"This is where so much business communication goes awry. Mission statements, synergies, strategies, visions -- they are often ambiguous to the point of being meaningless. Naturally sticky ideas are full of concrete images ... because our brains are trained to remember concrete data. In proverbs, abstract truths are often encoded in concrete language. "A bird in the hand is worth two in the bush." Speaking concretely is the only way to ensure that our idea will mean the same thing to everyone in our audience."
Adapted from Made to Stick, by Chip and Dan Heath
One of the principles of the plan-as-you-go business plan is that form follows function. Your plan isn't your plan document. It isn't your elevator speech, or your summary memo. Those are outputs. Your plan is what you're going to do with your business. It's what's going to happen, set out concretely so you can track what actually happens and compare it to what you thought would happen.
Think about how the plot of a well-known story generates different versions -- the novel, the movie, the television mini-series, the comic book version, the performance by the high school drama department. All of them have the same story at their core.
Your business plan is like that too. What people traditionally think of as the plan, the document, is just an output. Other common outputs include the pitch and the summary.
This matters because people get very confused. "Don't do a business plan," some experts say. "Just do a presentation." They justify that with the idea that few investors read business plans. But wait, the presentation has to describe what you're going to do, so you'd better have a plan. And maybe, just maybe, you don't create the plan document, just the presentation ... but if so, you better know what the plan is.
In this section I'd like to look at some of the standard outputs: the business plan document, the summary (or summary memo), the elevator speech, and the pitch presentation. For all of these, you start with a plan and then create the output as needed.
And these are hardly the only business plan outputs these days. Others include websites, blogs, and more recently Twitter had a business plan contest limited to 140 characters. The plan is whatever works for you, but only as long as it works for you.
I hope at this point I've made it clear that you don't necessarily need to have a standard, traditional, formal business plan. Until you really need to show a plan to some outsider who needs, wants, or expects the full formal plan, you can just use your plan-as-you-go plan to reap the benefits and avoid the hassle of the document.
However, there are business reasons that force you to produce the traditional plan document. We call these business plan events. The more common business plan events are related to seeking loans or investments. Ironically, the bank loan manager, angel investor, or venture capitalist may not read your plan, but most of them want to know you have one, which means they want it to appear in their inbox or on their desk.
Approaching a business plan event without being ready to produce a traditional business plan is something like approaching a publisher without having an outline and sample chapter. You'll look dumb if you don't have it. So have it.
The good news is that you already have the core of your plan ready, so you're a long way down the path from start to done. You have only to dress it up to make it a formal business plan. You know what you want to do, and why, so from here you spin it out from your core into the proper words. You already have the numbers, right? And you know your strategy, too, as well as your dates, and deadlines, responsibility assignments, and metrics.
So the bad news is that depending on how much you have, and why you need to show that plan, you may of course have to go through the exercise of supporting market information with something beyond just hunches and experience. I've said earlier that your plan doesn't necessarily include supporting information like market research and industry analysis, but when you're going to dress it up formally and send it out to represent you, it probably does need to include more background information.
At this point we've done a standard outline twice already, once in About This Book with explanations of where to look for what part, and again in Supporting Information, with notes about the explanations and descriptions involved. I'd like to do it here for a third time, this time with notes about the tables and charts to include as well. Some of this might be redundant, but, oh well, I hope it's convenient.
||Tables and Charts
|1.0 Executive Summary1.1 Objectives1.2 Mission1.3 Keys to Success
||I like a highlights chart here, a bar chart showing sales, gross margin, and net profit, by year, for the next three years. No tables.
- 2.0 Company Summary
- 2.1 Company Ownership
- 2.2 Start-up Plan (for new companies) or Company History (for ongoing companies)
- 2.3 Company Locations and Facilities
|Include either the startup costs or past performance data as a table (not both, just one of those two). You know which you need.A chart showing highlights of either one, as a bar chart, is a good idea.Particularly for retail, photos of locations might also be good.
- 3.0 Products and Services
- 3.1 Product and Service Description
- 3.2 Competitive Comparison
- 3.3 Sales Literature
- 3.4 Sourcing
- 3.5 Technology
- 3.6 Future Products and Services
|No standard tables or charts here. Use illustrations or product drawings to show products. Menus are nice for restaurants. Product lists or catalogs or website illustrations could help.
