Business planning: a beginner's guide

The good news when it comes to business planning, according to Barnaby Marshall, is “I don’t know if there’s any right or wrong way of doing that or documenting it”. But the Icehouse Ventures partner says there are some critical features that good plans must include, and some need to be done before you put pen to paper. 

Clarity

Clarity is king, says Marshall, and should be a guiding principle behind all the foundational work that goes into a business plan, as well as the plan itself. “Being clear is critical. It needs to be clear at a company level, team level and individual level and that all needs to correspond in a way that’s logical. Everybody needs to know that what they’re doing at an individual level is contributing to the team level and the company-wide goals.”

Structure 

Marshall suggests a simple framework for successful business planning. Although it’s not often considered as a part of a business plan, the first step is to clearly define your business’ purpose, vision, values and mission.

“That’s your north star. Then you can layer your OKRs [objectives and key results] on top of that.” With those operational goals in place you can start working on your strategy planning.

“You have to understand where you’re going before you know how to get there, but you also have to understand why you exist and what it is that you do.”

Measurement

One trap founders can fall into, Marshall says, is including key performance indicators (KPIs) or OKRs that are difficult to measure or don’t result in clear, usable data.

For example, a broad OKR like ‘improve customer satisfaction and response times’ will be difficult to measure accurately, whereas a more concise OKR, like ‘improve ticket first response time to 24 hours’ will be simpler and easier to manage, producing useful data.

“You can include a measurement that sounds practical and sounds like the right thing to measure but then discover it is actually difficult to measure. You end up with confusion about whether you’ve achieved success or not and you end up with grey areas at the end of the quarter or the year. The ability to effectively measure OKRs is one of the most important parts of a business plan.”

"Without talking to your customers you can end up with some key ‘gotchas’ where your product might not be practical or useful for those customers.”: Eric Laakman

Brevity

Zincovery founder and CEO Jonathan Ring’s best piece of advice for startup business planning is to keep things short. 

“If you’re a really early-stage founder, keep it brief; just a one or two pager. If we were starting out now I would make our business plan shorter so it’s easier to update.”

“In the early days there will be a lot of adjustments so it doesn’t make sense to have a 50-page plan document. It becomes a massive burden to go through and update. You just won’t get it done.”

Instead Ring suggests keeping to the basics. “Just write down the higher-level ideas and assumptions that you want to test. Test them, rewrite and keep going through that process.”

‍Test and learn

For Eric Laakman, CEO of Auckland sustainable boatbuilding startup Seachange, the test and learn phase is vital to ensuring a business is solving a real pain point for potential customers. 

“There can be a tendency to assume you know what your customer wants. Essentially your business is run by your customers so you definitely want stakeholders to buy-in before you commit five or ten years of your life to an idea. Without talking to your customers you can end up with some key ‘gotchas’ where your product might not be practical or useful for those customers.”

Both Zincovery and Seachange have been through crucial pivots through their development and found this customer-focused approach to planning helped drive important strategic decisions.

For Seachange,  that meant talking in detail to more than 100 different commercial operators about their business. “We got a lot of information out of that so we could paint a picture of what the market looks like.”

While this market research may not seem like part of business planning, it helps ensure your company is making the right product to solve the right problem, says Laakman. Testing and validating that hypothesis will evolve what you do and that impacts your business plan, he says.

Ring says for Zincovery, which decarbonises zinc recycling from galvanised steel, robust business planning and market testing eventually made the decision to pivot fairly easy once it was evident the company’s required market size didn’t exist.

“It took that human element out of the decision because it was clear what we needed to do.

“You don’t want to try and trick yourself into believing that maybe it’s okay and you should just keep throwing good money after bad. It really helped us when we got that information out.

“I think [our shareholders] appreciated that there was immediate communication. The leadership we showed around what we were going to do was a result of planning and thinking about what eventualities could happen.”

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