The end is in sight for traditional business plans. That’s according to Martin Feinstein, project director of Enablis. He says 80% of conventional business plans contain far too much non-essential general information that will not sway any potential investor.
The Magic Triangle
A good business plan is comprised of a magic triangle at the centre of which is the customer – who they are and what they want, Feinstein explains.
“At one point is the product or service, presented in a clear, unambiguous way. At the second is an outline of the financial side of the business, including the funding needed and how working capital will be financed. Operations is at the third point.”
He says this last factor is generally overlooked because people tend to not fully understand the very practical steps needed to operationalise a business. “If someone is looking to start a handbag manufacturing shop, for example, they will focus on design, branding and marketing, but they won’t think about where they’ll buy the leather and whether they have the right sewing machines to do the stitching in-house.”
Many business plans are rich in product information and market opportunity; they’ll tell you that the local handbag market is worth R300 million per annum. But of what relevance is that to someone who is starting a small handbag manufacturing operation in Durban? “A lot of market data is irrelevant to the nitty gritty of your specific location and business. So many business plans go into enormous amounts of detail about the industry sector when it’s completely immaterial. Far more important are the channels you will use to sell your handbags.”
Write the business plan yourself
Feinstein insists that it’s important for entrepreneurs to write their own business plans. “Institutions in this country have made consultancies popular. Government agencies give applicants a voucher and tell them to see a consultant. Not only is this disempowering, but in practice, the consultant does not feed into your processes. They will write a standard business plan after asking you a few basic questions.
Entrepreneurs often pull in business plan consultants who draw on industry statistics and generic information to make the document look more impressive. This appeals to the inexperienced because they want to hype up their business case. “In reality, this has the opposite effect,” Feinstein says. “What you get is a vast document which detracts from your original purpose – to show that you have a clear, practical and specific understanding of how to start your business and sell its products or services in your area.”
If you’re inexperienced, chances are you’re scared of producing a business plan that is substandard or amateur, but it’s worth remembering that financiers are not looking for award-winning prose. “Some of the best business plans I have read have been four pages long and written in point form. You can immediately see that the entrepreneur behind the business has a clear understanding of what and how.”
Where to Start
Feinstein says it’s a good idea to begin by articulating the business model in your own mind. “If you can’t do that, it will be difficult to translate your thoughts into document form. Basically, if the concept is fuzzy, the plan will be fuzzy. In some ways, putting it down on paper can get rid of any vagueness, but it will not do the job of thinking for you.Put your plan down in sections and understand that it’s a working document. “Many people want to start at the beginning and work through to the end, but it can be more constructive to assemble all the parts on paper and then move them around – this lets you get the structure of the business right.”
Although many entrepreneurs have English as a second or third language, Feinstein says this should not detract from attention to detail. “I received a business plan from a start-up media training company that was full of spelling and grammar errors. If there is no focus on attention to detail, readers will hit ‘delete’.
A big part of early stage success is giving people the confidence to believe that you can deliver.” Identify one or two experienced business people who have done it themselves and who have a practical, real-life understanding of running a small business. “Take them through your thinking, and listen to what they say about where you are on the right or wrong track – this will save you an enormous amount of time and trouble,” Feinstein concludes.