- 4.0 Market Analysis Summary
- 4.1 Market Segmentation
4.2 Target Market Segment Strategy
- 4.2.1 Market Needs
- 4.2.2 Market Trends
- 4.2.3 Market Growth
4.3 Industry Analysis
- 4.3.1 Industry Participants
- 4.3.2 Distribution Patterns
- 4.3.3 Competition and Buying Patterns
- 4.3.4 Main Competitors
|Ideally you include a market forecast table, along with a pie chart showing the market segments by size as they are today, and a bar chart showing projected growth of the segments over five years.
- 5.0 Strategy and Implementation Summary
- 5.1 Strategy Pyramids
- 5.2 Value Proposition
- 5.3 Competitive Edge
5.4 Marketing Strategy
- 5.4.1 Positioning Statements
- 5.4.2 Pricing Strategy
- 5.4.3 Promotion Strategy
- 5.4.4 Distribution Patterns
- 5.4.5 Marketing Programs
5.5 Sales Strategy
- 5.5.1 Sales Forecast
- 5.5.2 Sales Programs
- 5.6 Strategic Alliances
- 5.7 Milestones
|Include your sales forecast, and bar charts illustrating the next year's sales, by row, by months; and another illustrating projected sales for the length of the plan, also by row, and by year.Your rows are your sales items, from your sales forecast. Depending on your business, that might be actual items sold, or types of items, or types of services. The details have to fit your business.Also include the milestones table, with a Gantt chart if possible, illustrating the milestones flow for the next year.
- 6.0 Management Summary
- 6.1 Organizational Structure
- 6.2 Management Team
- 6.3 Management Team Gaps
- 6.4 Personnel Plan
|Include the personnel table, with projected compensation.
- 7.0 Financial Plan
- 7.1 Important Assumptions
- 7.2 Key Financial Indicators
- 7.3 Break-even Analysis
- 7.4 Projected Profit and Loss
- 7.5 Projected Cash Flow
- 7.6 Projected Balance Sheet
- 7.7 Business Ratios
- 7.8 Long-term Plan
|This section is full of tables and charts. The assumptions are a table, and so are the Profit and Loss, Cash Flow, Balance Sheet, and Ratios. Some plans will include a table of projected five- or ten-year plans in summarized fashion (sales, gross margin, net profit, assets, liabilities, and capital).Illustrate these tables as much as possible with business charts: Bar charts showing gross margin and profit by month and year, and bar charts showing cash flow by month for the next year.
As a general rule, I recommend including just annual projections in the tables embedded in the text of a plan, along with a heavy dose of business charts. Leave the monthly tables for the appendices.
Start with stories. In your business plan, your presentation, and even your elevator pitch, always start with a story about who needs what you're selling. Needs and wants are the biggest thing in business, so make that come alive.
Ralph promised his wife Mabel that he'd get new suits before his London trip, but Mabel normally goes with him to the stores and she's been busy with their daughter and new grandson, and Ralph hates shopping. His solution, for this and his long-term need for a steady supply of good-looking clothes befitting his position as president and founder, is The Trunk Club. He doesn't have to shop, his clothes will fit, he'll be able to just call the club and ask for what he needs, whether it's business casual, office suits, or formal, or even golf and hiking. He'll be in style and matched and he won't have to worry about it. And he won't have to go into a store either.
I just made that story up to illustrate a point. That one paragraph does a decent job, in my opinion, at setting up the market need, the target market, and the business offering. This is one of the more interesting new businesses I've seen lately. The plan, the presentation and the elevator pitch could begin with this story.
Linda's been dreaming about and thinking about the business she wants to start. Sometimes she can't sleep at night for thinking about it. Will people want what I'm selling, she asks herself? How many? How much will they pay? What's the right equipment to start? Can I afford it? What will I need to spend to get going, and what will I need to spend on people, rent, and so on as I start? How much will it cost me to build what I'm delivering? Can I make an offering that will be attractive to outside investors? Finally Linda gets Business Plan Pro and starts working, building the plan. She takes it a topic at a time, a step at a time; she jumps around the different projections and concepts. Now when she wakes up in the middle of the night thinking about it, she has a plan underway, somewhere to put those thoughts down. Now she has a much better idea of what she needs, how long it might take, what the key points are.
