Write a Successful Business Plan Your business plan should be both realistic and able to change as rapidly as the environment it's attempting to address.     May 10, 2004 How you answer the following question says a lot about the kind of business person you are and about your business's chance for success. And, yes, there is a correct answer. Which statement best describes your business plan? What business plan? I borrowed start-up cash from a gullible in-law and have been flying by the seat of my pants ever since. It's around here somewhere, but once I secured my financing I figured I wouldn't need it anymore and shoved it in the back of a file cabinet. Besides, it wasn't very realistic to begin with. My business plan? Why it's right here with the rest of my strategic-planning tools. In fact it's the cornerstone of my planning process. But it's not the plan I started out with; it's constantly changing to reflect new conditions both inside and outside my company. As you probably have guessed, the last statement is the one that augurs best for business success. But it's one thing to pick the right answer and another to make it part of your operating philosophy.     Don't Shelve Your Business Plan     In too many cases business plans are like those blue-ribbon government studies that are trotted out from time to time with great fanfare. They're intended to create a certain impression-not always an accurate one, by the way-and are promptly forgotten once that purpose has been served. If you've relegated your business plan to such a role, you're ignoring one of the most powerful planning tools you have at your disposal. Of course, before you and your business can reap the benefits of a productive business plan, it's necessary to understand what a plan should and should not be. "A business plan is supposed to simulate the future," says Stan Mandel, director of the Angell Center for Entrepreneurship at Wake Forest University's graduate school of business. "But," he adds, "as soon as a business plan has been written it is somewhat out of date." Mandel is correct on both counts, and that has major implications for anyone sitting down to write a business plan: First, a plan must be realistic and accurately reflect the business to be launched and the environment in which it will operate. Blue-sky prognostications are about fantasy not about the future. Second, a plan must be mutable, able to change as rapidly as the environment it's attempting to address. This second aspect is all about making your business plan a part of ongoing strategic planning, and we'll get to that in a minute. First, though, let's talk about putting together a realistic plan.     The Makings of a Good Plan     There is no shortage of blueprints to follow. Plug the term "business plan" into the Google search engine and you're presented with 2.5 million results. When "how to write a business plan" is used instead, the field shrinks significantly - to 19,500 hits. Your plan's real value is as an aid in the strategic-planning process. Mandel relies on a Harvard Business Review article written several years ago by Harvard Business School professor William A. Sahlman. Titled "how to Write a Great Business Plan,"Sahlman's article takes dead, unsparing aim at much of the conventional wisdom that has developed around business plan writing. For instance, he calls "acts of imagination" the one-year or even five-year financial projections with which many business plans are larded. Limit such discussions to reaching the break-even point and positive cash flow, he advises, and even then don’t give them too much prominence. Sahlman says a plan should be built around: The people who will be launching the business, with emphasis on any past experience and success they've had working together. The opportunity being pursued, meaning a full discussion of the proposed business and how it will operate. The context in which the opportunity is being pursued, showing an understanding of the marketplace and the economic realities that will be confronted. The risks that will be run and the rewards that will be reaped as the opportunity is pursued. In addition to identifying specific questions the plan should address regarding the people and the opportunity, Sahlman offers tips on how to realistically demonstrate risks and rewards. Print and electronic reprints of the article can be purchased at Harvard Business Online. The nominal investment required will be money well spent.     Create a Strategic Plan and Keep It Current     Once a new business is up and running, Mandel says, the business plan "morphs into a strategic plan." Think of it like this: A business plan gets you going; a strategic plan keeps you going. "If the plan is to be useful on an ongoing basis, it must be revised regularly to account for changes in the operating environment," says Jerry Osteryoung, executive director of The Jim Moran Institute for Global Entrepreneurship at Florida State University. He recommends annual updates. Osteryoung, who provides free consulting to entrepreneurs in northwest Florida, says a strategic plan need not be as elaborate as the business plan that preceded it, because it no longer is for public consumption. "Once you're up and running, you don't’t need a narrative, just bullet points,"he says. "You don't need to spend a lot of time on it." You can edit out "rhetoric aimed mainly at outsiders." The executive summary and elaborate discussions of the management team and their qualifications also can be dropped from the strategic plan. And you can reduce operating, marketing, and finance plans to outline form. When Osteryoung helps entrepreneurs create a strategic plan, the first session is devoted to identifying a business's strengths, weaknesses, opportunities, and threats. The comprehensive review,"says Osteryoung, "tells us who they are and holds them up so we see all the warts." The second and final session involves the setting of quantitative and qualitative goals and the formulation of a strategy for achieving them. The outcome of this session is an answer to the question: What gets done when and who does it? Any new opportunities or challenges that come along are then weighed in relation to the strategic plan and in some cases may cause it to be altered. Osteryoung offers the example of a software vendor that has been providing accounting software for the motorcycle industry and sees the potential to sell it to the automobile industry as well. After establishing that there is a definite demand that can be profitably fulfilled, the strategic plan is consulted to determine whether the company is configured to take advantage of the opportunity. If not, the company either can take a pass on the new venture or can revise its strategic plan. Osteryoung recommends that management meet at least monthly to evaluate the business’s performance against the strategic plan. He adds: "A plan without a follow-up loop doesn't serve any useful purpose." A veteran of 25 years in print and Internet journalism, Philipp Harper has been a regular columnist for Microsoft bCentral and contributes free-lance articles to other business and general-interest publications. He lives in south Georgia. Send your comments or questions to us.

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