What are the 4 requirements of good business plan documents?

Hello. This is Irino, a strategy consultant. I review more than a hundred business plans a year and participate in business plan contests as a judge. I will talk about 4 requirements of good business plan documents that I believe are important every day.

Requirement 1: It encompasses 17 elements

Executive summary
Background
Management team
Company overview
Management and business principles
Product/service overview
How your profits are made ♦♦♦
Analysis of the market and the competitors
Marketing and sales strategies
Operation plans
Personnel strategies
Start-up strategies ♦♦♦
Growth strategies
Exit strategies
Financial plans :
– Sales forecast
– Cost plans
– Financing forecast
– Capital policies
Risk management
Project management ♦♦♦

Particularly, I often come across business plan documents that are missing
7. How your profits are made
12. Start-up strategies
17. Project management

Requirement 2: It can be explained in 20 seconds

Everybody has feelings and passion for his/her business and probably can go on talking about it for over 10 hours. However, you need to be able to explain it in 20 seconds in practice. The reason why it’s 20 seconds is because the time you often get chance to explain your business plans to others is when you swap business cards. So, you usually have short time for that. Also, unless you keep it within 20 seconds, no word of mouth will take place in your clients’ offices. 20 seconds means about two key words. If you have more than that, then it will be difficult to explain orally and those in charge of investment and loan will have a hard time requesting for decisions in their offices. Business plan documents tend to be rather complicated, so take time to polish them up so they are concise and describe your strengths eloquently.

Requirement 3: What you are supposed to do now is clear

Plans are meaningless unless you are able to execute them. Even if you have a 5 year plan, it is important that you can easily know what you are supposed to be doing now by reading the business plan documents. No matter how much abstract and sophisticated information you put on your business plan documents, they become executable only after you have specifically indicated what tasks need to be done next. Business plan documents that have schedule charts and task management charts in the “Project management” section and that allow managers and office staffs to get to work immediately are recommended.

Requirement 4: Sales hypotheses are thoroughly verified

What tend to be speculated incorrectly in business plan documents is sales plans. The reason why they are often wrong is because the following sections remain on hypothesis level.

8. Analysis of the market and the competitors
9. Marketing and sales strategies
15. Financial plans: Sales forecast

Make sure you don’t stop at hypothesis levels. Take time to investigate facts and test them so you can verify the hypotheses. What I mean by investigating facts is checking market size or sales amounts of the competitors in order to get objective data. Testing means developing prototypes of your products or services and not only do test runs, but also verify if people will actually spend money for them. I somehow get the impression that good business plan documents are “dirty”. Good business plan documents are composed of a lot of collected facts and descriptions of test runs. They don’t have much “beautiful” logic that is yet at the hypothesis stage.

Editor’s note: In February, Nikkei BP and BizOcean

My columns on the theme of “business plan documents” are published on Nikkei BP and BizOcean in February. Please have a look at them if you have a chance.

That’s it for today.

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