Leslie and Terry both work, and they also both care very much about creating the right home life for their two children, three and one years old. When they shop for groceries they always go to the more health-oriented grocery store. They buy organic, they cook organic, but they don't always have the time to cook. They hate giving their kids the foods they can get delivered, and they hate giving their kids the meals they can pick up. Then they discover a new business that prepares healthy family meals and sells a subscription plan. Terry stops by several days a week to pick up the family dinner on the way home from work. What business is this story for? You tell me; I'm just thinking here about a problem that needs solving. It's about telling the story. That makes a business plan come alive.
One final example, this one a true story: Recently, I spent most of Thursday and Friday one week at the University of Notre Dame with seven other people reviewing more than 60 executive summaries submitted to the two Notre Dame venture competitions – the McCloskey Business Plan Competition. As part of this we reviewed two otherwise equal executive summaries. One starts with the founder's story of how he had this problem nobody could solve. That one scored significantly higher than the other one, which was relatively similar on all other noticeable points but was missing a story.
This story idea isn't new. For more on how to do it, try reading Made to Stick by Chip and Dan Heath or All Marketers are Liars by Seth Godin. What's new here is that I've experienced another example of how much difference this tactic can make. Turn your core marketing strategy into a story, and then tell that story first.
Adapted with permission from Planning Startups Stories blog
Let's take a couple of real-world cases. First, the executive summary for a formal business plan, which will be used in a venture competition or as a tool for seeking outside investment. Second, the executive summary for a bank, as part of a loan document. Third, the executive summary for internal use, for employees, or managing a plan. Each of these is a different animal.
The Classic: Seeking Investment
This summary, whether you like it or not, performs a sales function. You are selling your concept, your startup, or your growing company to an outsider who is interested in becoming an investor. So put yourself in the investor's place and emphasize the elements that will make her money.
What's strongest about your plan, compared to others? Make that a highlight. You might even lead with it. For example, if you've got a venture already backed by major brand-name backers, say so early in the summary. If you've got a founders team that includes several known entrepreneurs with good track records, then get that up front. If you have a good business track record, like impressive early sales or landmark deals with major channels or corporations or governments, put that first. If you have an amazing new invention or break-through technology, lead with that. Use good judgement. You're an editor, at this point, looking at things through the audience's eyes.
So the order depends on the specifics of your company, but, regardless of order, here are some elements you should definitely include:
- The heart of the plan. That includes the essential reason for buying, the target market, and key elements that match identifiable core competencies and market opportunities.
- If you have a new product or new technology, sell it to the investors. Sell it by showing there are already customers and commitments, if you can. If you don't have that, and you have a patent, then say so, but don't think you don't have to defend the patent. Be prepared for objections and don't make the summary imply that a patent alone is enough. If you have working prototypes, say so.
- Description of the management team. You can't get away with saying nothing about this. If you have to depend on board members or advisors, so be it; investors are always looking for the team. The better the track record, the lower the risk. If your team has no experience, say very little.
- Some key numbers. Usually this includes a sales forecast. In some rare cases, some Web companies can get away with forecasting traffic; in those cases, however, they'd better explain a business model. Sales are almost always essential, and profits are good too, if you have a realistic projection. Include just a few numbers as bait in the summary, don't go too deep.
- The offering to investors. What do you want from investors, and what are you prepared to give in return. You have to see the deal from the investors' point of view. Don't tell them just how great your company will be, tell them how they make money. They want to know how much money you need now and how much equity you are prepared to give.
- About the business model: if you have a traditional business, the business model is obvious. You have to explain it only if it's not obvious. Channels of distribution can make a big difference too; if your business depends on physical distribution, you should show that you know the channel and that your projections are realistic. Your sales should assume channel margins too.
The Summary for Lenders
Read through my recommended points for the investment or venture competition-oriented summary, and think about the revisions you'll want for a summary for a bank. Here are some highlights you want to hit:
- The heart of the plan. Just about the same as for investors. People want to know what you're doing.
