If you’ve ever written a short story, a magazine article, or even an essay, Phil Rhodes’ advice on writing a good business plan won’t come as much of a surprise. Good writing is good writing, no matter what the context, form, or purpose.
But to a business, writing a business plan is more than just a chance to dust off Strunk and White’s Elements of Style and create something nice to read. A business can live or die based on the strength of its plan. Rhodes knows this based on his four decades as a business consultant. Now retired, Rhodes volunteers for Princeton SCORE, where he helps small business owners on various topics.
Rhodes will lead a free Princeton SCORE workshop on writing a successful business plan on Thursday, April 28, from 6:30 to 8:30 p.m. at the East Brunswick Public Library. For more information, visit www.princeton.score.org or call 609-393-0505.
A good business plan will serve as a roadmap for future plans, as well as the main way to show potential investors or partners what your company is all about. Rhodes said the planning is done in three stages: First, the “back of the envelope” plan to test the feasibility of a business. Next comes a more detailed plan that serves as a blueprint for designing a business. The third and final draft is a more polished version that can be shown to potential lenders or investors.
Rhodes lists the steps to creating a good business plan:
Seek help and others’ opinions: No matter how good a business person you are, you have blind spots that you may not even be aware of. Soliciting input from other people can help cover those blind spots and gain insights you never would have had otherwise.
No grammatical or spelling errors: Grammatical errors can impede the clarity of your writing and make you look unprofessional. Taking the time to have someone proofread your work is essential. (Another set of eyes is critical because it’s easy for a writer to overlook flaws in his or her own product.)
Make sure it covers all the bases: Although every business is unique, every plan should give all the important aspects of how a company will work, such as the purpose of the company, the products or services it will sell, the market, and how the company will be managed and financed.
A business plan is like a story: “The whole thing should unfold like a story,” Rhodes said. “Each section should flow into the next one. Human beings are really designed to focus on stories, to like stories, and to understand stories.” It should be a coherent story, not a bunch of disconnected text.
It should be highly skimmable: A plan doesn’t have to be short in order to be readable. Descriptive section headings and organization can make it easy for readers to quickly find particular information they are looking for.
It should anticipate questions: What will investors or lenders want to know? If you have talked to investors before, you might have a good idea of the kinds of questions they like to ask of business owners. Try to anticipate these questions and answer them in your plan.
It should be concise and a pleasure to read: Like any piece of writing, the plan should be no longer than it needs to be in order to get the point across.
Don’t get bogged down in details: A business plan should include details, but they shouldn’t get in the way of the story that you are telling with the business plan. Put all details in appendices so that they are there for the curious reader, but don’t obstruct the flow of the narrative.
Rhodes said there are several common mistakes that business owners make when creating business plans. The first is following a cookie-cutter template from a website. “You can’t get a design by filling in blanks,” he said. “Every business has issues that are unique.”
Another is blind optimism. Rhodes recalls one business owner who correctly anticipated the venture would need $1 million in funding to get their venture off the ground. The owner was only able to raise $100,000. Predictably, the business crashed and burned.
“People are constantly going into businesses they don’t understand,” Rhodes said. “They take unnecessary risks.” A good counter-example to this tendency is Phil Knight, the founder of Nike. As a track coach, Knight understood the athletic shoe market. He began selling them out of the trunk of his car at track meets, not taking on unnecessary expenses until he had shown there was a market for his product. Needless to say, Nike became a successful business.
Rhodes grew up in Westchester, New York, where his father was a lawyer who had a math degree. Rhodes studied physics at the University of Michigan and after graduation joined the sales department of IBM. He was a consultant for most of his career, eventually rising to a senior management role at PriceWaterhouse Cooper.
In his career Rhodes has seen hundreds of business plans and has even written a few himself. One good thing about writing a business plan is that if it works, it’s unlikely you will have to do it again. “Hopefully someone shouldn’t have to go into business over and over again,” Rhodes said.