Many business owners know and understand the value of a business plan. The business plan is a key component of the loan process and serves as a foundation for your organization. However, it only tells half the story. To get the whole picture and have a framework on which to build your business you also need a strategic plan.

First, lets look at the difference between a business and strategic plan. In the simplest terms:

A business plan covers the “who” and “what” of the business.
The strategic plan gives us the “how” and “when.”

In broader terms, the business plan tells us who by showing us:

1. Who is running the business? What makes them qualified? What do they bring to the table that adds value?
2. Who is the competition? What do they offer and what makes you different?
3. Who is your customer? How big is the market? Where are they? What do they want and how will you give it to them? Also, how will you connect with your market?

The business plan answers the “what” by telling us exactly what the business provides and how they provide. Product and services and operations are all explained so that we understand how the claims are being met and if the business is run efficiently.

The strategic plan, on the other hand, lines out the following:

1. How will you measure success? What metrics matter and how will you track them?
2. What needs to happen so you can achieve your goals? What resources do you need to get there?
3. When? When will each activity take place, who will do it, and when do you need to reach specific milestones?

Bottom line, the strategic plan is the action plan for your business. It’s the task, milestones, and steps needed to drive your business forward. Typically a strategic plan is lined out for a 3-5 year period, with specific phases rolled out quarterly. Benchmarks are often set in six month and yearly increments to allow time to plan, execute, and gain traction between milestones.

In both cases, you need a team of players on hand to help you plan, develop, and execute both the business and strategic plans. Remember, your business needs both to give it a clear foundation and a sense of direction, as well as to assist you with identifying key players and resources to seek out and acquire. Without them, you’re practically driving with the brakes on.

When I first started working with business plans back in the late 1970s, the average plan was much longer and more complex than what I see today. That might be because business plans are more common than they used to be–they’re used more and more often and by more people. It might also be a matter of trends among bankers and investors who read business plans. Or it could be because people have less time to waste wading through documents!

For whatever reason, the trend in business plans these days is to go back to the fundamentals, with good projections and solid analysis. An “easy to read quickly” format is more important than ever. If you want people to read the business plan you develop–and most people do–then my best advice to you is keep it simple. Don’t confuse your business plan with a doctoral thesis or a lifetime task. Keep the wording and formatting straightforward, and keep the plan short.

But don’t confuse simple wording and formats with simple thinking. The reason you’re keeping it simple isn’t because you haven’t developed your idea fully. You’re keeping it simple so you can get your point across quickly and easily to whoever’s reading it.

With that in mind, let’s get down to some specifics when it comes to simplifying your plan.

Rein in your prose. Effective business writing is easy to read. People will skim your plan-they’ll try to read it while talking on the phone or going through their e-mail. Save the deep prose for the great American novel you’ll write later. When you’re crafting your plan, remember these tips:

* Don’t use long complicated sentences, unless you have to for meaning. Short sentences are fine, and they’re easier to read.
* Avoid buzzwords, jargon and acronyms. You may know that NIH means “not invented here” and KISS stands for “keep it simple, stupid,” but don’t assume anybody else does.
* Use simple, straightforward language, like “use” instead of “utilize” and “then” instead of “at that point in time.”
* Bullet points are good for lists. They help readers digest information more easily.
* Avoid “naked” bullet points. Flesh them out with brief explanations where explanations are needed. Unexplained bullet points can be frustrating.

Keep it short. The average length of most business plans is shorter now than it used to be. You can probably cover everything you need to convey in 20 to 30 pages of text plus another 10 pages of appendices for monthly projections, management resumes and other details. If you’ve got a plan that’s more than 40 pages long, you’re probably not summarizing very well.

Of course, there are exceptions to the rule. I recently saw a plan for a chain of coffee shops, for example, that included photos of the proposed location, mock-ups of menus and maps of other proposed locations. The graphics made the plan longer, but they added real value. Product shots, location shots, menus, blueprints, floor plans, logos and signage photos are useful.