- Financial history. How long have you been in business? What legal formation or legal entity is involved? Who owns this company, and what kind of financial history do they have?
- A balance sheet. Banks can't lend you money for ideas; they need to secure the money with assets. You have to have more assets than liabilities.
- Payment history. Your company has to live with the debt and payment record it has, and the bank has to check that. Give a head start.
- Description of the management team. You can't get away with saying nothing about this. If you have to depend on board members or advisors, so be it; investors are always looking for the team. The better the track record, the lower the risk. If your team has no experience, say very little.
- Some key numbers. Usually this includes a sales forecast. In some rare cases, some Web companies can get away with forecasting traffic; in those cases, however, they'd better explain a business model. Sales are almost always essential, and profits are good too, if you have a realistic projection. Include just a few numbers to make your reader interested in the summary; don't go too deep.
- For bank purposes, expect to submit a complete financial projection including profit and loss, balance sheet, and cash flow, both for recent past and projected into the future.
What Else Should an Executive Summary Include?
For a standard summary you should generally include:
- business name
- business location
- what product or service you sell
- purpose of the plan
Another paragraph should highlight important points, such as projected sales and profits, unit sales, profitability and keys to success. Include the news you don’t want anyone to miss. This is a good place to put a highlights chart, a bar chart that shows sales, gross margin, and profits before interest and taxes for the next three years. You should also cite and explain those numbers in the text.
How long should an executive summary be?
The shorter the better. If you can say it in a single page, then wow, that's really impressive. Generally two pages is better than five, and five is better than 10, but ten pages is probably too much.
Stay sensitive to the exact purpose and audience. These days you run into situations in which people use the phrase "executive summary" to mean "business plan, but keep it short." Always ask if you can.
Particularly in venture competitions, find out what the general standard is and how the summary will be used. I've seen competitions (and been among the judges as well) in which the best summaries were penalized for being short. Longer summaries seemed to do better because they included more information and the judges were impressed. The short ones didn't get a chance to make all the points they wanted.
Realize that some people say summary or summary memo when what they want is a one-page letter or email. As I said above, always ask if you can.
If you check around, you'll see that experts differ on how long an executive summary or summary memo should be. Some insist that it takes just a page or two, others recommend a more detailed summary, taking as much as ten pages, covering enough information to substitute for the plan itself. Although business plans of 50 pages used to be common, investors and lenders these days expect a concise, focused plan.
For a bit of venture capital history, the pitch presentation became fashionable in the late 1990s during the dotcom boom, when investors were frequently buying into businesses that had website traffic and no money, and no business model they could use to get money.
The pitch presentation is a 20-minute (or so) slide presentation, usually done live but with either PowerPoint or Keynote slides in the background, that tells investors about a new business.
The best writing anywhere on this is in Guy Kawasaki's "Art of the Pitch" chapter in his book The Art of the Start.
And I'm happy to say that Kawasaki has posted much of the same material on his blog, in the post named The 10/20/30 rule for PowerPoint presentations. He says on that post:
It’s quite simple: a PowerPoint presentation should have ten slides, last no more than twenty minutes, and contain no font smaller than thirty points. While I’m in the venture capital business, this rule is applicable for any presentation to reach agreement: for example, raising capital, making a sale, forming a partnership, etc.
Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting -- and venture capitalists are very normal. (The only difference between you and a venture capitalist is that he is getting paid to gamble with someone else’s money.) If you must use more than ten slides to explain your business, you probably don’t have a business. The ten topics that a venture capitalist cares about are:
- Your solution
- Business model
- Underlying magic/technology
- Marketing and sales
- Projections and milestones
- Status and timeline
- Summary and call to action
Of course that's an excellent general guideline, but you'll customize and tailor it to fit your exact needs.
For example, you don't need a slide on the business model unless your model is unusual. If you're buying things and reselling them with a profit margin, or you're providing a service and making a profit, or manufacturing something that you can sell for a profit, then ignore the business model. If it isn't obvious, then you have to explain it. That comes up most often with website businesses.
Or, if you're doing a presentation for your own team, summarizing the key points in your business plan, you don't necessarily include slides showing the team, or the business model, or the underlying magic. Those descriptions are for outsiders, not for internal use.
