People buy people, not business plans

Anyone who runs a real business knows that none of the areas covered by a business plan can be tackled without people. Why then do so many business plans feel that it is sufficient to insert an appendix with the CVs of the managers?

Should the people not be at the core of the plan? Should they not be visible in the background to the business and in every other section? Otherwise, the plan is merely a matter of theory and business school jargon.

CVs are not enough

The CVs of the current managers do not give any feel for how the business is being run, what the gaps are, what essential skills will be needed in the future etc. It all comes back to strategic planning vs day-to-day firefighting. That is why business plans are not, as many people think, just for the purpose of raising finance or satisfying the bank manager: they are essential management tools that need to be reviewed on a regular basis.

Here is a model that might help to analyse the 'people' section of the plan.

• Draw up a table with 4 columns, headed a) People, b) Experience, c) Skills and d) Functions.
• Make a list of all the people who are involved in your business in column a) and summarise their experience and skills in b) and c) so that you can clearly see who you have on board and what they each bring to the business.
• Make a list of the areas of sector and functional expertise required for the business and see who is ideally placed to fill each of these roles. Are there any functions that cannot be undertaken by the people who are within the team and, if so, how do you propose to fill these gaps?
• Draw up another table showing the business in 3 years’ time. How will the management team be different? What steps do you need to take in order to both keep existing staff satisfied and recruit new staff of sufficient calibre to deliver your ambitious future plans as described in other sections?

Think about the future as much as the present

Businesses change over time, and it is unusual for an early-stage company to have a full management team. Generally an entrepreneur will endeavour to fill many roles, some of which they will be particularly unsuited to. Why not explore in the business plan what roles could be performed better by others? Finance Director, Sales Director, even Chief Executive. How are you going to afford people of sufficient calibre to deliver what you want? Perhaps you need to raise some finance? One of the most valid reasons for raising equity capital is to pay for people who are good enough to take a company to a higher level, and yet generally entrepreneurs leave such recruitment too late.

Of course, while we are on the subject of fixed costs – which is how management is generally categorised – the business plan needs to contemplate all the other fixed costs that the business needs now and in the future. How virtual can you make this operation? Does it need an office? How much capital expenditure will be needed? These days it is tempting to run an almost entirely virtual operation, but if that is the strategy what barrier is there to anyone else entering the market?

One of the keys to business success is identifying resources that you have which are not available to others: people, intellectual property, finance, property etc. All of these are capable of giving you an edge, and without them you will be battling on equal terms with everyone else. The dilemma comes from the fact that fixed costs are a financial burden to any business and need to be justified. Creating a business plan gives you and the rest of the management team the chance to explore different options available to the business.

How scalable is your business?

For many businesses the ability to raise external funding is dependent on being able to demonstrate scalability. What does that mean? Essentially it means being able to build the revenue without increasing fixed overheads in parallel. Some find this easier than others. Generally, fixed costs do not rise in a linear fashion: they rise in steps, so now it is time to think about a timeline and milestones for your business.

This will give you an analysis of the critical moments when you may have to go backwards (at least in terms of cash) before you go forwards. Such a timeline can become unwieldy and of little value if you don’t prioritise and delegate actions to specific people. This will be a ready reckoner that can be central to effective monitoring of the business.