As an investor, I look at scores of business plans from eager entrepreneurs seeking funding for their emerging enterprises. Most plans are not well-written and I find only a few that are excellent. I invite the founders with poorly conceived plans to improve their efforts and return when they are ready to present again.
Those high achievers who have thoughtfully prepared outstanding plans, with reliable assumptions, often receive the funding they need for company growth.
I asked Thomas Harrison, chairman of Diversified Agency Services, an Omnicom division, to share his views on the key elements of a great business plan. He has seen numerous presentations from companies Omnicom has purchased. He, too, has seen a combination of terrific and terrible plans.
This is what he had to say:
"I think some people get confused between a business plan and a marketing plan. A business plan is a genetic, molecular definition of my business. It crystallizes why I'm in business; it shouts what I do for the world, for consumers, for my customers. It dissects my business DNA and how it is unique, and it clarifies why my customers should do business with me."
Tom recommends the following 10 points as part of a well-conceived business plan:
- Describe why your company is relevant. What need is being addressed?
- Explain the overall state of the market and any important trends.
- Explain why customers will buy your product or service.
- Describe, in detail, who your customers are.
- Explain who your current competitors are and their advantages.
- Explain which competitors you will displace.
- Describe your product offerings, how they compete with other brands and why they are needed.
- Provide an overview of the various resources, including the people that will be needed to deliver what the customer expects.
- Describe corporate priorities and the processes to achieve them.
- Include three thorough financial plans -- one conservative, one moderate and one optimistic -- each with realistic and achievable sales revenues, margins, expenses and profits on a monthly, quarterly and annual basis.
Mr. Harrison knows what he is talking about when it comes to superior planning. He oversees 170 global companies that generate billions of dollars in annual sales.
When I see a fantastic business plan I note the following:
- The plan is viewed by management as a living document. It is concise and accurate. It is considered by everyone daily. It is a constant guide to high performance and corporate success.
- The leaders have precisely defined who their customers are, by the numbers, with specific, measurable demographics. They know everything about their buyers, including what they watch, read and hear. They know these targets better than their own family.
- They know what customers need, what they want to buy, when and where. They know what people will pay for their products or services. They know why people need to buy, the emotional components as well as the utilitarian purposes.
- They have heard what's on the minds and in the hearts of potential and existing clients. They are able to forecast what people might purchase in the future, even before the customers know they will need it.
- These leaders know the industry like the back of their hand. They know everything about the competition and what they are doing. They have excellent relationships with trade association members and channel partners.
- They understand industry trends and are forward thinking.
- They have conceived, developed and manufactured exactly what the customer needs. They have built products with features and benefits that differentiate themselves from competing offerings.
- They have set specific priorities with key objectives they will achieve via the correct resources.
- They have developed sound, repeatable and time-tested processes that yield high efficiency and productivity.
- They have the right people on the bus, with measurable tasks and rewards. Everyone has participated in developing their individual plans that are aligned to achieve their goals and the overall objectives of the organization.
- Their financial plan is defensible and accurate. They have backup plans in the event of unseen consequences.
- Leaders meet regularly to evaluate their progress and the progress of each organization within the business. They report to all employees, often.
- Management has developed a powerful culture based on teamwork, innovation, client and employee satisfaction, integrity, results and hard work.
Perhaps these insights can be of value as you consider your own business plan. If you are developing a plan for your first business, engage the help of people who meet the criteria I have described. It will be well worth the additional effort.
This article originally appeared in Alan Hall's weekly Forbes column.