to show how much Yago's father could sell.
But it would be misleading for this article to talk only about money. The plan's main purpose—which remains the same whether you write it for a company, a non-profit organization, or yourself—is to function as a guide. In this manner, it reflects your mission and vision.
Therefore, even though business plans are usually associated with the creation of a new enterprise or a search for investment, they can be created and used by the company at many times: when launching a new product, restructuring, or simply mapping out future steps. In such cases, these plans can be created for internal use only, and the contents are a little different.
How to Start
Writing a business plan requires attention to detail and a generous openness to all possibilities. As this Chinese proverb says: “If one piece is moved wrongly, the whole game is lost."
Picture your business plan as a letter. Well, you probably don’t write many letters, so you can picture it as e-mail – but don’t write it in a rush, using abbreviations or emoticons, OK? ;). The text you write will describe exactly what your company is – or will be – and how you will carry out the ideas you write about.
As in any e-mail you send, you should consider the people who are going to read it. Business plans that desribe the same business to different people can have different approaches and contents. For example, if the plan is for you or for your company’s internal use, it should probably contain more specific strategies. It must define your goals clearly and show how you will reach them, including potential problems and how you will deal with each one. Also, you don't have to talk much about what the company's business is, and who the key people are –you probably know them already.
On the other hand, if the business plan is aimed at an external audience, such as an investor, the plan can be more like a general vision of the company –you don't have to be so specific on every little detail–, and you must use a different approach. Remember that the investor is, in a way, your client. Show him the salesman in you; explain how much the investment is worth and why he should believe in your company. Of course, I'm not saying you should write things you don't believe or omit potential problems just to get an investment. In fact, playing such tricks wouldn't be effective, since a good investor would not believe a ”perfect” plan. Instead, show him why you believe in your company and try to make him as excited about it as you are.
Contents of a Business Plan
Start by presenting your company. Of course, a business plan for internal use can abbreviate this stage. Present your company’s key people to your staff, give a brief company history, and move on. Maybe you are the company’s only employee and your whole history is that you registered a website last week. All the same, it is interesting to explain the company’s vision and background, even if it is just to yourself.
Now list your company’s goals (to sell a product or offer a service). Also say how the company is going to survive—how will you get paid? Maybe you have figured that it will take a few months or even a few years to profit. Will you need external investment?
In addition, it is important to list your differentials. That simply means: why is your company any better than your competition? What are your advantages?
List your strengths and weaknesses, which are internal to the company, and the opportunities and threats in your external environment. Together, these four things are called the SWOT matrix.
If you are starting a new company on your own, it may seem silly to write all this down. But it isn’t. The business plan helps you get a clearer vision of what kind of world you're dealing with and how well equipped you are to succeed. On the basis of this analysis, you can act.
It Isn’t Just About Money
Getting money from investors or through your customers is not the business plan's only role.
A good business plan may also help a philanthropic foundation. In such a case, instead of predicting financial results, it must demonstrate how the organization will benefit the community. At the same time, instead of getting money from investors, the business plan must consider other forms of support, such as donations.
If you are starting a company, helping the community is not your sole purpose. But if it is on your list of goals – and I hope it is – it can also be on a company's business plan. For instance, nowadays, many companies cite sustainability as a policy and as one of their differentials.
Sustainability means producing value without using up the earth's resources or hurting people and the environment. The principle is a good way of showing that you can survive over the long term, as well as a smart strategy for making money.
Thousands of companies include sustainability as a differential. They include the Brazilian multinational company Natura, which buys source materials for cosmetics from communities in the Amazon Rain Forest; Wal-Mart, which intends to become a symbol of sustainability by motivating responsible social and environmental actions; and companies as different as the Body Shop and GE.
Beyond your vision and desired impact on the world, a business plan can include your goals regarding how consumers think of your brand and the feeling they get from it. Generally, this part is called a “marketing plan,” which can also help your business a lot.
Hitches
Remember: you can’t foresee the future.
Even though a business plan should be thorough and objective in considering future actions, you obviously can’t exactly predict the environment in which you'll carry out the plan. Competition may appear, the economy may grow more or less than you had imagined, a supplier may go bankrupt, the price of source materials can rise of fall...a lot can happen.
As unexpected events come your way, you must reflect on what you have written and decide if it is still valid. If you've observed your environment carefully and portrayed it honestly, you probably won’t need to make radical changes, but you'll have to reconsider some aspects.
For example, the famous founder of Apple Computer, Steve Jobs, founded another computer called NeXT Computer company before returning to Apple. NeXT focused on selling computers, but people were not buying their machines. Because hardware wasn’t a good market for them, they narrowed their focus to their software, NeXT Step. Apple ended up buying NeXT Step and using it as the base for MacOS X, which in turn led to the greatest success Apple and Steve Jobs ever had.
Looking back, observers can see that Jobs was riding a wave of change: hardware was becoming commoditized (in other words, companies couldn't make their hardware a differentiator and couldn't make big profits from new hardware) while software grew in value. No doubt I’m oversimplifying the history, but I think it’s a good example of how an environment can change and a brilliant businessperson can change a company's direction with it. Similarly, you must be prepared to update and rethink your plan as often as needed.
But some things in your business plan must not change (not much, anyway). For example, don't change the company’s vision and mission, which is how the company sees its role in the world and its final goal. In general, this will be the company’s “personality,” and will guide your actions in all your future moments.
Other Uses for Business Plans
Even if you don’t have a business, you can have a plan.
What do I mean? Think it over. A document in which you explain the environment you act in, your strategy, your expected goals, your strengths and weaknesses, etc., may serve as a guide for your life. You can write a business plan for a career, for example. List your goals for the coming year, along with why they're important, how you will reach them, and how you will overcome difficulties. Try it! I bet you will gain a lot.
