Business Plan 202: Advice for startups

Happy Groundhog Day - have you written your business plan yet?

For years, my dental hygienist nudged me about the importance of flossing. It was just like Groundhog Day every time I visited. For years I nodded, flossed for the next couple of days then forgot again until just before the next visit. (BTW, after years of embarrassment, I finally learned my lesson and floss every day.)

If you’ve been reading this blog regularly, you may have noticed a lot of nudging from us about putting together a business plan. The reason is, like flossing, even if it might seem like a bother, developing a plan is one of the most important things you can do for your enterprise’s long-term health – especially if you’re a startup.

Says Michael Eisenberg, an accountant who’s worked with small business owners for more than 30 years:

“When you’re building a business from the ground up, you’re taking a bigger risk than if you were buying an existing business or a franchise with some operating history… And if you’re trying to raise money from others, they’re going to want to see your business plan...”

But while everyone agrees about the importance of a plan, it turns out there are a lot of ways to write one. In fact, BusinessWeek’s David E Gumpert says there are five common ones to consider:

1. Executive summary: A cohesive and engaging two-page mini business plan that covers your business’s strategy, management team, market, product or service, sales plan and finances. (I’ll talk more in depth about an executive summary in an upcoming post.)

2. Synopsis: Gumpert calls this an executive summary on steroids – “the emphasis here is less on the particulars of the idea and more on why the idea is especially relevant to the investor.”

3. Summary business plan: 10 pages or less, it will include an executive summary plus a page each on components such as your product, market, competition, marketing and finances. Gumpert says this is the most common type of plan requested by prospective investors.

4. Full business plan: A traditional 25- to 35-page document with full marketing data, financial projects and more.

5. Operational business plan: The Godzilla of business plans, this type of plan can be 50 pages or more and is usually developed not just to raise money, but to plan how your business will operate.

Here is a fantastic resource on writing your business plan – you’ll want to check it out.

And, of course, speak to your accountant, possibly the best person to turn to before you get started.

Any questions about writing your startup’s business plan? We’d love to help if we can.