in the marketplace. Ultimately, this reflects one of the “secrets” to success: Successful entrepreneurs adapt to the state of the market and the needs of customers. Yet the ability to adapt and make effective decisions depends on the depth of your knowledge and understanding, which is what you improve through the business-plan process.
For instance, one time I was able to significantly raise the price of a product when I discovered that a larger company had recently increased its price of a product tenfold. I was interviewing a prospective customer who was hopping mad about the larger company’s decision and who vented his feelings throughout our conversation. My product was in the same regulatory field, but specifically targeting a different need. I decided to reprice my product significantly prior to launch with the knowledge that I would not draw the same negative attention, since my product would still be priced below the larger company’s product. Plus, no one would know I had changed the price.
Another time a prospective customer was assessing the product I intended to launch when she commented that she had seen something similar from a local manufacturer. She showed me a sample hidden away in a drawer. With a little detective work, I found a competitor had illegally entered the market despite the patent protection around my invention. Before that company could create too much market damage, I was able to use my strong patent position to get an injunction on their marketing. Eventually they withdrew from the market altogether. Without the business-plan process, I might not have discovered the competitor until much later.
How to Engage Your Stakeholders
Personally, I find the business-plan process the most exciting part of the startup phase because it requires face-to-face discussions about how to turn an idea into a company. To engage with potential customers, I usually go where I know they will be gathered in large numbers. Typically, that will be at a major exhibition running at a convention center, which is also where lots of my potential competition will be showcasing their products and services. I also go to shopping malls and markets where I can conduct surveys with prospective customers. Sometimes I have rented a small exhibit space at a relevant trade show and conducted a market research survey with attendees. People love to talk about themselves and answer survey questions, especially if I offer free coffee, bagels, or some other gift in return. What I learn in these events often takes my business idea in different directions than I would otherwise have envisaged. This sounds “old school,” but it is an essential. There simply is no substitute for a free-flowing conversation between an entrepreneur and a prospective customer.
How do you conduct effective face-to-face research? Do you conduct formal surveys or simply chat to people? How many contacts is enough? There are no rules. I think the right approach really depends on your idea and its related market. I have done all of these things. I find that a generic-style survey with multiple-choice answers results in generic responses. Alternatively, I find that having a casual, friendly chat with a prospective customer using the art of conversation eventually reveals exceptionally deep information about their true feelings. These might not be the feelings I imagined they would have, and I might or might not have thought to include them as an option on a multiple-choice questionnaire, but they are genuine emotionally driven opinions.
People enjoy surveys and quizzes, and the anonymity of the internet can get you more realistic responses through a website or social media group chat than a bland paper survey. That helps, but I feel that to really understand a customer’s perspective requires actual human interaction. In all cases, I believe authenticity wins the day. Typically, I’m up-front with people and explain that I’m planning a company to fix a certain problem, and that I don’t yet know the answers to all the questions. This gains support and fosters camaraderie. People open up more; as humans, most of us have a natural inclination to want to help the underdog succeed.
I can’t say how much information is enough, but I know when my intuition is kicking in and pulling me in a certain direction. When that happens, I have enough data to form a strategy. This is why deepening your intuition is so valuable.
Even if you have started a business already but have avoided going through this process, I recommend you go through it now. It is never too late, and you will never regret making the effort. These conversations teach you so much about how others see you and your business, which is information that gives you the opportunity to mirror, adapt, and improve.
Psychologists say there are three perspectives on ourselves: There is the way we see ourselves, there is the way we think others see us, and then there is the way others actually see us. Only by getting away from our desk and talking face-to-face with our stakeholders can we grasp all three views.
Creating a Business Plan
As I say, the process of researching a business plan is more important than the shape or size of the final document. How you organize and write your plan is less critical than the information you gather through the process.
Many entrepreneurs get bogged down by the idea of the written document. That is not the goal of this whole process. No investor cares if your final document is ten pages or a hundred pages. An investor wants insight. That’s the goal. What makes your winning idea different? What need does it serve? What is the market size? How is the investment going to be used? What are the barriers for competitor entry? Why is it exciting?
A potential manufacturing vendor needs to know about your forecasts for growth. A commercial partner wants to know what benefits your product provides to customers and what they in turn think about your prototype. When vendors ask you for the information they need, you typically pull that data from your plan and give them just what they ask for and no more. The information is important, not the document’s style, format, size, or even structure. No one cares about the document.
Here’s the hard truth: No one but you will ever read the entire business plan. And you will probably only ever read it all through once, on the day it is finished. That’s my experience. Investors will read the executive summary. Vendors might read the sections that apply to their role. Later, after you start your company, you’ll find that much of your plan will become irrelevant as things surprise you and you adapt to survive. Eventually, the business-plan document you spent so many months writing and stressing over will simply collect dust until one day it gets tossed in the trash to be replaced with an update.
Personally, as an investor, I read the executive summary, and I pretty much make up my mind by the end of that. If I am intrigued, I’ll look for what marketing and customer research has been done. If none, it goes in the trash can. That sounds harsh, but it is the real world. Investors receive hundreds if not thousands of business plans every year, and the majority that I receive read like they came straight out of an MBA course. Guaranteed trash-can toss. These days I charge people to submit their plan, and I have to say, that does separate the wheat from the chaff.
Knowing this to be true, many would-be entrepreneurs spend weeks trying to produce a killer executive summary — but without actually performing the business-plan process. I repeat, the business plan is not a document. It is a summary of the insight you gain through your interactions with customers and vendors. You cannot imagine that information or replace that process, and those executive summaries that try betray themselves within the first few paragraphs.
A successful executive summary only results when an entrepreneur has gone through the full process of researching the business plan. The resulting information is of course collected and organized into a document, but it’s the knowledge gained in the process that arms the business owner with the ability to write, present, and pitch that killer executive summary.
My advice is: Don’t try to produce a perfect document, since you are the only one who will ever read it. Don’t be anxious about following some standard format you find online, and never pay for an online business plan. Research each area I outline below by actually leaving your office and talking to real people in some way, and do so
