How to Build a Lean and Efficient Business Plan

The concept of the lean startup, developed by entrepreneur Eric Ries, looks at how product development cycles can be shortened and businesses can run more efficiently by continuously measuring progress and feedback. This philosophy is particularly relevant when it comes to thinking about your business plan.

In business, it is the continuous planning process that matters. Your business plan, like your business, is a living, evolving, flexible thing. It requires rapid changes and fact-based decision making. I like the body metaphor implied by the term. Lean doesn’t just mean thin; it also means healthy, muscular and efficient. Here five ways to help make your business plan leaner:

1. Make strategy the heart of your plan. Strategy is focus -- focus on specific target markets using specific products or services. Your strategy is based on some strength or characteristic that links you to your preferred buyers and the solutions you offer them. It defines how you want to set your business apart from the crowd. Strategy isn't text -- it's concepts. You can summarize strategy in bullet points, using charts or even with a series of images.

To test your strategy statement, read it and ask yourself whether it describes your unique business or could be applied to many others. Is it specific enough to be implemented? Does it define a market, product and branding focus? While everything in a business plan is subject to change, the strategy changes more slowly than the rest of the plan in response to changing conditions.

2. Summarize more, elaborate less.Your business plan is held up by eight key core concepts: market, product or services, production, marketing, sales, distribution, management and finance. A fat business plan describes each of these key areas in elaborate detail. Lean business planning means using more bullets and less text. It refers to trends and ongoing assumptions as economically as possible, explaining them in detail only where the detail isn’t already understood.

3. Track progress and manage course corrections constantly.
Track your progress with lists and tables full of numbers that you can use to course correct. This is lean to the extent that it's specific, concrete and measurable. The most important part of this is a list of milestones. These are scheduled achievements and activities, each of which ought to have dates, budgets, performance measurements, expectations for spending and sales and specific assignments for task responsibilities.

Aside from these milestones, good planning also needs regularly updated projections of sales, costs, expenses and cash. The projections should be just detailed enough to offer good plan-verses-actual analysis for better management. For example, monthly projections are probably essential for at least the next six months, and usually 12 months is better; but monthly projections beyond a year are most often a waste of time. The goal isn't guessing right (which never happens) but rather laying out the probable results and connecting the dots (like expenses to sales) so you can track progress and make useful changes.

4. Dress up your plan with descriptions.Descriptions you use to dress up your plan depending on the audience might include market details, technical or scientific background, company history, bios of the management team, generic market research, proof of concept and competitive analysis. Like clothes, you make these descriptions appropriate to the occasion. For example, you might need to prove a market to assure investor or to prove financial stability to assure bankers.

5. Be consistent about updates.Planning for a startup is a lot like diet and exercise. Business planning is a process, not an event. Like diet and exercise, the key to staying lean is regular repetition over a long time to generate real positive benefits. You don’t do it once, or even once in a while. You review and revise your plan regularly.

Tim Berry
Tim Berry is the president of Palo Alto Software Inc., based in Eugene, Ore., which produces business planning software. He is also the author of 3 Weeks to Startup and The Plan-As-You-Go Business Plan, published by Entrepreneur Press.

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