Nov 27, 2012
By Lew Turnquist, Senor Managing Partner, Kirchner Private Capital Group and featured expert on Episode 6, Season 2. Find out more about Lew Turnquist
A common struggle for the early-stage company CEO is the business plan.
Often, it seems like a luxury that costs too much precious time to create and doesn't provide the immediate benefit that knocking to-do's off the list seems to. The problem that this creates though, is that the business suffers from a lack of direction and won't advance forward except by luck.
This is a case of focusing on the urgent at the expense of the important.
The business plan is the CEO's way to draw on her experience and knowledge and plot the course forward for her company. Done well, it also allows the chance to trace the interdependencies between all parts of the business and its operations and thereby optimize where resources (like that precious time) are spent.
It starts with the Company's vision for what it will be. In tonight's episode, we saw that this was missing, or, at the very least, couldn't be articulated.
The vision should be mindful of the Company's core strengths (e.g., competitive advantages, operational competencies, management experience and skills). But it can't be only that, it must also serve to inspire and point the way forward for the Company through the "fog of the now." In so doing it must be mindful of what is going on in the world around the Company (e.g., market trends, competitive activity, economic climate).
This strategic, not tactical, start dictates the practical executional elements that the business plan will describe in detail.
A simple outline for a business plan is as follows.
0 EXECUTIVE SUMMARY
1 COMPANY BACKGROUND
1.1 Products & Services
1.2.1 Recent Key Milestones Achieved
1.2.2 Upcoming Key Milestones
1.3 The Proposed Financing
2 MARKET RELEVANCE
2.1 Current Market Trends
2.2 Product Fit [how the product plays to the trends, how necessary is it?]
3.1 Objectives/Goals/Intents/Benefits of Products
3.2 Product Overview [how it works]
3.3 Intellectual Property Strategy
3.4 Product Evolution Path
3.5 Development Status & Short-Term Enhancements/Developments
3.6 Development Capability
4 COMPETITIVE & ENVIRONMENTAL LANDSCAPE
4.1.1 Market Size
4.1.2 Market Dynamics
4.2.1 Overview of Competitive Landscape
4.2.2 Known Competitor Profiles
5 SALES & MARKETING STRATEGY
5.1 Marketing Strategy
5.1.2 Product Positioning & Differentiation
5.2 Sales Strategy
5.2.2 To-Date Sales Successes, Reference Accounts
6.2 Shareholders, Voting Blocks & Directors
6.3 Org Design, Expansion Plans, Requirements
7 THE EXIT
8 FINANCIAL OVERVIEW
8.1.1 Revenue Assumptions
8.1.2 Expense Assumptions
8.1.3 Capital Assumptions
8.2 Base Case Summary Projections
8.3 Sensitivity Analysis & Stress Cases
Now, it should be noted, of course, that every company has different needs and so, naturally, each company's business plan should be different too. For instance, if a financing is not intended in the short term, section 1.3 wouldn't be necessary. But business plan authors should be cautioned against carving too much out of that outline - the real value of it is in considering the whole business.
Investors as a rule demand business plans when considering putting money into a company. But not strictly for the reasons you might think. It is less to grade the quality of the content of the actual plans within - seasoned investors know what seasoned entrepreneurs know, that plans will and must change dynamically as the world around the Company changes and are probably out of date as soon as they are printed. No, investors want to see that the CEO has a vision and has thought through all the implications of how the Company must execute toward that vision. That is, has everything been considered by Management and is there consistency within the plan across all facets of the business. By demonstrating that she has thought through all the issues and planned for them, the CEO demonstrates to the potential investor that she is capable of doing that going forward, as the world changes around her.
Put another way, this common struggle for the early-stage CEO, the business plan, is a case where the journey is as important as the destination. And it begins with the single step of the company vision.