the hundred dollar business

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Over the last few year, I’ve worked more with business plans than I’d realized. This includes:

A. portions of plans for others’ businesses
B. hypothetical businesses I’d like to start & business concepts I have started
C. co-writing plans with friends considering business partnership ideas,
D. having others write miniature plans for ideas they’d like me to start
E. writing plans for companies seeking funding
F. reading plans from companies seeking funding
G. for companies I currently worked for
H. for clients whose companies I had an outside view of
I. reading samples online
J. reading samples from BYU’s Business Plan Competition
K. writing an “action plan” in lieu of a full business plan
L. using templates & software to create a plan
M. writing plans from scratch

What It Is

So, after all this, I’m starting to get a good view on what a business plan is and isn’t. I’m willing to wager that the average entrepreneur doesn’t have that much exposure to business plans when they attempt to write their own, which perhaps is reflected in the accuracy and quality of their own plan.

Now whether you operate your business based on your business plan, or if you just “wing it” constantly, the fact is this:

If you want or need to get funding– angel, venture capital, loan, or otherwise, a business plan (along with other factors) gets you in the door.

No Business Plan, No Open Doors

I’m sure there are exceptions to this, but the standard protocol is business plan + executive summary + introduction + good recommendation + organization/investor/bank with some funds + lots of meetings + pitch + presentation + due diligence + personal financial statements + lots of luck + three to six months= maybe you will get some funding.

In the job hunt world, a resume doesn’t get you a job, it gets you the interview. But no interview, no job– usually. So you have to have one! And not just any resume, a decent one that can work some mojo on your future employer.

It’s the same with a business plan. It’s not the “be all and end all” of running your business, it’s simply a way to organize the critical, standard data about your business, meet industry expectations, and get you entrance to the doors you need to open.

What It Isn’t

A business plan is not a guarantee. Writing one is simply gathering hypothetical or mainly unproven data about the business concept you hope to execute, with an emphasis on the fact that you are capable of making it happen. Nothing more, nothing less.

• If you fail to execute the plan, then obviously the plan loses its value.
• If the market changes and you need to go in a different direction, but insist on sticking to “the plan”, again, the business plan doesn’t serve you.
• If you write a plan with insufficient data, or overstate your projections & become unable to meet your loan/investment obligations, then you’ve spent time on a plan that has been in a sense, completely wasted.
• If your plan gets you a meeting with an angel or VC, but you give a lousy presentation and have a poor business reputation… you get the idea.

Ultimately, a business plan is a living, highly update-able document that covers the basic areas of business, helps you determine and articulate your strategies, and ultimately indicates to outsiders your level of formal market research/preparation and business savvy or naiveté.

Consider it your “final exam” for the semester or years-long effort you should be investing to determine whether your idea even merits substantial amounts of your time & other people’s money.

Who should write the business plan?

You? Your partner, spouse, employee, an outside agency? Well, who runs the company enough to use the plan?

This is, in my opinion, the person who not only has sufficient data to justify each critical section (marketing, finance, operations, projections, the opportunity, sales plan, etc.), but who also ultimately carries the burden of implementing the plan & being accountable to the investor/banker for the use and return of funds.

The Sum-Up

Writing a business plan can be intense. I’ve written them in a matter of hours, days, weeks, and even a few months. It takes some serious effort, more so when you’re under a time crunch.

The ideal time frame is probably about a month to get a solid working plan done, with updates either every few months as you change the direction your company goes in, or else mini-updates before submitting it to an interested party, to tailor it to the things they will be looking for.

(And it does vary, investor to banker to potential partner, as they’ll all scour the plan for different kinds of data).

The bottom line is that you need a business plan, whether you want to call it a “business plan” or not, and even whether you actively “use” your business plan or not.

On any given day, do you know what your financial projections & current status are? Why you’re pursuing a particular marketing strategy? How much everything– everything– is costing you? What your margins are? The particular advantages of your product over 6 of your competitors which you can actually name & detail their product mix & its price & customer reach?

In business, the more information you have about your market & business, the better your chances for success. This is the information that a business plan will guide you toward knowing, if it’s not already accessible to you.

Two Candidates: One Of These Is Not Like The Other

Two candidates are competing for $1M in investment. One’s got a business plan that is being executed, that is full of information that directs the investor towards knowing how lucrative the opportunity is.

The other entrepreneur “hasn’t quite gotten around to working on the plan yet”, and it shows up in the day-to-day operations.

Which entrepreneur is going to get the (positive) attention?

Enough said.