How to Simplify Your Technical Business Plan

When Less Can Become More

 
A common mistake made by entrepreneurs creating a business plan is to make their plan too technical. What do we mean by too technical? Simply by including too much jargon and details about the specifics of the product or service being created.
 
Now this may seem a little contradictory since essentially what you are pitching is your product/service and that is what makes you different from competitors in some sense. But as in all things, there is a time and a place for all things. These technical details and jargon can be shown later on in the process. Too correct this commonly made mistake entrepreneurs need to recognize their audience, acknowledge the purpose of their business plan, and change their focus.
 

Audience and Purpose

 
The business plan, especially for startups in manufacturing or other industrial startups where technical details are prevalent, is written to obtain capital and support. The readers are business professionals, investors, lenders, etc. who are focused on profitability and potential. These people do not want to see necessarily see how your technology works but instead want to see how it;
 

  • Solves a consumer pain
  • Exceeds competing products or processes
  • Is defendable in terms of patents, market entry, etc.
  • Can be produced in a timely and cost-effective manner
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    As you write your business plan, skip the technical details of how it works and focus on answering these questions. Record those technical details in other documents to show investors as the process is carried out.
     

    Change of Focus

     
    It is a general rule of thumb that a good business plan is anywhere from 20-30 pages long. That is not necessarily a ton of space to include all the competitive advantages and product descriptions of your business. Writing a business plan becomes an analysis of determining truly vital information and non-vital information. The more technical information included essentially means there will be less room for other strategies and plans that investors really want to see within the business plan. This includes
     

  • A Target Market Analysis
  • Marketing and Sales Strategies
  • Budget Planning
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    Investors want to know who is going to buy your product, how you plan on selling it to them, who is already buying this product, and even how you plan on delivering the product to the target market. For investors, answering these questions is just as important as explaining how the product works. Even if the product works and blows all the competition out of the water in terms of usability, if you can’t get anyone to buy it, then they won’t fund it.
     

    The Lean and Mean Plan

     
    Know your audience. Know why you’re writing the plan and focus on that. At the end of the day a few blanket statements can cover a solid business plan strategy. Focus on your competitive advantages that your audience wants to see by writing objectively, clearly, and concisely. This will produce a shorter document where truly less is more.

    Is My Business Plan Permanent?

    The Business Plan versus the Business Model Canvas

     
    The recent push for the Business Model Canvas has sparked a debate questioning the need for the business plan for today’s new start-ups. The argument lies in how a start-up is structured versus a large company and in the flexibility of the business plan versus the business model canvas.
     

  • A start-up is defined as an organization in search of a repeatable & scalable business model.
  • A large company is defined as an organization which executes a repeatable & scalable business model.
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    Taking these definitions into account and studying them lead to the business model canvas and the lean business model canvas which are centered on noting core organizational functions which build a minimum viable product. Once this minimum viable product is built a repeated process is followed of putting a product into the market, receiving feedback, rebuilding, and then repeating the process until a scalable and repeatable business model is found. This approach is heralded for its flexibility and promotion of innovation in the uncertain world of a start-up.
     
    Ultimately, the business model canvas is an effective tool for entrepreneurs searching for a successful business model and a way to monetize their ideas.
     
    So, where does that leave the business plan?
     
    The business plan is a document that has become standard for anyone searching to start a new business. It is most often is used as a document presented to lenders and investors as a way to gain needed funding. As well, the business plan is a thorough analysis of business processes including the business model, target market, cost structure, staffing decisions, future strategy, and of course deliverables such as products/services. No doubt a business plan can be a tedious process but indeed helps one to understand his or her potential business.
    Like a business model canvas, the business plan is a tool to help entrepreneurs get their business up and running.
     

    Is the Business Model Canvas a Replacement of the Business Plan?

     
    As stated, both are tools with similar purposes. Many see the business model canvas as a superior tool because of its flexibility in the search of a business model which ultimately is the goal of a start-up. But is the business plan permanent? No, and it should not be considered as such. The business plan is a workable document that should be revisited, corrected, and changed as deemed necessary throughout the life of the business.
     
    Anyone who has created a business plan and has thrown it out as soon as the business catches steam or begins to fail is not using it correctly. The business plan should be treated as flexible, workable, learning-tool just like the business model canvas. Those who have used it successfully have been the ones who reworked their plan and adapted as their business matured and grew over time.
     
    Both are valuable to entrepreneurs. The business model canvas will help find a business model around which to build a company. A business plan will help in the understanding of how to build a company around that business model. The business model is ultimately part of the business plan and cannot replace it.
     
    Successful entrepreneurs will let the market drive their products and will plan accordingly as their company grows and matures.

    Why Seeing the Bright Side of a Recession May Be the Best Decision You Ever Make

    Is a Recession a Good Time to Start a Business?

     
    As of September 2012, 49.2 percent of private-sector employment was from small businesses across the United States while small businesses also account for 64 percent of new private-sector jobs (sba.gov). This statistic finds agreement with President Ronald Reagan when he said, “Entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States.”
     
    Unfortunately, only about 50 percent of all new businesses make it through the first five years of existence while only 33 percent survive past 10 years.
     
    The reasons that businesses fail can be wide-ranging and diverse. Almost all reasons can be attributed to two forces: Internal Factors & External Factors and the risk associated with them.
     

    Internal Factors

     
    Internal factors are those which originate from within the firm. They can be either strengths or weaknesses to the company. These are often mentioned in a company’s SWOT analysis. Examples of internal factors include management skills, communication, firm structure, capital, and marketing.
    A mastery of these factors does not guarantee success but it definitely boosts your chances.
     

    External Factors

     
    External factors are the outside influences that affect the success of a business. These outside influences either help or prevent a business from reaching its goals. Examples of external factors include economic conditions, government regulations, competition, and technological advancement.
     

    Understanding the Economic Environment

     
    The current economic environment is outside of the firm’s control and therefore can significantly hinder or boost the success a firm has early on in its life. For example, a firm cannot dictate what the current interest rate levels are.
     
    The Federal funds interest rate illustrates how market risk has a large impact on the success of small businesses. A recent study done titled “Rate of Business Failures: An Analysis of Determinants” by Augusta Yrle and Sandra Hartman found that between the years 1959 and 1994 that “in the years preceding the increase/decrease in the rate of business failures, the interest rate also increased/decreased correspondingly.”
     
    Their data showed a strong correlation between failures and increasing interest rates. The data showed clearly that in the two or three years following an increase in the interest rates, the failure rate also increases. But the opposite was also true; lower interest rates mean higher success rates.
     
    The significance of this is that businesses cannot create nor diversify away this type of economic activity, and such changes can affect small businesses more than large businesses.
     

    Is Now the Time?

     
    As mentioned at the beginning of this post, entrepreneurs are the life-blood of American economic growth. Common perceptions currently are that entrepreneurial projects need to take place but that now may not be the best time to begin.
     
    So does our current economic outlook necessarily bode badly for current startups?
     
    Think about the advantages right now:
     

  • Interest rates are the lowest they have been in decades
  • A larger supply of skilled workers are available
  • Investors are looking for sound investments
  • Almost everything is less expensive
  • Your company will be built on good business practices
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    While it takes skill to achieve success, when starting your new venture, timing may be everything and now may be as good as ever.