~PLAN~
Business Plan: Common Mistakes and Best Practices
When you are creating your business plan you will be working on financial projections, describing your vision and mission, and overall showing bankers, investors, potential partners – and yourself - how and why your future business will work. This process is not without its challenges, so this article offers guidance about best practices (or smarter ways to do things) in addition to some common mistakes to avoid.
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BEST PRACTICES
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The Writing Process
First, this is not a process that is best done all at once, by one person, with an immediate deadline. Instead, it is best to share and discuss with others while working on the plan. Talking through concepts and including others’ perspectives and inviting feedback will result in improved quality throughout.
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Incorporating good graphics throughout your business plan is also good to do. People understand information in different ways, and supporting your information with graphical representations works well.
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Focus
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Be very focused with your business plan, starting with a smaller scope and more known elements and then growing and extrapolating from there.
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Your focus on the customer and diligence in researching and fully understanding the market will also serve you well throughout the creation of your business plan.
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Be cautious about overestimating your own strengths, skills, and time that you will have available to execute your plan. Understanding your strengths and limitations while projecting adequate support throughout your business plan is practical. A business plan that seems unrealistic calls into question the feasibility of the project.
Content
Ensure consistency throughout the business plan. Review and edit for consistency while developing a powerful and readable message. Inconsistencies detract from the overall impact the business plan can have on those learning about your vision.
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Design a Preliminary Feasibility Plan
To get started, create a preliminary feasibility plan. Start small and informally, drafting one paragraph for each of the following areas:
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Business idea
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Value Proposition
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Competitive advantage
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Ideal customer demographics
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A few marketing ideas to attract and retain customers
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A simplified sales forecast
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Ideas on how the business would operate
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Simplified cash flow statement
Once complete, review this plan carefully paying special attention to the finances. Do the results meet your needs and expectations - including compensation for yourself? Remember that a business plan is first and foremost for yourself and your partners. If it falls short in some ways, you may need to revisit your mission.
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Feasibility Plan
Once your Preliminary Feasibility Plan passes muster, create a Feasibility Plan. This includes the following:
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Conduct preliminary research, including potential market size and competitive advances to include in your business plan.
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Fine tune our business idea and your market differentiators
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Identify additional actions for your marketing plan
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Include more assumptions for your sales forecast
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Make assumptions regarding staffing and sourcing of any needed supplies, location, etc.
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Develop the cash flow statement
Again, as before, review this plan carefully. Do the financial results still meet your needs and expectations?
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COMMON MISTAKES
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As you draft, review, and fine tune your business plan, keep an eye out for these common mistakes:
Executive Summary/ General Layout
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Opening message does not succinctly describe the business idea and why it will be successful
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The business plan layout reflects poorly on the entrepreneur
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Business focuses on you and not what you are doing for potential customers
General Company Description
Key information is often not obvious to your reader:
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Commitments
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Guarantees
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Funding from other sources
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Legal issues
Products and Services
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No focus on particular products or services
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Not enough emphasis on the current business and its challenges
Marketing
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No understanding of the market
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No clear statement about how you will generate revenue
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Your sales forecast is not believable
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Plan demonstrates a large amount of hubris
​Management Team & Organization
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Key player bios not included
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No supporting team
Financials
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No funding provided by owners
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Amount of requested funding is not supported by the financial statements
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Amount of requested funding is primarily to pay your first year salary
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Not including the three basic financial statements
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No stated assumptions on which the financial statements are made
Following these best practices and reviewing for the above common mistakes can give you a leg up on developing your business plan and could help to favorably inspire your reader(s). During the review process at each stage, remember to bring in other people to read and discuss to provide a more diverse perception of your projected reality. The ultimate beneficiary of this plan is you and your team, and the more accurate and realistic that you can be while preparing this plan the better template you will have to work from when the project begins.
Contributing Author
Candace L. Moon, Esq Attorney, The Craft Beer Attorney
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Candace L. Moon is a San Diego-based attorney who has spent the last thirteen years dedicating her law practice to the craft beer industry. She has worked with over 500 craftbreweries and craft breweries-in-planning nationwide, handling many different legal areasincluding alcoholic beverage law, contract review and trademark law.
Building a good business starts with a good vision for the business. Much like children are often asked “what do you want to be when you grow up?” a brewery’s vision lays out what its founders hope the organization will become in the future.
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Although setting a compelling vision seems straightforward, a 1994 survey of 1,050 executives published in Business Horizons illustrates how challenging it is. When asked to identify the most important traits of effective strategic leaders, 98 percent listed “a strong sense of vision” first. Meanwhile, 9 out of 10 executives admitted they had serious doubts about their own ability to create a good vision. Thus, having a good vision can provide a company with an edge over competitors.
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Visions work by getting employees focused on a common path toward a desired end. For example, the vision of one UK-based craft brewery is “to ensure Acorn Brewery will be renowned for brewing excellent quality beers as well as delivering fantastic customer service, by ensuring pride and passion underlines every brew and customer interaction.” One key here is reputation building – the brewery will not be satisfied with providing excellent beer and fantastic service but instead aims to become celebrated in the public domain for these strengths.
William Camacho, HRVST
Forming a new business or a substantial expansion of an existing business is a life changing risk. A proforma transforms that risk to an educated level. This establishes confidence in the process of the person or group undertaking this voyage along with the financiers backing it up.
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The goal of authoring a proforma is to reveal the true bottom line to answer one simple question: Are my assumptions viable?
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The essence of a proforma is reflected in the following equation:
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Cost + Sustainability + Payback = Viability
The components on the left side of the equation break down as follows:
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Cost
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A successful proforma happens when you can overcome the amount of Start-Up cash flow needed to get past the break-even point (where cash overcomes debt).
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Sustainability
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Are your income assumptions realistic?
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Does sales volume align with your equipment
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Writing a business plan for your Brewery is important, but it shouldn’t be complicated. This is meant to be an outline to help you prepare to write your brewery business plan that will help you secure funding and help you both start-up and operate your brewery successfully. Here we will give you the basic components of what your brewery business plan should look like and where we can help.
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Whether you’re building a business plan to raise money, grow your business, or just need to work through the practical functionality of your idea; every business plan needs to cover these essential topics. Here’s a quick overview of each topic. There are many more details to consider for each step that's where our expertise here at Plato Brewing and Consulting can assist.
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Executive Summary
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The executive summary is an overview of your Brewery and your plan. It comes first in your plan and is ideally only one to two pages to clearly and concisely describe your Brewery and Business. Most people write it last, as it is really a culmination and summary of your entire business plan.
Jeff Mendel, Left Hand Brewing Company
When thinking of starting a brewery, or any business for that matter, it is essential to have a Business Plan which details what you intend to do, how you intend to do it, how much money you will need to accomplish your plan, and the strategies and tactics that will help you achieve success.
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The Business Plan has two important purposes. First, the Business Plan is presented to potential investors. It provides investors with the necessary information allowing them to make a most informed investment decision. It is likely that your effort to build your brewery business will require a moderate-to-large sum of money, and it is likely that you will need sources of funds in addition to your own to get the job done. The business plan will need to be presented to potential equity investors (shareholders) as well as potential sources of debt financing (banks, municipalities, etc.). Anyone person or entity who is a potential source of funding will need and want to see your Business Plan.
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Your Business Plan will also serve as your guide, laying out the strategies and tactics you intend to employ in order to achieve your financial goals and provide a return to your financing sources (paying out investors, paying back loans).
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Secure/raise financing
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Build your brewery
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Establish vendor relationships
