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 Nine Ways Small Business Plans Should be Different

business plan

How about something a little better?

In 1994, I wish I’d known what I know now; small business plans should be different than big business plans.  I could have saved myself time as I wrote the plan for my consulting business.  I would have developed my plan differently.  I should have used my plan differently to help me operate and grow my business.

Twenty years on, here’s what I learned about writing small business business plans.  The business plan strategy for small businesses should be different.

Nine Ways to Create and Use a Small Business Plan

1.  Big businesses do a lot of research; small businesses do a lot of noticing.  Unlike big business projects, small business strategy is often based on one or two key insights.  Those key insights are like needles in haystacks.  They lie unseen until someone’s eye catches the glint of metal amidst all the straw.  That’s the polar opposite of the Big Data number crunching.  I started my consulting business with three key insights:

  • Most consulting businesses scale down very easily; for skilled founders, the barriers to entry were low.  Further, there were few economies of scale.
  • In 1994 it was becoming possible to work from home and completely equip an office with good connectivity and relatively inexpensive computing power.
  • A consultant can be a one person company almost as easily as a sole proprietorship, but bill at substantially higher rates.

If I’d buried my head in business statistics I would never have noticed those insights.

2. Big Businesses write long plans; small businesses should write short plans and long checklists.  Articles about writing business plans often say that business plans end up being 20-30 pages long.  Meanwhile, venture capitalists say they never read business plans that are more than 15 pages long and ten pages is better.  How long should we make our small business business plan?  We at Goodbusiness suggest that small businesses don’t have as much to talk about, so why create more business plan than necessary?  Try for ten pages.  We have a better way spend your business planning time.

Make an appendix to your plan, call it “Checklists” or “To Do”, and make that appendix the longest part of the plan.  I wish I’d done that.  There are lots of things to do to start any business, and there’s just the founder or a tiny founding team to do it.  Things get done, or tried/changed/redone, task by task.  Individually, those tasks aren’t important enough to be included in the body of the business plan; that’s were we create our business strategy.  But execution, task by task, is absolutely key to our small business success.  Let’s give ourselves a big head start.

3. Big businesses over-focus; small businesses get distracted.  There’s a business consultant aphorism that’s often quoted because it often explains why big businesses wither and die.  “They thought they were in the railroad business when they were really in the transportation business.  (In the 1890’s, railroads were the most powerful and profitable sector of American Business.  Do you know any railroad business that operates trucks, ships and airplanes?)  The modern equivalent is Kodak, who thought they were in the film business when they were really in the image business.  That’s the result of being so focused on a business line that you don’t notice that that market has changed.

But small businesses rarely over-focus.  Rather, we’re all too easily distracted.  We’re easily seduced by the latest success story on this month’s magazine cover.  We’re also easily distracted because there’s so much to do.

When I wrote my business plan for my consulting company, I made the mistake of suggesting we’d enter three consulting markets.  Fortunately, we never worked hard on my second and third target markets.  I avoided my mistake; but don’t write a mistake into your small business plan.  Develop one product, one service, to exploit one market niche.  Just make sure that niche is big enough to be worth it.

4.  Mission statements don’t help.  Mission statements, so beloved of business pundits a decade ago, don’t keep businesses focused.  In fact they don’t do much of anything except sound noble; that’s why few people write them now.  Skip the mission statement.

5.  Small businesses write short management sections.  Big Businesses almost always have big organizational structures.  Small businesses don’t have the people, resources, or multiple product/service lines to manage.  So why waste time and space writing about management we don’t have and don’t do?

6.  Small businesses write different financing sections.  There are two reasons why.  First,  big businesses need to fund big projects, and they have many financing options.  Small businesses don’t have many financing options; perhaps just two or three.    Second, small businesses bootstrap, substituting ingenuity and elbow grease for money.  Here’s where you want to spend some time thinking and writing.  How are you going avoid spending money?  Here’s an even more interesting perspective; you may need investment capital, but investors love to hear about businesses who spend wisely.  Descriptions of our bootstrapping efforts go a long way and impress multiple business plan audiences.

7.  Big businesses write about market penetration.  Small businesses should write about capacity growth.  The big business plan almost always has an extended discussion of the size of the market and the expected market penetration.  Why?  Because it takes a lot of revenue and substantial market share to justify a big business investment.  Small business plans need to say something about their projected sales, but most business plan readers understand the weakness of those projections.  Instead, small business strategy should concentrate on explaining how the business will ramp up to meet the demand.  Artisanal businesses need a laser-like focus on this issue because so many of them struggle to take full advantage of their hard-earned success.  Finally, some businesses simply don’t scale very well; specialty consulting is one example, and I learned the hard way.  I should have paid careful attention to Peter Drucker’s observation that boutique consultancies rarely have more than 10 to 12 employees.

8.  Big businesses write many business plans;  small businesses write one plan many times.  Big businesses often write a separate business plan (or business case analysis) for every major project.  Small businesses write one plan.  Then it’s time to execute the business plan (remember that checklist appendix?).  Usually some parts of the plan work and some don’t. Those need to be scrapped or revised; then it’s try again with a revised checklist.  That happens a lot.  Our small business plan advice is to save time writing and use that time to change the plan through learning by doing.

9.  Big Businesses pay attention to their plans; small businesses often don’t, but should.  Large (successful) companies know that projects need management, and the plan is the blueprint for the project.  Big business executives consult their plans often measure their progress against the plan.  Too many small businesses make the plan, start the company, perhaps get some financing… and then ignore the plan for weeks or months.   Is it any wonder that small businesses get distracted and lose their way?  We recommend that small businesses reread their plan monthly for the first six to twelve months, and then quarterly after that.  I was surprised to find how often my small business plan reminded me about issues I’d already thought through.

However, here’s our best small business plan advice.  Small business people should never fall in love with their plans.  The business is the focus, not the plan.  Here’s one way to keep the focus where it belongs.  We should avoid rewriting our small business plan.  Instead, to minimize time and effort, we should turn on our word processing app’s “track changes”  option and mark up our plan.  That keeps the changes short, crisp and meaningful. And we can get back to the changing our small business for the better.

Do We Need a Business Plan or a Business Model?

You may have heard about business models.  We’re written about them too, in Business Plan?  Business Model?  Or Both? There are good reasons to use a business model instead of a business plan.  Choose the right one… business plan or business model… and you’ll save lots of time.

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