You’ve got that million dollar idea, thought of the company name, designed the logo, are starting your social media campaign, and now realize you need investment. So what’s the logical next step? To create a business plan to get funding. A business plan should not be a means to an end, but a critical cornerstone to building a company’s foundation.
A business plan, for all intents and purposes, is utilized as an organization’s bible.
It defines the strategic path the Company is headed in (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 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.
In the past few years, I’ve had many rushed entrepreneurs approach me in a panic to create their business plan or to provide them a template business plan that they can fill in the minor details (and in days to deliver). 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 as no one understands the idea better than the owner. A business plan has several elements, and 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, some reasons being 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 detail. Below are two of them:
1. 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?
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, 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 skill set.
- Developing a hiring plan. After you’ve defined who you have and who you need, you’ll want to develop your hiring plan.
Abraham Lincoln said, “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.