Once you decide to take the plunge and start your own business, the next logical step is to write a business plan. This episode of The Brand Called You delves into the what goes into writing a business plan, how should you modify your plan as you go along, how to plan for losses and when do you not need a business plan.Watch on YouTube
I have met lots of young entrepreneurs who get very intimidated when they have to write a business plan. A business plan is nothing but an articulation of multiple steps that you want to take to do your business. There is nothing complicated about it.
The things that you need to ask yourself while formulating a business plan are what business do you want to be in. Who are my competitors? What is the government environment for that particular type of business that you want to be in? How easy or difficult it is for competition to get in later on? And then you come to the last point which is how much money do I need? So, when you are writing a business plan think of everything that is going on in your mind and put it down in paper.
When I wrote my first business plan for Guardian, I had a vision which was that I want to build India's largest pharmacy chain which would enable customers to be able to shop themselves. I also wanted to make sure that the employees of Guardian would be able to say that this is one of the best places to work in, and finally I wanted to say in a country that has been plagued with fake medicines, Guardian would be a place which would give 100% reliable medicines. So, the first line of my business plan was, I want to build 'Boots' in India. 'Boots' is one of the largest British pharmacy chain. Everything started to flow from that. How would my stores look? How would my merchandising look? What would my colleagues in store wear and so on and so forth.
Remember that a business plan is not a document that has to be filed in a library. It is also not a document that has to be sent for awards because it has got fantastic English written in it. I've always believed that the entrepreneur must write his or her own business plan because only then will the business plan be a living document that it is supposed to be. Before anything else, it must be able to meet your own aspirations. What am I setting out to do and how will I get there? When you Google ‘business plan’ you will get millions of options in a few nanoseconds. Read those, get your ideas but when it comes to putting pen to paper, make sure that you write every single word yourself. There is nothing complicated about writing a business plan. There is nothing complicated about creating a document that will be a guiding document as you build your business.
Market research is always important. I would never say it's not. Knowledge of your market is very important but when you are starting a business, don't get overwhelmed by data and research. As I mentioned, a business plan is a living document and, therefore, right through the life of your business you will keep on modifying it, you will keep on enhancing it, you willkeep on adding to it, you will keep on deleting from it. No first business plan is ever the best business plan or is ever the right business plan. Make assumptions but record them carefully because one year later you would have forgotten the assumptions you've made and then you will wonder how do I justify what I have written.
The topic of raising money is a whole new ballgame. A lot of entrepreneurs bootstrap their business. They dip into their savings, they dip into whatever are their resources and they start to do their business. I am firmly of the view that unless you know that you're going to strike oil or you are going to win big in roulette or in a casino, I don't think any entrepreneur should bet their bottom dollar to say that I'm going to put everything I have into this. That's because you have to be sensible when you make an investment. You have to be sensible for yourself and if you have a family you need to be sensible for them. You cannot, because of your own desire to do everything possible, make the mistake of betting everything you have.
A vision statement outlines where you want to get. A business plan is much more than that. It is a list of all the steps that you want to take to get there. So the vision is, say, to be able to build a social media company which is going to be the best in the world. Now what are all the steps that you would want to take to reach your vision? You need to have content, you should be able to reach people who will come and talk to you, you have to have funding, you should be able to reach out to consumers who will listen to your content, you will have to ensure that a database is available, and the list goes on. There are so many things that you do in your business on a daily basis which have to be articulated in your business plan.
A business plan must be modified because every day once you start your business you learn new things. If you have all the answers then it's probably not a business you want to be in because then everyone has the same set of answers. Your entrepreneurial journey is a journey of exploration. It is a journey of trying to achieve what you envisioned and as you go step by step you will come across many things that will make you change your core assumptions. So, you must be ready to make changes in your business plan. Having said that, changing a business plan on a daily basis is not a wise idea. That means you haven't thought through what your business plan should be. Ideally, when you and your team sit down to review a plan, it should be done once a quarter and that is when you can make course correction and as you get better and better at it you will suddenly realize that by the time you are in your fourth or fifth or sixth quarter you are being able to predict fairly accurately. Then the only challenge will be dealing with situations that are beyond your control. Some examples of such situations are an action or a law that has been enacted by the government which you have no idea about, a natural calamity that may affect your business, or some of your key team members deciding to walk out without a succession plan in place. In such scenarios quickly review your business plan. At all other times try and keep the review every quarter.
Losses are a part of life for every startup. Before your revenue starts to flow in, before your profits start to flow in, you are bound to make losses. It is better to plan for losses than to get surprises. So if you have planned that you're going to lose three lakh rupees in the first year and you lose thirty then you have a serious problem, but if you planned for losses at three and you go to four or you make it two then at least you have planned correctly and there are not going to be some incredible shocks. So, plan for your losses, there is absolutely no problem in making a loss as long as there is light at the end of the tunnel. Go ahead and implement and don't be shy of losses.
Iconic entrepreneurs like Jobs and Gates worked out of their garages and I am sure none of them wrote business plans before they started implementing their ideas. But, once you have begun your entrepreneurial journey you have to start bringing in some sanity into your business plan which will start giving direction to you and also lay out a clear path for your organization which has got a lot of employees. So they must know what is the direction you're going in. Being a maverick in the early days of your entrepreneurial journey is fantastic. However, as the team starts to grow larger, every maverick has to start getting straitjacketed into a business that will be able to guide what you have started to create. I've known several people who were mavericks who then became serial entrepreneurs. They don't like being straitjacketed they don't like a business plan and therefore what they do is after a few years they sell their whole business and start something new. It has often been seen that people who create new businesses are not necessarily the ones who run them later on.