Use business charts. Make your important numbers easy to find and easy to understand. Use summary tables and simple business charts to highlight the main numbers. Make the related details easy to find in the appendices. Also…

* Use bar charts to show, at a minimum, sales, gross margin, net profits, cash flow and net worth by year.
* Three-dimensional bars look slicker, but two-dimensional bars are usually easier to read. Make sure the numbers are obvious.
* Stacked bars make totals easier to visualize. If your sales divide into segments, stack the bars to show the total.
* Use pie charts for market share and market segments.
* Show tasks and milestones as horizontal bars with labels on the left and dates along the top or bottom. Most people call this a Gantt chart. Show only the major tasks and milestones, because too many details make these charts hard to read.
* Always put the source numbers close to the charts in a summary table so readers can reference them quickly and recognize the numbers in the charts. And never leave a business plan reader unable to find the source numbers of a chart. That’s frustrating.
* Don’t use a chart without referencing it in the text. If source numbers aren’t completely obvious in the summary tables, make sure you specify which appendices contain the detailed numbers.

Polish the overall look and feel. Aside from the wording, you also want the physical look of your text to be simple and inviting. So take my advice:

* Stick to two fonts for your text. The font you use for headings should be a simple sans-serif font, such as Arial, Tahoma or Verdana. For the body text, you should probably use a standard text font, like Century, Times Roman or Book Antigua.
* Avoid small fonts. Only a few of the more readable fonts are fine at 10 points; most of them are better at an 11 or 12 point size.
* Use page breaks to separate sections and to separate charts from text and to highlight tables. When in doubt, go to the next page. Nobody worries about having to turn to the next page.
* Use white space liberally. Words crammed together into small spaces are uncomfortable to read.
* Always use your spell-checker. Then proofread your text carefully to be sure you’re not using a properly spelled incorrect word! Double check that your text numbers match those in your tables.

Tim Berry, President of Palo Alto Software and resident business planning expert, has been talking a lot about business planning lately. I’m going to chalk this up to his being involved in judging multiple business plan competitions in the last several weeks. So it’s more than likely been on his mind.

I thought I’d share a few of the articles Tim has written on the subject in the last couple of days.

On Entrepreneur.com

Is Your Business Plan On Track?
Tips to help track and tweak your business plan beyond the startup phase

On his own blog, Planning Startups Stories

Big Mistake: Huge Unbelievable Sales Numbers

And finally, over on his Entrepreneur.com blog Up and Running

On Winning Rice’s $1Million Business Plan Contest where he discusses the recent winning team at the Rice Business Planning Competition and what it took to win.

Enjoy!

‘Chelle Parmele
Social Media Marketing Manager, Palo Alto Software

We’re in the middle of business plan competition season, and we’re seeing some great plans, and a lot of common mistakes. We’ve assembled some of our best advice on business competitions, below.

Ask Tim Berry – Tips for Business Plan Competitions

• Don’t Shade Your Eyes, Summarize: “I don’t care if you’re the next big thing, with an unimaginably exciting new idea and a great team, you can still create a meaningful summary in 10 pages.”
• Writing an Executive Summary: Hit these highlights, and customize your Executive Summary for the intended audience.
• Estimating Unknown Expenses: How do you predict expenses? Normally you need some experience. If you have no idea, then you might think again about starting this business.
• Why not do your best? If you’re going to a graduate level intercollegiate and international venture competition, ask somebody to edit the plan for simple practical writing. Make sure your projected income and balance link up correctly with the cash flow, and that the cash flow understands working capital. Use business charts to illustrate the main numbers.
• How to Succeed in Competitions: Competitions normally receive far more entrants than they can practically screen any other way, so the business plan is the critical document. This white paper explains how to customize and improve the output you create in Business Plan Pro to meet the sophisticated needs of a venture contest.

How to lose a business plan competition

• Top 10 Business Plan Mistakes: From “hockey stick” forecasts to technobabble to numbers without charts, Tim Berry discusses the most common planning mistakes in business plan competitions, and why they irritate judges.
• Big Mistake: On Business Plans, Cash, Investment, and Whose Peace of Mind Matters: You don’t ask for investment so you can have cash in the bank.
• Big Mistake: Business Plans And Investor Returns: Investors care about returns, but you can’t predict them accurately. Show them credible management, sales, and market knowledge instead.

Presenting your plan to judges:

Guy Kawasaki’s 10/20/30 Rule: How listening to crappy business plan pitches is giving Guy Ménière’s disease.

