Chapter 4: The Business Plan
Plan, Execute, Iterate
business plan, execution, iteration, planning, strategy, entrepreneurship
Why Plan?
We’re going to move from risk to talk about business planning and execution.
Because I had a background in accounting, finance, and economics from Tech, and because I had worked into business development in my second role, I developed into this business-planning guy. So wherever I went, I became the business planner. Putting a plan together to start a business — or remake a business — in my view of things takes all these puzzle pieces. All of them you see on the board. There are probably even more than that, but I think these are the big ones. The ones in color — people, market, idea, finance, and exit — are, I think, the really big ones. The others are very important, but the big ones are the colorful ones.
So you think about a plan when you’re going to start a business. A plan is an iterative thing. You’re not going to write it once and never look at it again. A plan is something that you write, you review with people, you’ve gone through your data, you get their ideas, you redraft or update the plan, you start the business, you operate it, you see how things are working, you iterate again. It’s not a static document.
As you work on your business plan to start a business, don’t try to write the be-all and end-all. Get the important points down — people, market, finance, the idea, and exit — and then iterate and get feedback from mentors and people who know the business, and from your customer base once people start buying. Then work on the plan. It’s an ongoing thing.
The boards of directors I worked with tended to meet monthly. We tended to review our plan at least annually and rewrite the plan annually — sometimes more often, depending on how things were going. The iteration is important.
A good plan is a good story, and it’s all about telling a good story. So one of the skills I would encourage you to develop while you’re here is public speaking and presentation skills — putting those plans and those stories together. If you’re going to be an entrepreneur, depending on what your exit plan is, you’re going to have to keep telling the story a lot. You have to tell it to your employees, to your market, and if you’re eventually going to sell it — whether venture capital, private equity, or going public — you’re going to have to keep telling this story and convincing people of it. You’re going to get good at the story.
Plan, Execute, Iterate
I want to come back to the execution piece in a minute, but first let’s talk about exit. A really good story has a really good ending.
One of the biggest mistakes I made in my entrepreneurship career was not being aligned with the CEO on the exit idea — what were we going to do with this thing? We’re going to build it up, and then what? Are we just going to continue to operate it? Are we comfortable running a ten-or-so million dollar business forever? There’s nothing wrong with that — it’s profitable, that’s fine. Are we going to go venture capital, private equity, try to take it public, sell it to a bigger company? What are we going to do with this thing?
My goal going in was to exit at some point. I didn’t really care — venture capital, private equity, selling to a bigger company — but my plan five years out was: we’re going to sell this thing and move on. He and I were never aligned. So when you’re writing the story of the business you’re creating, how does it end?
Quick personal aside: I have a ten-year-old grandson. For his entire life, whenever I have him, he wants a bedtime story — and he wants you to make it up, which is a big ask. Every night I have him he wants a bedtime story, and the most important part of the story is what’s the end. It’s got to have a good twist, especially to engage a ten-year-old. You’ve got to have your exit figured out. It’s okay to maybe change it down the road, but you really have to have a good idea.
A lifestyle business that generates a nice income for you and your family and your employees is all good. You may start something and run it forever. I have a brother-in-law — he would probably be unhappy about me saying this — but he runs a lifestyle business. It’s not a taxing business, not a heavy lift, but it throws off a ton of cash. He didn’t have to do anything but put product out every day and he makes a ton of cash. Great lifestyle business. He’ll eventually maybe sell it or maybe one of his kids will take it over, but he’s never going to change it because he doesn’t have to. Nothing wrong with that.
Or you might want to build it and then sell it. Venture capital and private equity are generally the first steps, then an IPO would be another step, or a bigger company buys it. But have that in mind. Whoever you’re working with, be aligned on this: we’re going to do this for five years, and in five years we’re going to be in position to sell and exit and move on. Have that figured out — that hook, that end of the story. Think about the ten-year-old at bedtime. That end of the story is really important.
Now, getting the plan to operate well — the execute-and-harmonize part — is the trickiest part. As an entrepreneur you’ve got to have some operating skills, or you have to have somebody on your team who is a decent operator. That’s why people are important. The hardest part of any of this, actually, is getting the people right. In any business, the rest of this stuff anyone can do. The hardest part is having a group of people around you who are aligned, working toward the same goals, and focused on the same things. That’s the challenging part of any business, whether you’re doing a startup or operating an organization for the long term.
The idea is important — vet it with your mentors or people who know the space. The money side of things is super important. The market and finance pieces fit very well together, because one of the things you can get right — and have to get right early on — is: what’s your market in terms of who is it and how big is it, and how are you going to price this to the market? Once you have that figured out, you’ve got the revenue picture of the business. Once you have the revenue picture, you can build the cost side. Those two things get overlooked too often. People, market, finance, idea, and exit — I think those are the most important pieces of the puzzle.
Elements of a Successful Business Plan
Any questions? Okay.
Like I said, don’t try to write the longest business plan in the world. There’s no extra credit for long — in fact, you probably get marked down for really long, because people don’t want to read really long. What you want is concise and to the point.
You want to get across who your market is — you’ve studied this keenly, and we’ll talk more about that. How you’re going to price this. How you’re going to manage the business and who’s going to manage it with you. And what are your significant milestones. Start there, and the rest of it you can work on — you can iterate over time.