Business planning, not business plans

I usually cringe when I hear an entrepreneur or small business owner talking about writing (or worse, being told to write) a business plan.  The reason I cringe is that, too often, what people mean by “business plan” is some 30+ page Word document that no-one will ever read and which will end up as a dusty binder on a bookshelf, or some forgotten bytes on a dusty hard drive.

Let me make it clear – I’m not advocating running your business without any plans; I am a big advocate of planning – both strategic and tactical.  I just want those plans to be meaningful to you and your team in running your business.

At this point, you may be asking “what about if I need to give a ‘business plan’ to a potential lender or investor?”.  Then what you are going to create is an “investor-facing” document which is based on the needs of that audience.  Such documents are based upon the plans that you have defined and from which you run the business.  If, for example, the audience is Venture Capital, they are not going to read a traditional 30+ page business plan.  On the other hand, your bank loan officer may demand one (not because he is going to read it, but because it is on his checklist of items you must submit).

Plenty of other people across the web-o-sphere (with more knowledge and experience than me) have basically said the same thing; so why do we keep seeing people asking for help creating “business plans” and others pointing them to the same old tired templates?

I want the people I advise, mentor, coach and consult with to create plans that are reasonable and feasible – both in terms of what gets done when, and how much money they need to support their efforts.  Plans that show they’ve done their homework about how to get from here to there.  Who is the audience for these plans?  You and your team.  It’s the map that keeps you all on the same page.

In broad terms, I tell people that they need to:

  • Define a destination
  • Create strategies that will get them to the defined destination
  • Understand the tactics and actions that must be undertaken to bring the strategies to completion
  • Ensure that their resources and daily processes/procedures are aligned with the tactics and actions

In other words – make sure your ‘wagon team’ is all facing and pulling in the same direction; because it is real hard to get your wagon moving if the horses/oxen/asses are all pulling in different directions.  After all, while creating ideas may best be done in a solitary environment, turning those ideas into reality needs a good team (see last week’s blog Isolation vs Collaboration).

Out of this will come the marketing and operations plans, the staffing requirements, the financial projections, etc. that make the plans something for you and your team to work with.  From here you can then create your elevator pitch, one page teaser, pitch deck, traditional business plan document, or whatever you need to communicate to the audience you wish to communicate with.  Of course, any of these external-facing documents you create will just be a current snapshot of where you are with your business and what your plans are currently – those plans will change and a later snapshot may look very different.

So, ask for help with ‘business planning’ not writing a ‘business plan’ – and if someone offers to “write your business plan for you”, turn around and run (yes, run don’t walk) away from them!!

Excellent Execution

Posted in Entrepreneur, Execution, Funding, Planning & Strategy, Small Business and tagged , , , , , , , , , , .

9 Comments

  1. [This comment was originally posted to a LinkedIn Group]

    Very well said, John. Thank you. Here’s our take on Business Plans: “There are those who will attempt to persuade you that you must know everything there is to know about electricity before you can operate a light switch. Their mantra is “business plan.” Be not surprised that these same people are from academia, government or large corporations, have absolutely no hands-on experience in starting and growing a venture, nor any comprehension of the importance or even the existence of the entrepreneurial exponent, nor any capability, whatsoever, of understanding and operating at risk.Yet, they presume to be “the” experts in teaching you how to have a successful business.”

    “Business plan building” is a big business, as demonstrated by the thousands of books, tapes, videos and courses sold today. Even your friendly, neighborhood, tax-subsidized, small business development center will be happy to sell you numerous courses on the topic, with such enticing titles as “Roadmap to Success” or “How to get a Loan.”

    Seven things to know about business plans:

    1) Even the most perfect plan ever written will not necessarily get funded.
    2) Even the most perfectly written business plan perfectly executed will not necessarily produce a successful business.
    3) The struggle in composing the business plan has caused more than one potentially great entrepreneur to never launch a wonderful idea.
    4) There are literally hundreds of thousands of highly successful businesses in operation today that were started without a business plan, a college degree or deep pockets.
    5) The next time you’re hob-knobbing with Bill Gates, Donald Trump, Mark Zuckerberg, Ralph Lauren, Michael Dell, the late Mary Kay Ash, Steve Jobs, Sam Walton or Walt Disney (just to name a few), ask about their business plan?
    6) Remember the huge “dot com” implosion? Every one of those busted companies had a business plan that was read in detail by the investors.
    7) Here’s something you may find of interest: a Houston Chronicle article Saturday, November 5, 2011 – about the 20 year old who just raised 1 million dollars: “We didn’t have an executive summary or a business plan . . . just two people and a story and a demo.”

