"Through planning, you put yourself in a better position to earn significant profits year in and year out than you do by just responding to events as they unfold."

New Wave Biz Plans

By John Bowen

As I work with our coaching clients and travel around the country making speeches and presentations, I talk with hundreds of financial advisors. The most successful in today's volatile and competitive markets are intentional about their actions. Activity alone is not enough—value comes only from deliberate action. A well-thought-out business plan can ensure that your actions are intentional and focused on your goals.

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To the extent that you plan for success, you dramatically increase your chance of realizing that success. However, it's clear that few advisors are doing any business planning at all. And very often, those who are doing it are doing it ineffectively. Research by CEG Worldwide confirms the role a business plan plays in an advisor's success. Our research shows that the highest-earning advisors are more than four times as likely to have a plan as their lowest-earning peers.

This piece of research also hints at the lost potential of advisors who fail to plan. While the highest-earning advisors are much more likely to have a plan than others, only 31.4 percent do have one. I've no doubt that those without a plan would experience a much higher level of success if they took the time for this important exercise.

Traditionally, as one of the first steps in starting a business, entrepreneurs would produce 30-40 page documents outlining their business and marketing strategies, production plans, and financial forecasts. This was a price of admission—almost as a rite of passage—for entrepreneurs to be taken seriously before starting a business.

Unfortunately, the time and expense an entrepreneur has to devote to developing this traditional business plan has proven to be unwarranted. It isn't a good use of your time and doesn't allow you to focus on what's important in your business. It's also no longer necessary, even if you're looking to raise capital to grow your business.

A new type of business plan is emerging that is consistent with how business really works. Entrepreneurs bootstrap their firms first, proving out a workable business model with real revenue before raising capital. They adapt their businesses by overcoming obstacles through persistency and flexibility. Only then do they complete a new type of business plan—one based on their true needs.

Given both anecdotal and empirical evidence that a formal, traditional business plan is not a productive use of your time, I recommend developing a three-part, non-traditional business plan. This type of plan, which is recommended by many successful venture capitalists and investment bankers, most frequently incorporates a PowerPoint presentation describing you and your business, a set of financial projections, and an executive summary.

The first reason to develop this type of innovative, streamlined business plan is simple: You'll make more money. Through planning, you put yourself in a better position to earn significant profits year in and year out than you do by just responding to events as they unfold. In addition, this type of business plan will become an important tool if you decide either to raise additional capital or sell your firm.

The second reason is the value of the process itself. All of us have limited resources and attention spans. As you consider and develop your business plan, you'll become more focused and clearer about what is important and what you want to achieve. Remember that things must happen twice—first in your mind and then in reality. When you create your business plan, everything you want to accomplish happens in your mind, greatly increasing the probability that it will happen in reality.

For the first part of your business plan, I recommend using a simple PowerPoint presentation to address each of the following seven areas, which describe you and your business:

1. The Market Opportunity

• Discussion of your marketplace and its needs
• Opportunities present in your specific niche markets
• Current confirmation of opportunity based on business experience to date

2. Your Compelling Value Proposition

• How you help investors make smart decisions and avoid costly mistakes with their money
• The expertise of you and your partners within your market niche
• Why investors will want to work with you

3. Your Unique Qualifications

• What skills you bring to the table (i.e., rainmaking ability or existing client relationships)
• What skills your team brings to the table
• What skills your partners bring to the table

4. Your Business Model

• In-depth discussion of your business model
• Explanation of your service delivery methodology (i.e., its key systems and processes)
• How your business model is different from the competition

5. Leveragability of Your Business Model

• Clear delineation of how you are going to scale your business
• If appropriate, how you are going to move from a lifestyle boutique to an enterprise

6. How You Will Make Money

• How you've made money in the past in business
• How you currently make money
• How you're going to maintain or increase margins as you scale

7. Risk Factors

• Your specific risk factors (i.e., relying on key personnel including yourself, financial market uncertainties, regulatory changes)
• What could go wrong

Once you've developed your PowerPoint presentation, you can build your financial projections based on your business model. While much about traditional business plans is changing, there is one area that has not changed. When used properly, financial projections will concisely communicate the essence of your business in a way that makes it easy to understand.

To make sure your financial projections are effective, work with a financial expert to help you put your projections together for the next 24 months or, at a minimum, to review what you already have. The easiest way to lose credibility with your team is to have them point out problems with your numbers. In your projections, make sure all information is as up-to-date as possible and that you are prepared to explain the rationale behind every number.

The final part of your new business plan is an executive summary that highlights the most important parts of your plan. It should be no longer than three pages and answer four questions:

1. What do you do? Provide a brief description of your business, value proposition, business model, and how you make money.
2. Why should readers care about what you do? Tell readers what's in it for them. How can they benefit from the plans you have for your business?
3. Who are you? Outline your background, education, and qualifications.
4. What are the important numbers for readers? Include current revenue and net income, as well your forecasts for how these will increase.

There are several factors that will enhance the overall quality of your final business plan:

Make sure you've captured your vision. Your vision for your business is the bedrock of your business plan. It will guide all the decisions you make about the business, where you want to take it, and how you want to get there.

Think of your business systematically. What systems and processes have you implemented to ensure that every client has the same high-quality experience, whether you are present or not? Great value is created when you can delegate responsibility to your employees and maintain quality. Keep it short and simple. For example, "I'll limit the number of investment solutions I handle rather than trying to be all things to all people."

Fine-tune your marketing plan. Consider the demographics of your target market, how you market to and monitor prospects, and why prospects buy.

Maintain flexibility. Recognize there is no one right way to do business. What works today is unlikely to work tomorrow. Success requires constant innovation, finding a better way.

Involve your peers, employees, and consultants. No great businesses have ever been created by one individual. Putting your business plan in writing and asking other people who understand our industry to review it can uncover blind spots that can be easily addressed. Encourage reviewers to pick it apart and find things that don't make sense. You're not looking for compliments, but for breaks in logic or ways you can better serve clients so that the firm and your clients can be more successful.

Stay the course. As you reach toward higher levels of success, greater opportunities will present themselves. Don't be tempted to change your plan radically. If something doesn't fit your plan, don't do it. Be consistent and specific. Be strategic, not tactical. By staying on track, working the plan, and fine-tuning with the new feedback the market will provide, you will be well on your way to realizing your dreams with newfound confidence.