You’ve got that million dollar idea, you’ve thought of the company name and designed the logo. Now, you are starting your social media campaign, and realize you need investment. The logical next step? Create a business plan to get funding.
So many business owners and entrepreneurs see a business plan as a check-the-box must-do thing. But a business plan should not be a means to an end, but a critical cornerstone to building an organization’s foundation.
Why a business plan is more than just a to-do
A business plan, for all intents and purposes, is utilized as an organization’s bible. It defines the strategic path the company is headed (short term and long term), it helps secure funding, and should be utilized as a weapon to strategically manage cash flow. A business plan illustrates how an organization will be structured, and acts as a tool that management can utilize regularly to ensure the business is on course with meeting its objectives, targets, and operational milestones. As organizations evolve and become bigger, the business plan also evolves into new elements in the organization such as an employee handbook, a strategic plan, a sales plan, etc.
Over the past few years, I’ve had many rushed and stressed entrepreneurs approach me in a panic to create their business plan, or to provide them a template business plan where they can fill in the minor details (and deliver in just days). Spoiler alert: A business owner should be at the forefront of developing a business plan, especially as startups have a high rate of failure.
It is imperative that the owners of the company be an active part of the business planning process because no one understands the idea better than the owner. Some of the best business plans I have seen are between 60-100 pages. Writing a business plan is no easy task. A business advisor should be utilized to flush the strategic ideas out and review the plan, while a consultant can be utilized to write the plan after all ideas are flushed out and discussed.
Startups fail for many reasons: delivering products or services no one wants, not having the right team, a lack of a strategic operational, sales, or marketing plan, or simply just running out of cash. Having a thorough business plan could mitigate some of the risk of startup failure.
From my experience as an advisor, there are a few elements in a business plan that most entrepreneurs fail to address with enough details. Here are two of them:
This week, my business partner and I just starting flushing out our ideas for a new company we are creating. We started discussing revenue streams, competitors, strategic alliances – all of which are key elements in a business plan. However, the reason we were able to move so quickly and arrive at all of these fundamental elements is that we had defined our mission statement.
A mission statement is imperative for aligning all internal and external stakeholders in a company. A mission statement should NOT be a summary of the products or services a company provides. A mission statement explains what your business is trying to achieve and drives the direction of the company. A mission statement will inspire the business owners, employees and potential investors.
Most importantly, a mission statement must be realistic, believable and achievable. A mission statement is like the guiding northern light, it will direct business decisions during difficult times.
Does your company have a mission statement? If not, check out our blog post on 4 tips to developing an effective mission statement.
2.Team and internal governance
Starting, scaling and running a successful operation (cannabis or non-cannabis) requires the manpower, energy and leadership of a skilled and diverse team. Through my tenure, I have learned that one thing that is undeniable about successful companies is the team.
Many startups fail because they don’t have the right team, or no team at all. Some startups might have the right team initially, but don’t define a corporate governance structure, nor set defined roles and responsibilities for the team. This sometimes leads to chaos, missed deadlines and a lack of vigor. Having a toxic environment or team will not create a sustainable company.
There are several components to building out the team or organizational structure of the business plan. These includes:
- Defining your current team and advisors. This includes listing out all key members of the team and including their functional area and key skill set.
- Performing your management gap analysis. Once the team and advisory board has been finalized, it is imperative that a management gap analysis be performed to understand where the organization is lacking in its skillset.
- Developing a hiring plan. After you’ve defined who you have and who you need, it’s time to develop your hiring plan.
My favorite quote of 2017 is by the 16th president of the United States – Abraham Lincoln: “Give me six hours to chop down a tree and I will spend the first four sharpening the axe.” A business plan resonates strong with President Lincoln’s quote: plan, strategize and then execute. The first step to launching and sustaining any business is to determine the plan of attack from all angles.
Source: Cannabis Business Executive