The 3-2-1 Formula to Make the One-Size-Fits-All Business Plan Obsolete

Are you one of those who puts off a business plan because it's too hard to do? Do you rationalize that you don't need a plan because you're not looking for investment and not applying for a loan.

It occurs to me that I can divide six main business plan essentials into a 3-2-1 formula: three planning essentials that can help every business do better and new businesses start better, two more for businesses seeking outside investment, and one last one for businesses looking to borrow money.

The first three points, what every business needs from its planning, are:

1. Focus. Identify key target markets, channels, and offerings, realizing that you can't do everything. Focus on core competencies. Play towards strengths, and away from weaknesses. Differentiate. Solve real problems and offer real benefits. No, this isn't a laundry list, it's actually all in the single word "strategy." Strategy is focus.  
2. Specifics. Dates, deadlines, budgets, clear assignments of tasks. In Business Plan Pro we call this "milestones." Strategy without specifics a plan is just blue-sky, nice to have, but not solid. Good business planning is nine parts implementation for every one part strategy.
3. Cash Flow. Every business runs on cash and cash is not intuitive. Profits are not cash. The mechanics and financial principles involved can be laid out clearly enough in month-by-month detail but it's really hard to do it in your head. Do you have any idea how many profitable companies go under? Every business needs to plan cash.

Okay before I go on to the next two points, I have to admit there's a cheat here; three points do expand. You can't get to these three points by taking them cooly by themselves. You can't really get a proper focus, or strategy, without having a very good understanding of your market, your competition, your business offering to your customers, and your situation. You can't get to cash flow without projecting sales, personnel, expenses, assets, capital, and liabilities.

The point however is that you don't do a plan as a document, for the document purpose alone. You do it as planning that will be the first step in a regular process that will eventually become management. Planning means you follow the plan with regular review to follow up on where results differed from plan, understand why, and use that review to create tracking and accountability and management.

If you don't need to show your plan to outsiders, you don't have to worry about some of the other parts of a standard business plan, like company history and backgrounds of the management team. You don't worry about text as if it were a homework assignment. Do it in simple bullets. Get the specifics right, get the numbers right, get the focus realistic, and make sure you use the tracking and follow-up required to make it planning process, not just a plan.

Which brings us to two more essentials that have to get added to a plan involving seeking investment:

4. Make the investors money. Strange how obvious that is but strange also how many plans fall down on this point. Investors want you to make money and be a healthy company and to succeed but that's just because you're so likable, while their real job, what they get paid for is to make sure that investors make money. Make sure you show the investors their return, and your exit strategy.
5. Management team. Investors need to minimize risk, it's their job. And the best way to minimize risk is to know where you're going. They want management teams with experience.

Now here again, as with my previous three points, I admit I'm pushing a lot into one. Because making the investors money also implies that you've got to have an interesting market, a defensible business offering, and whatever you want to call your secret sauce. Showing a high return on investment doesn't cut it when it isn't believable.

And finally, my last of six points, this one relevant for plans tied to seeking loans:

6. Collateral. Show the lenders they'll get their money back. Show them you can pay the interest. Show them you have assets to pledge as collateral. Banks can't invest in your business plan just because it's a good plan. That would be against the law. They have to protect their depositors' money.