Your business plan is a vital part of getting started - but in the early days of business (and beyond) things can change rapidly. So how should your business plan approach this? Lars Wallden, founder of Wallden Technology, talks to us about why it's important to have a business plan that's constantly evolving.

I have spent the better part of my life working as an entrepreneur - for me it is more of a lifestyle than a job. During the years I have worked on many projects of various sizes and in different sectors - electronic music, renewable energy, software development, and now I am involved in an IoT project for the utility industry. No matter what size and type of project that one gets involved in, it is necessary to have a plan. As an entrepreneur you would probably rather work on the project then develop a business plan; many of us would maybe prefer that an accountant does it for us, together with the budgeting!

People make business plans for all sorts of reasons — to attract funding, evaluate future growth, build partnerships, or guide development. Unfortunately, most of these plans are usually out of date as soon as they have been created. To be successful the business plan and budget should be one of the long-term priorities for you, and constantly evolving.

I will not go into the best ways to develop the plan - Virgin Startup has many tools and templates on this subject - but it is important that you don’t look at the plan as just something that was necessary just to get funding, and then is filed away. The business plan is your story about why you are in the business, and how are you going to reach your goal.

Andy Fishburn - Head of Investment, Virgin StartUp - Reading

A living document

As your project evolves from the initial idea to a business venture, with all the hardship and rewards that entails, you will naturally have to tweak your initial plan - no one gets it right on the first try. This should be reflected in your business plan and budget. The business plan should be a living document, instead of being a snapshot of a certain point in the company’s development it should be like a moving picture that is fluid and can at any time give a true picture of your vision for the company.

As your company develops you will have changes of key people - maybe founders come and go. Your assets will change and maybe you will undergo important strategy changes. All this must be reflected in your plan. If it shows that you had to resort to trial and error, it’s nothing to hide - the people reading the plan will get a lot better understanding of your situation. No-one expects you to have everything figured out from the beginning.

Some parts of the business plan will stay almost the same through the company’s lifecycle, while others are much more volatile. This depends a lot on the company’s evolution. When you are describing your assets you probably want to focus a lot on the people involved, and this will change with time. The core business idea and “Why am I doing this” is in most cases something that you will keep the same. But opportunities come and go, people change their habits, and technology evolves. All this must be a part of your planning and reflected in your business plan, especially if you are a technology company or involved in a rapidly-changing businesses.

For example, when I first started out in the electronic music business 30 years ago I had no plan written down. I was seduced by the technology and the hip environment of having famous artists as my customers. This didn’t go as I planned and, after a while, I could see that the established companies caught the market. While I had focused on selling really expensive instruments to a few famous artists I missed the rapidly growing consumer market of electronic music. I for sure had some fun and got to meet some famous people but I had no plan and my business had no future, even though the market was exploding.

If I instead had put some effort into examining the market and used the contacts I had, I could have used that as a marketing strategy for a catalogue of cheaper products and I then might have been in the music business even today - who knows? The important lesson I learned is that I lost the market because of I had no market research and no plan to guide me in a rapidly-evolving industry.

Breaking things down

You can split your business plan into a few different plans that can be easier to maintain one at a time. The sales plan is clearly a document that is constantly updated while the technology development plan must have a longer time frame, for example.

A way to evolve the business plan can be to use different formats. It doesn’t have to be a 50 page Word document - you can write it in a powerpoint format and work from there. Do it as a group and if you are a single founder ask some friends or colleagues that you trust to give you feedback. Be sure to feature your greatest asset prominently (these will evolve), outline how you will test whether you have a valuable product or service, and show that you understand the risks and explain how you will address them.

A benefit of choosing a more flexible format is that, in rapidly-changing industries, it can be hard to keep a traditional plan up to date and five year projections are just pure guesswork that has no value. The winner of the future is not the biggest one - it is the fastest one.

How I did it

When I started with my latest project I wrote a 100-page business plan to business school standards. It included market research and analysis, projections and long planning of how the company should evolve during the coming five years. I don’t know how many hundreds of hours of work that was put into it and the budget and presentation. The result was that I was nominated for the EIT Venture Award, but I never used the plan in the business. The plan very quickly became outdated and there was no way I could spend the time to rewrite the plan and do all the research and analysis again.

The next plan was built on the first one but in a much shorter version, focusing on the important details of the business and how to get it started. It is the first 12 months that are vital for the business and the focus should be on that - kick start it and survive by any means to reach traction and positive cash flow. If you don’t have an evolving plan that shows this, you will have a lot harder to go forward. If the plan is in a shorter format it will be much easier to do this.

Stick with your plan - it is yours, it shows your own vision, and your own path to success. If you let your accountant write it for you, or some professional write it, it doesn’t reflect what your own ideas are and how you really want to build your future.

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