Business commentators are divided on the ability to effectively plan in the new economy. Some opine that the pace of change is so rapid that it is impossible to plan for the future. Successful companies during this competitive era are preparing clear, flexible business plans that develop their vision of their intended destination. Planning is necessary to develop your vision, but it needs to be flexible. As a result, I am advocating a variation of the traditional business plan that I call the “e-plan.”
The e-plan helps you capture your vision while providing a flexible platform for responding to the inevitable changes and shifts in the economy. The new economy is no place for the 100-page business plan that flushes out every conceivable detail. This exercise is not about earning a gold star on your business plan from a difficult teacher or some picky banker. Rather, it is about capturing your vision in a flexible format that facilitates the execution of your business model — that is the essence of the e-plan.
Enter The E-Plan
Extensive business plan were often aimed at traditional lenders who wanted to be sure that no stone was left unturned. Chances are that in today’s economy, many of the old stones will disappear and be replaced by new ones by the time a conventional business plan is finished.
I was never a fan of the business plan treatise. Supplementary information, such as product circulars and marketing materials, can be included in an appendix, but the narrative part of the plan should be a maximum of 20 pages. The object is not to unearth every conceivable detail but to think through your business model. Few plans are read in their entirety by potential investors, and the new economy requires an even more concise way of formulating a business model.
This new format — the e-plan — is designed to help all the users of the business plan, which includes the entrepreneur as well as potential investors and employees. It is streamlined both for speed of digestion and ease of use.
The e-plan consists of an executive summary and approximately a dozen PowerPoint slides. Each slide addresses an important component of your business model. I consider the e-plan to be more of a compass than a map. It is designed to guide you in the right direction but is flexible enough to accommodate shifts and changes in the marketplace. As these changes occur, the e-plan can be used to produce a corresponding shift in strategy.
Some of the advantages of the e-plan format are its overview, flexibility, and presentation.
Overview. The executive summary and the slide format provide a quick overview of all important components of your business model and provide a comprehensive understanding of the model. The e- plan serves as a ready reference for the big picture.
Flexibility. The slide format provides you with the ability to change directions quickly. As changes occur in the marketplace, your big picture can be changed accordingly.
Presentation. The slide format also facilitates the presentation of your business to potential investors and employees. Chances are that more people will be hearing your presentation as opposed to reading your plan.
Elements of The E-Plan
Executive Summary
In the following text, I provide a one-paragraph summary of each of the slides in the e-plan. Just because a plan is concise, however, doesn’t mean developing it is easy. I devote an entire chapter of my book, entrepreneurship.com to each of these slides: what information investors are looking for, how to gather and condense this information, and insights gleaned from the successes and failures of other start-ups. This article is intended as an introduction to the e-plan; my book will guide you through process of preparing one.
This one- or two-page document is the single most important part of your plan. In a nutshell, it summarizes your particular market opportunity and the solution to a problem that your business offers. Busy investors often don’t have the time to read the complete business plan, particularly when they are qualifying potential businesses. They usually rely on the executive summary to provide a snapshot of your business model. One way to look at the summary is to think of it as the story of your business. What need does your business fulfill? How can you best summarize your business in 60 seconds or less? What is your vision?
Slide 1: Name of Company
Suffice it to say that the name of any Internet business is extremely important. As you might have already found out, selecting a domain name these days is no simple matter. Choice domain names are being bought and sold for heavy premiums. With the domain name so important, it is obviously something to which you need to give considerable thought. Start immediately searching for one if you don’t have a name already.
Slide 2: Mission Statement
The mission statement is an abbreviated form of the executive summary. In one or two sentences, what does your company stand for?
Slide 3: Management Team
The management team is of particular concern to investors. Note that I use the word team. Writer John Dunne proclaimed that “no man is an island.” In addition, no entrepreneur is an island, either. The entrepreneurs that can attract the right people are the ones that ultimately succeed. The management team is the backbone of the company. A founder that cannot attract a quality management team will have trouble attracting good employees as well as customers.
Slide 4: Market
This slide will analyze the size of the potential market as well as its growth rate. One of the primary advantages of the Internet is that the target markets are so huge.
Slide 5: Industry
Industry concerns a discussion of the structure of the particular industry that you are targeting. Who are the buyers and the sellers? Who are the suppliers? What is the market chain of the industry? How would you diagram it? Is the industry in a growth mode?
Slide 6: Pain — The Market Opportunity
This slide considers the pain or the opportunity in the market. Where is that part of the market broken or inefficient? How does it create an opportunity for you? Where is a problem that your business will solve? The best business opportunities are based on the most compelling needs of the marketplace. This often applies to a highly fragmented industry or an industry with an inefficient market chain.
Slide 7: Solution
What is your solution to the problem or pain in the marketplace? What is your answer to the disintermediation or the need in the marketplace? How does your product or service benefit the marketplace? Why is your solution unique from others? Do you have a competitive advantage that can be sustained? Is your solution scalable, allowing it to be implemented on a large scale?
Slide 8: Marketing Plan
This slide represents an overview of your marketing plan. How are you going to attract customers? Are there viral marketing possibilities you can exploit? Viral marketing is a strategy in which customers do much of the marketing for you. What unique marketing advantages do you have? What important alliances can you develop?
Slide 9: Financial Projections
This portion of the plan involves the projection of revenues and expenses from the business. Although many investors discount projections, they can play an important role in examining the financial portion of the business model. The most useful projections are developed around a meaningful unit of measure, or metric. For example, revenues and expenses could be analyzed and expressed on a per customer basis. What is your acquisition cost per customer? What is his or her worth in terms of lifetime revenue? How many customers do you need to break even? Your projections should detail your use of start-up funds, which include capital expenses and working capital needs until the business reaches breakeven.
Slide 10: Valuation Analysis
This final slide can be thought of as a segue between where your presentation ends and negotiation begins. Build the case for the valuation of your company based on your business model. Choose the most relevant metrics to compare your business with one traded publicly. This slide is very useful in talking with potential investors and employees.
Uses of The E-Plan
The main audience for your e-plan is you. First and foremost, the e-plan is a way of quickly capturing your vision and putting it in a format for execution. The plan has to make sense to you and guide you in propelling your vision into reality.
The next audience for your business plan is potential investors. Investors today simply don’t have the time to wade through long plans. A short, direct format serves the purpose better. Moses Joseph of Anila Corporation relayed that knowledge of the market is much more important than a written business plan. He mentioned that he can tell whether a person really knows the market within five minutes of talking to him or her. In Joseph’s opinion, the value is not so much the written plan but rather the discipline of the planning process itself. This process forces you to fully examine the particular market opportunity and confront certain critical issues associated with your venture. It is very important for entrepreneurs to completely and fully understand their markets.
The next audience for your business plan is your potential employees, suppliers, and affiliates. For this use, a good business plan can show them that your business is for real and that you have given it considerable thought.
Article Copyright 2001 by Tim Burns, author of Entrepreneurship.com. All Rights Reserved.
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