  2. [This comment was originally posted to a LinkedIn Group]

    I’ve been helping entrepreneurs/founders of growing firms develop business plans for many years and I have written a book about it: GUIDEBOOK TO PLANNING – A Common Sense Approach. Any entrepreneur/founder can get it in E book format from Amazon for less than $10. It might be the best and least expensive investment they ever made. It certainly will save them some of their precious start-up funds.

  3. [This comment was originally posted to a LinkedIn Group]

    I agree. Twenty years ago, I was a prime advocate of the business plan. Not so today. Most of the deals I work on now, the money is raised by a great demo, or free version, with a few hundred early users. I just had a conference call with a start-up client in Napa, CA where I reiterated the same thing.

  4. [This comment was originally posted to a LinkedIn Group]

    Good to see you bringing out this point John; I will be interested in seeing the responses; yes we need the “Business Plan” to satisfy and acknowledge the business community. We need the “Action Plan” to bring it to fruition. Cheers!

  5. [This comment was originally posted to a LinkedIn Group]

    John,
    I respectfully disagree with your assertion that entrepreneurs and small business owners don’t need to write a business plan. A business plan does not need to be a lengthy document; we advise people that 15 – 20 pages should be enough.

    The process of writing a business plan allows an entrepreneur to examine their business from a critical perspective, which often leads them to both challenge and defend their assumptions. More importantly, if you choose not to write your business plan you’ll miss an opportunity to consider your business from many angles and potentially avoid costly mistakes that become evident on paper before your put your plans into practice.

    Writing a business plan is important for several reasons beyond raising capital. It is, first and foremost, a plan for the success of your business. It will outline what you’re selling, who your customers are, and the anticipated financials. It explains how you market, sell, and provide your product or service. Developing financial projections will help you determine pricing, understand your fixed and variable costs, and ultimately steer your business to profitability. The financial model will help you determine, based on revenue and costs, how many customers you need each month. It will also help you estimate your cash flow, which will help ensure that you invoice your customers and collect payment in a timely fashion; this will also help you plan your payments to suppliers and value the credit they extend to you.

    Writing a business plan is a valuable process that yields a tool helpful for managing the business as it is launched and grows.

    • Karen,
      I understand why you disagree. Let me say this:

      “The process of” business planning “allows an entrepreneur to examine their business from a critical perspective, which often leads them to both challenge and defend their assumptions.” Notice I used most of your words.

      I think if you re-read the blog post, I think you will see that what I am advocating IS creating a “plan for the success of your business” – and, yes, that includes market strategy and financial assumptions and projections, etc.

      What I’m against is people downloading or being given a template for a “standard” business plan when they don’t really need to create that type of document – or worse being charged thousands of to have someone create such a document for them.

      If you want to write something down – and I advocate writing things down because it helps you get clarity and it supports clear communication – then write down the things that are going to help you run your business every day.

      I haven’t seen one “standard business plan template” that clearly connects goals, with strategies to reach them, with actions and tasks to complete the strategies, and that can be used to ensure that all your processes and resources (people, money, etc.) are aligned with the actions, strategies and goals. Most of them seem oriented towards defining how much money I need to raise, what am I going to spend it on, and why you should lend/invest me the money.

      Fundamentally, I believe we agree on the process and the information that is the important output of that process. I just don’t see a 15-20 page document, formatted as a “standard” business plan being THE deliverable of the business planning process.

  6. [This comment was originally posted to a LinkedIn Group]

    A business plan is required, but should be 10 pages and be a living document that summarizes current status, sets direction and provides a dynamic roadmap to gain action, commitment, capital and other resources from stakeholders and to grow customers, markets and valuation.

    Read “Business Plan FAQs and Answers” on our blog at:
    http://strategydynamixllc.wordpress.com/2012/03/09/business-plan-faqs-and-answers/

    Learn about our “10 Page ‘Investor Ready’ Business Plan” based on assisting hundreds of companies as well as incubator tenants to raise capital and to ReThink, ReCreate and Relaunch at:
    http://strategydynamix.com/services/businessplan.php.

    Best
    Sylvester

  7. [This comment was originally posted to a LinkedIn Group]

    Good discussion and good points.

    The reality is that both business planning and business plans are still critical depending on the purpose and the audience. Non-traditional lenders such as CDE’s, CDFI’s, SBA 504 and 7A still require start-ups and fledgling entrepreneurs to put together coherent business plans to be eligible for non-traditional funding. Business planning is increasingly in vogue when pursuing venture capital especially from the likes of evergreen funds.

    • Don’t disagree with your point about the “business plan” as a presentation vehicle for certain audiences.

      My point is that it is the output of business planning is that is important, not what format you put it in to communicate to others. Too often I see business owners too focused on creating the “right” document and not putting enough focus on what is important to their businesses.

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