A Practical Guide to a Lean Business Plan

The plan is useless. But planning is essential. — Dwight D. Eisenhower 

 

You might have heard this Eisenhower quote before. All kinds of different people, from Richard Nixon to Mike Tyson and other entrepreneurs, have quoted it in different variations. It reminds me of five pervasive myths about business plans. 

The Myths

1. Myth – A business plan needs to be as detailed as possible. 
   • Reality – Clarity is key. Investors appreciate clear and concise communication. So will your team! Airbnb’s epic pitch deck proves it. They used this deck to secure $600K in funding from VCs. (We’re not getting paid by SlideBean. We simply think the deck is inspirational.) 
2.  Myth – A business plan is a static pile of paper.
   • Reality – It’s relevant to -and effective in- your decision-making. You should regularly update it to reflect the current status of your business and the market.
3.  Myth – Financial projection is most important in a business plan.
   • Reality – While numbers are indispensable, so is putting things in perspective. Emphasize your unique value proposition, competitive advantage, and target market. Be very clear on these aspects and communicate them effectively.
4. Myth – The plan needs to be perfect.
   • Reality – Entrepreneurs and business professors point out that “the perfect business plan” is a fallacy. Your business plan needs to be well-researched, but you can’t know the unknowns in advance, such as the way that customers will respond to what you’re offering.
5.  Myth – A business plan is only for external parties.
   • Reality – Your internal team needs a plan as much as investors do. It’s an outline for them: what are the goals? What’s the next step after they achieve these goals? How does the competition look? Getting team members on the same page will save you headaches later.

According to Steve Blank, educator and founder of eight companies in Silicon Valley, these myths exist partly because “for years MBA programs taught students to apply large-company approaches to start-ups and new ventures.” This kind of approach isn’t always the best for every situation.

 

Lean Business Plan: Embrace the Effective

Drawing from their lived experiences, many entrepreneurs realize that early-stage companies are not the micro versions of corporations. They don’t “unfold” according to five-year plans written in isolation. Copying the ways of big companies isn’t practical, so in comes the dynamic Lean Business Plan. It is made up of three components:

1. Strategy
2. Execution
3. Forecasting

In the startup community, business plans rarely survive first contact with customers. A lean plan allows you to adapt, iterate on, and improve your initial ideas as you continually learn from customers.

 

Create (and Use) a Lean Plan

Let’s get started. Follow these four steps and create your lean business plan today.

• Strategy

The word “strategy” appears in business writing too often. In a lean plan, summarize it in two key points: a problem (or problems) you observe and your solutions to it. 

Have you visited M.M. Lafleur’s website? It’s a Direct-to-Consumer startup selling professional women’s clothing. They present the problem and their solution clearly: “Our goal is to take the work out of getting dressed [problem and solution] so that you can focus on the work that matters to you.”

Don’t overcomplicate this step. Just write down the problem(s), your unique solutions, and your business identity. Forget about the creativity, punchiness, rewriting, and editing. It’s not an advertising experiment or a research paper!

• Execution

You have the solution. It’s time to deliver it. Think about

• Who needs your solutions (your ideal customer profile)? 
• How much will you charge (pricing)? 
• How will you charge: subscription, commission, product purchase (revenue source)? 
• How do you let your ideal customers know about you (marketing)? 
• What are your current customers saying about your solutions(marketing)?
• Who do you need to deliver your solutions (team)? 

Alignment is the key to execution. For example, does your pricing match the product-market mix?

• Set SMART goals

SMART stands for Specific, Measurable, Attainable, Relevant, and Time-bound. It’s good for a lean plan. It also applies to almost every idea you want to turn into a reality. It could look like this:

• Acquire 1,000 customers by the end of June 2024
• Launch my Shopify website by the end of May 2024
• Hire a sales development manager when we reach 2,000 clients

It’s easier for most people to see progress and stay motivated when every step leads to tangible results.

• Know your essential numbers

Essential numbers are traffic lights on the road of entrepreneurship. They help you stay on track. If you’re a super visionary, they might even protect you from acting on too many ideas. Always keep handy:

• Sales forecast
• Cost and expenses
• Cash flow forecast

A sales forecast isn’t an accurate predictor of the future even when you use the most sophisticated, cutting edge tech. You can make educated guesses yourself. You must understand sales drivers (seasonality, email marketing campaigns, locations) and how they influence your sales results. Use these as benchmarks when you review your forecast vs. your actual sales and make adjustments accordingly.  

Do you know how to forecast the sales of a new product or service? Search for a product or service in the same category. New business owners often share their stories and revenue online. Read them, use your judgment and lived experience, and you’ll have your sales forecast!

We’d also like to emphasize the importance of a cash flow forecast. Having money in the bank doesn’t mean you have cash. Keep in mind any hidden or unexpected future expenses. 

• Read and revise often!

A lean plan is practical. It adapts as you continuously learn and improve, so don’t let it sit in a vacuum. Read it, listen to customer feedback, and revise it often! Keep it fresh like a GPS! We have a worksheet for you to get your thoughts in order. 

 

End Note

You might wonder if a lean plan only works for start-ups. Not necessarily. Well-established companies use the steps listed above to uncover new territory. In 2010, General Electric’s energy storage division interviewed dozens of global prospects to listen to their issues and frustrations with the battery status quo. GE was able to find a new customer segment—-utility companies—- and a create a new product known as Durathon.

The frantic, ever-changing times we find ourselves in require businesses to make changes -rapidly. A lean business plan is a good place to start.

For business owners, customer acquisition is a topic that never gets old. How do you attract your ideal customers? How do you find the people who inspire you to work with. Stay tuned for our next blog post, where we will introduce Michael Port’s time-tested system Book Yourself Solid.

 

Need help with your planning? Schedule a 15-minute consultation.