About once a month, I get an email or phone call from a colleague that is transitioning from their corporate role into entrepreneurship.  I generally give the advice along the lines of developing original content to be used for blogs, their website and marketing materials.  I also talk about identifying and maintaining expertise in an industry of their choosing.  I encourage ongoing networking and the like.

Most nod their head and agree by taking notes for their future development.  They all get it at this point.  Then, I tell them the single most important item that they should include in the development of their company is writing a business plan.  Boom!  The deer in the highlights.  Most will nervously state “oh yeah, a business plan” but I can tell they do not have a clue what’s included, let along where to start.

When I launched Gray Cat more than 20 years ago, the first item I completed was a 23-page business plan that outlined the focus of my company; the financial model for the next five years; and the tactics to achieving this model.  Still today, I am amazed how on target my plan was and how it provided the foundation for how my business has evolved over the last two decades.  In a nutshell, if YOU don’t know where you are heading, how to you expect anyone else to know?

Here is a guiding path for entrepreneurs and business operators of items to include in your business plan:

Overview & Principal History:  This should be a section that not only outlines the span and scope of your company, but how your background justifies the credibility of what you are trying to build.  A doctor probably shouldn’t build trains.  A five-year plan should be included that outlines all possible revenue sources combined with all the operating and capital expenses for the company.  Combined, these will produce a profitability projection, or EBITDA (Earnings Before Interest Taxes Depreciation and Amortization) of the company. 

Business Description:  Great detail should be put into this section as it is the meat-and-potatoes portion of the plan.  Included should be the description or portfolio of all services/products that your company will be offering.  Next, how will you make money?  This is the part most entrepreneurs miss – they determine what they want to offer but have no real sense of the financial implications of their services and/or products.  Will they make any money?  Have they thought through how their company churns a profit? 

My company, Gray Cat Enterprises, was built on four pillars:  1) Strategic Planning; 2) Senior Project Management; 3) Interim Executive Management; and 4) Public Speaking/Presentations.  Each section had its own financial plan regarding estimated revenues against expenses.  These amounts were vetted against industry standards and guidelines – i.e., I would like to charge $100K a speech, but that is highly unlikely that I will land a single presentation! – so they were grounded.

Stacking Up Against the Competition:  Conducting a SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) is an excellent way to gauge your position in the marketplace.  Too many “me too” companies are created without consideration to their place in the marketplace and they lack differentiation – ultimately folding.  In addition, creating a “how to go to market” strategy is essential to proactively identify and go after revenues.  It is one thing to have a great service or product, it is something completely different to know how to promote to a target audience.  Lastly and related to expenses, make sure you outline any capital needs for the start-up – i.e. computers, office furniture, etc.  Minimizing these capital expenses to the “need to have” versus “want to have” helps give you a fighting chance to make it.

Financial Projections:  I mentioned it early on, but it bears repeating.  Know your numbers!  Take the time to create a financial proforma that outlines all the revenue and expenses for your company.  I usually recommend five (5) years but even if you did it for three (3) it would be better than nothing.  Said another way, if you don’t know where your revenue is supposed to come from, how can you create a marketing strategy to attract it? 

Secondly, I would highly recommend that you take the time to document your assumptions on how you came up with your projections.  This will be advantageous a year from now to see how accurate you were on your projections.  I view an overall business plan as a living, breathing document that can be adjusted as new data is known.  Your initial assumptions will provide a baseline.

Your business plan can act as a roadmap to success.   I am a big believer in “war gaming” where I try to look ahead and create solutions to issues before they occur.  With your business plan as your foundational strategy, the chances of your success will greatly improve.

Want more ideas?  For more information on Gray Cat Learning Series, visit: https://www.graycatenterprises.com/gray-cat-learning-series