Always be flexible. Don't change the truth for a presentation, but do present first that part of the truth that answers the audiences' more important questions. Make the presentation easy for people to follow, and highlight the most important things, not all the details.
Please use good presentation technique. Give people pictures to look at that are related to your topic, but not lots of bullet points to read while you talk.
PowerPoint slide presentations can be terribly boring. Read Garr Reynolds' book Presentation Zen if you can, or Cliff Atkinson's book Beyond Bullet Points, or Seth Godin's excellent post Really Bad PowerPoint, or, at the very least, Guy Kawasaki's chapter on presentations in The Art of the Start.
Don't forget that you might be using a slide presentation as the only output of your core business plan. That would be unusual, but it could work very well. Instead of bullet points or an elevator speech, wrap it up in a slide presentation. Then you'll be ready when the pitch moment comes.
If you can't give your elevator speech in 60 seconds, you have a problem. Your strategy isn't clear enough. It should be a quick description of the business that you could give in the time you share with a stranger in an elevator. The term is becoming popular in the everyday language of the entrepreneur, the venture capitalist, and the teaching of entrepreneurship. There are even elevator speech contests at business schools.
I don't think its academic, though. I think it's important. I think it's a great exercise that everybody in business should be able to do. Let's get simple, let's get focused, let's get powerful. So we're talking about the heart of the plan strategy. What better way to condense it than in a quick elevator speech. If you can't do it, worry.
Start with a Story
Start your speech with a person (or business or organization) in a situation. Personalize. Identify clearly. For example:
John Jones doesn't particularly care about clothes but he knows he has to look good. He sees clients every day in the office, and he lives in a ritzy suburb, where he often sees clients by accident on weekends. But he hates to shop for clothes. (The Trunk Club)
Jane Smith wants to do her own business plan. She knows her business and what she wants to do, but wants help organizing the plan and getting the right pieces together. The plan needs to look professional because she's promised to show it to her bank as part of the merchant account process. (LivePlan)
Paul and Milena live in a beautiful apartment in Manhattan, with their two kids. Paul has a great job in Soho, Milena works from home, and neither has time for food shopping (Just Fresh).
Acme Consulting has five people managing several shared email addresses: email@example.com, firstname.lastname@example.org, and email@example.com. The five of them have trouble not stepping on each other. Sometimes a single email gets answered three or four times, with different answers. Sometimes an email goes unanswered for days, because everybody thinks somebody else answered it. (EmailCenter Pro)
Notice that in each of these examples I could be much more general. The Trunk Club targets mainly men who don't like to shop but need to dress well and have enough money to pay for a shopping service. LivePlan is for the do-it-yourselfer who wants good business planning software. Outpost is for companies managing shared email addresses like sales@ or info@. But instead of generally describing a market, I've made it personal.
Sometimes you can get away with generalizing. "Farmers in the Willamette Valley," for example, or "parents of gifted children." It's an easy way to slide into describing a market. However, I suspect that you're almost always better off starting with a more readily imaginable single person, and let that person stand for your target market.
Follow With What's Special About You
In the next part of your elevator speech address "Why you"? Why your business? What's special about you that makes your offering or solution interesting to the target person or organization you just identified.
This is where you bring in your background, your core competence, your track record, your management team, or whatever. For example:
The Trunk Club invented the best-possible solution to this problem. Founder Joanna Van Vleck first succeeded in sales at Nordstrom's and then took her personalized shopping-for-others style into a hugely successful first market in Bend, Oregon. Now, having proven the idea on the front lines ...
Palo Alto Software has dedicated itself to business planning for more than 20 years. Its founder is one of the best-known experts in the field. Its current management team grew up with business planning, in the trenches. The 8-person development team has more than 50 person years in the same focused area.
Palo Alto Software has been managing this e-mail problem internally for more than ten years now, and has been working with its own in-house solution for nine years. It has a very strong relationship with hundreds of thousands of small but growing businesses.
What we focus on here is core competence and differentiation. And, in the classic elevator speech, you have to say it fast. You make your point quickly and go on.