Ask Tim Berry – The Elevator Pitch

Sara Prentice Manela
Editor

Palo Alto Software is sponsoring the Governor’s Business Plan Contest in Wisconsin.

The Wisconsin Governor’s Business Plan Contest – the nation’s first statewide, tech-based business plan competition – is accepting entries online for the 2009 competition. Entries will be accepted now through 5 p.m. Jan. 31, 2009. The contest’s Grand Prize is worth $50,000 in cash and services.

Who’s eligable to enter? Wisconsin residents 18 years and older and teams from Wisconsin-based businesses and organziations are eligble to enter the contest.  Teams from outside Wisconsin are eligble as long as they plan to base their business in Wisconsin.

For a full list of rules and contest information as well as the form to enter the contest -  visit the Governor’s Business Plan Contest website.

www.govsbizplancontest.com

Let me begin by saying that I never thought I’d be quoting Tyra Banks. On anything. But she recently wrote a piece in Newsweek about her life and her thoughts on, of all things, entrepreneurship. She compared starting a new business to having a new baby – you lose sleep, work 24/7, and look for only the best people to take care of your wonderful creation.

It’s a good analogy. No matter your child’s, or your business’s, stage in life, you have to have a plan. As a new father, I can attest to that. From the time you find out you’re going to be a parent (maybe even before!), you start planning for the future. How we will divide childcare duties? What’s the nursery going to look like? How will we afford to send him to college? Then the baby arrives, and there’s even more planning – you can’t leave the house for the afternoon without a plan!

A business is no different. Every business starts with a plan, maybe not a formal bank-approved business plan, but a plan to make your idea reality. But being up and running doesn’t mean you can stop planning. What are you sales goals in five years? How will you achieve them? How will you market your company to take it to the next level? Once you’re there, what’s the next step?

What would happen to your child if you didn’t take the time to plan ahead? What do you think would happen to your business?

Jay Snider
Palo Alto Software

The 2008 Forbes.com Boost Your Business competition is nearing it’s final deliberations. Next week in New York City the final five finalists will present their business plans–including how they intend to invest the prize money to boost their prospects–to an expert panel of judges. One of those expert judges is Palo Alto Software’s own Tim Berry.

According to the Forbes.com Boost your Business blog: In addition to next week’s presentations, each finalist also must submit two written business plans: a full-length plan (20 pages max), that only the judging panel can see, and a condensed 3-page version which will be posted–along with videos of the presentations–on Forbes.com during the final voting period in November.

Palo Alto Software sends their good wishes and congratulations to all the finalists of the Boost your Business competition.

‘Chelle Parmele
Social Media Marketing Manager
Palo Alto Software

Regardless of whether you are based in San Francisco, California or London, England, we all agree that recent months have been pretty unstable from an economic perspective. What should one do with all of the business uncertainty we now face? As these two articles by Alan Gleeson of Palo Alto Software Ltd, U.K. describe, it is not a time to “batten down the hatches”. Instead Alan describes a number of solutions to help you manage your business through these times of unprecedented business uncertainty.

In Planning in times of Extreme Turbulence he suggests that managers revisit their business plans, undertake some scenario planning and also that they look for new opportunities as competitors scale back!

In his article, Steps to Recession-Proof your business plan he describes how it is important to assess your own businesses vulnerabilities as well as ensuring that all aspects of your credit control system are functioning effectively.

As he concludes:

“The increased uncertainty in our environment means that planning for the future has become more difficult. However, it is how we deal with this extra risk that will determine how our businesses fare over the coming months and years.”

Tim Berry
Founder and President
Palo Alto Software

What a great title, right? “I hate business plans.” That’s the title from John Jantsch’s newest blog post on his Duct Tape Marketing blog.

He talks about business and marketing plans being different than the actual planning, and about Tim Berry’s new book, Plan-As-You-Go, The book on Business Planning.

He’s also running a giveaway for 10 of Tim’s books (which I think he’s already ended) where people comment and finish the phrase: “I hate business plans but I love business planning because . . .”

So make a point to check out the post and don’t forget to read the great comments!

‘Chelle Parmele
Social Media Marketing Manager
Palo Alto Software