STARTUP SATURDAY: Window dressing business plan is the first mistake
Writing a business plan is as important as the idea itself. A lot hinges on the business plan which puts a clearer perspective on the goals of the business and how you will go about achieving it. Namita Shibad speaks to Advait Kurlekar, who runs consulting firm Upohan and is a TiE Pune charter memberpune Updated: Nov 17, 2017 22:32 IST
Misconceptions startups about a business plan
Before we go into the elements of a good business plan I would like to bust certain myths startups have regarding a business plan,” says Advait Kurlekar.
The number one myth is that most startups see this as a financial plan, ‘which it is not’, says the CEO of Upohan Management Consultants .
“Finance is a big part of the business plan but it is not all of it. There are several other elements including founders, team profile, the uniqueness of your product or service and market attractiveness.
“The other thing is that most startups think that once a business plan is made then it is a cast in stone. That is not so,” he said.
“Entrepreneurs feel that a business plan is linked to strategy and that cannot be changed, so the plan must not change. That need not be so.
“In fact when we give a template to make a business plan I ask my mentees to put their inputs on post-it notes as their thoughts clarify,” said Advait, who is also a charter member of TiE Pune .
Then, there is a difference between profit and cash.
“In the early stages revenues are important but then profits become vital. You need to understand the difference. Cash flow is always important.
“And lastly people mistake it as a plan that is put forward to just one audience, the investors. I feel that like valuation, a business plan should be made depending on whom it is being presented to. “Different audiences need different aspects of the plan highlighted. For example some people find the founders and the core team profile holds great importance to the business, some feel it is the product and the innovation, others may want clarity on the distribution model and so on.”
Art of deriving an effective business plan
Moving the myths out of the way Advait shares the steps to writing a good business plan. “A business plan makes you think. It forces you to put on paper what your idea is, what is your value proposition, where are the gaps in your thoughts that becomes clear on paper.
“It helps map the future course of your business and provides clarity on growth, helps devise a contingency plan and much more.”
The first step in writing a business plan is to define the vision and mission of the business you are setting up. The mission statement clarifies what is the purpose of your business and the vision states what are the goals?”
For example, Grofers (an Indian on-demand online grocery delivery service) mission is to make shoppers experience pleasant by connecting them to merchants in their vicinity through the mobile platform. And the vision statement of Tesla (an American automaker, energy storage company, and solar panel manufacturer) is to create the world’s most compelling company via electric cars.”
Next is to describe your company. What does it do and what it aims to achieve. Then you describe your service or product. After you have put these down, a business plan will go into the market analysis. This covers issues like what is the market size for your product, trends, growth, market opportunities.
Who is the competition, buyers, new entrants, and so on? This will also include external factors such as political, environmental, social, technological, economic and legal aspects that will impact your business.
The other vital element is the team. You need to describe in detail about the founders and ownership structure, introduction to the board, the various departments and who handles them, skills and experience required of managing the team, structure of reporting and existing management members details.
Once this is done you move on to your marketing plan. Your market analysis, sales strategy, advertising, public relations and customer service.
The plan then includes operations and how your business will go about delivering the product. A SWOT analysis helps understand strengths, weaknesses, opportunities and threats.
An important aspect though not exclusive is the revenue projections. This part of the plan shows how the company aims to earn its revenues. It covers issues like income, expenses, EBIDTA, profit before tax and profit after tax. This clarifies to the investors how the company aims to make profits. A cash flow statement details how the cash is being managed.
Advait states that though the above mentioned are just guidelines, there are multiple versions of a business plan.
Importance of mini plan and presentation plan
There is a mini plan which pays attention to key matters like the business concept, financing needs, marketing plan and financial statements. Then you have a working plan that has a total emphasis on details and is continuously used to review business progress and operation.
And finally, you have a presentation plan that will emphasise on the marketability of the product and is used for presenting to bankers, VCs and others.
“I always tell my mentees that you should do a scenario planning and make business plans accordingly. So if there is a 90% probability or what we call P 90, that your business will hit the numbers mentioned, it is an optimistic scenario, if it’s P 75, it is realistic and if it is P 50, that chances are 50% of you getting your numbers then it is pessimistic scenario planning.
“All this is meant to be a guide. But the most important aspect of a business plan is honesty. We at TiE always tell our mentees that follow the code of ethics, do not window dress your business plan.
“You may have different versions based on various scenarios but never exaggerate to the point that the truth is diminished. No alternative facts here.”
First Published: Nov 17, 2017 22:31 IST