Make sure your point is the right point: benefits to the target customer. It's not what's great about you, but rather, what about you lends credibility to your ability to meet the need and solve the problem.
I included two different paragraphs for the same company on purpose. See how the unique qualifications differ for different contexts. It's the same company, but in the first example it's relating its speech to LivePlan, the flagship product. In the second example it's building up Outpost, the new product. The descriptions have to change for each.
You might also think of this as the classic "What do you bring to the party?" question. It's not just your brilliance or good looks or great track record, it's fostering credibility for solving the problem.
Then Explain Your Offering
Now explain what that person you're selling to gets. You've personalized the need or want, identified your unique qualities to solve the problem, and now you have to put the need or want in concrete terms that anybody can see. For example:
For a Trunk Club member, when his wife says it's time for a new trip or a new activity is coming up, or the mood strikes him, he just grabs the phone and calls his Trunk Club counselor. "I need more casual stuff for the golf course, or cargo pants for hiking, or two more slacks-and-sports-coat combinations." She knows his size, knows what he likes, what his wife likes, and what he needs. The new clothes come three days later, with a complete money-back guarantee if he or his wife doesn't like them.
LivePlan lets Jane jump into and out of her business plan at a moment's notice whenever she wants. She can start with the core strategy and build it in blocks, planning while she goes, refining projections as needed. It's built around a solid error-checked, financially and mathematically correct financial model, and a generalized set of suggestions for outlines, but is also completely flexible for adding and deleting topics and creating a unique business plan. Each task, whether topic or table, comes with easy-to-understand instructions and useful examples.
Outpost lets a team share an email address like sales@ or info@ efficiently. E-mails can be assigned to team members or not, and answered e-mails are processed and visible, and unanswered e-mails remain at the top until answered. Furthermore, it manages collections of snippets or text templates to build on standard but flexibly customizable answers to frequently asked questions.
In each example here, we can see clearly how this product or service meets the need or solves the problem. Forget features as much as possible, and illustrate benefits. You've already described the person with the situation, and built up your ability to solve it, so now it's just about the solution. Stay focused and concentrated. People will get one or at the most two unique attributes of your business offering. Don't confuse them with more.
A Note About Context
For the purposes of planning as you go, that's it, you've done your elevator speech. However, since we're right here together on this page at the end of this discussion, let me suggest what you might do
in a real elevator speech situation: finish strong. The finish depends on who you are, where you are, and what you want. If you've personalized in the first part, sold yourself and/or your organization in the second, and established the attractiveness or suitability of the business offering in the third, it's time to finish strong with a closing.
Your closing depends completely on context. What do you want from the person or people you're talking to? The classic elevator speech context is a venture competition when looking for investors. But there's also the true elevator speech for the established company, simply describing your company to somebody who asked, with no real close. Be honest, you're not always asking for an order, even when you're just chatting with the person in the next seat on the plane. If you are trying to sell, then do ask for the order. Seriously: "If you give me a card, I'll send you a copy with an invoice. If you don't like it, send it back. Here's my card."
For the venture competition or investment-variety elevator speech, don't try to convey too much information. Do establish in general terms where you are or what you want. "We're looking for seed money of half a million dollars." Or "We're now raising round two financing of three million dollars to be used for the mainstream marketing launch." Or "We're looking for serious marketing partners able to put money up front in return for privileged first-year pricing." Or "We're trying to establish a royalty relationship with an appropriate manufacturer." And then, ask for a business card, and give one. "If you know anybody who might fit that bill, feel free to recommend us." Or "Please give me a call." Don't offer to send a business plan, and don't ask a person directly to invest when it's about investment; reduce the awkwardness by suggesting that your audience might know somebody, not that your audience might invest.
Don't talk terms in the elevator speech. Just establish what you want or need.
If you're in a real elevator with a real potential investor, soft pedal: "If you know anybody who might be interested, please pass this along. Or maybe you want a business card and permission to send a follow-up e-mail."
And if you're doing an elevator speech in a business venture competition, close with an appropriate call for investment. Venture competitions always hinge on the would-be or hypothetical pitch to the investor, so make it clear. The better ones end up with something like an intriguing reference to seed capital or first-round equity investment. Stay general. Make them want more.