Is the business plan dead?
There's been a lot of debate surrounding business plans- how long it should be (the original 40 pages or more condensed?), what stage you should create one at, or whether you should even create one at all. I think that they're useful, but I'd love to hear what everyone else's thoughts are!
Personally, I hate 40 page plans! To read them, to do them... or to teach others about them, like I used to do.
I prefer the One Page Business Plan(R) I learned about the program from a day-long event I took in 2000. Used their resources with my clients for years, and then I became a consultant for the program in 2003.
They offer a certification program (drop my name).
I find that even banks will talk with folks who have a one pager. Not to get funding, (yet) but to talk to them. Much better than walking into a bank or VC cold.
In my experience around entrepreneurship, I tend to agree with those that have mentioned the business plan as a document that will evolve as the business evolves. This is truly because plans will not go according to how they are forecasted, but investors and partners need something to go off of in order to see that sound business sense is present, and that avenues for redirection are there in case issues arise that need to be addressed.
There's an old saying: There is no good wind for a sailor who does not know where he wants to go. First this means you have to formulate your business goals, The second meaning is the wind, an ever changing factor on your way to realise your targets. So Plan, act and "re-plan" as a constant routine.
If not you'll never reach were you wanted to o.
Business plans are essential, as a business mentor for new start ups i always encourage the development of a BP as a living document to be reviewed on a regular basis.
my orgininal BP was very basic and meet my business needs at the time, however I recently completely rewote it, it's now much more comprehensive and reflects the direction my business much more accurately.
The essence of strategy is to create value (in the business). So the plan should reflect the planning needed to do so. Simply put, it should show where the business is at now and where it is desired to be at a future point.
The tactical issue needed to get it there are written as the inclusive data. The Bank Manager (say) is looking to understand the resources available and the competency of the owner/s to progress the planning. That would include Milestones i.e. the 3/6/12/months (or whatever) updates are relevant to making progress and/or changes to planning. It's a dynamic working document subject to change within the business' operating environment. Its main purpose is to be the guideline that helps keep you on the chosen course - unless you change that course (the end game). Smaller businesses must be prepared to make changes in order to capture the opportunities - so don't be afraid the change it as necessary to meet real circumstances beyond your control. Business Plans must never be written in stone for smaller organisation's because you need to know a lot about the business landscape you are operating in and that means research before formulating the first Plan - otherwise you could just be writing personal speculation or opinion (fiction not fact).
I have always believed in the business plan, but I have long since stopped believing in the written business plan. While the questions that are asked in devising the business plan are important,not only do I think that document the answers is unnecessary, I also believe that doing so can be harmful for the following reasons.
Firstly, in a world where things are changing at an ever increasing rate the written business plan can become a document set in concrete. This leads people to try and get the world to fit the plan rather than trying to adapt to change.
I have also found that detailed business plans are often too big to revisit regularly and hence they get put on a shelf or in a drawer where they eventually turn a sepia colour suitable for a museum.
The other problem with the written business plan is that the fact that it is written down makes it seem an undeniable truth. I have always regarded the cashflow forecast a bit like ecumenic forecasts. Something that supposedly tells you the future and which you then spend time working out why it turned out wrong.
Answer the business plan questions by all means, but keep the answers in your head so that they can be modified as the world changes. Only do a business plan on paper as a last resort to appease a banker who doesn't understand but wants an insurance policy to cover his lending decision.
I believe there are other ways to get your point across besides a business plan that few people will read. I'd look at Shark Tank and see the questions asked by the Sharks and build around those. The only one's asking for business plans are people who want to learn more about the business, and less about you. I wrote business plans for years, sometimes charging as much as $7K -- I just don't do them anymore, as they are a waste of time and money. I would try to be innovative and clear-thinking. Business plans are dead, in my estimation. Go on kickstarter or do an info graphic, be creative. Have the financials on hand, but all the SWOT and stuff.. well, build it as you go along, but don't work on writing a tome that no one is going to use except to glance over it and come up with the original reason they were poised to deny or grant you money in the first place. Life is short. So is money. Be smart. Creative. The success stories in the world are not of people who followed the rules. The rules keep you down.
In very basic terms - without a Business Plan, you haven't got a Business. And of course, the Business Plan must be subjected to both Regular, and Opportune Reviews and possible Updates.
No Business can proceed in an orderly manner, without a Plan. Also, if you need to raise Funding, your Plan should be available to the Fund Sources so that they can make an informed decision on whether to lend you the money, or not. (If they say "No", you really ought to get help in to review your Business Plan - hopefully, you will have done that BEFORE needing Funds.
As for reviewing the Business Plan - this is simply common sense. You need to be able to see how well you are progressing, against your anticipated performance in your Plan. If you have constructed a sensible, auditable Plan, then you will be able to see where you are 'going wrong' and make the necessary changes. And sometimes, there are rapid Market Changes, for which you must yet again check that your Business Plan is sufficiently robust and, if not, make the necessary changes.
Review timescales ? Well, Scott's recommendations are a very good start - ensure that you have formal Plan Reviews at least once a Quarter. As for the 'Opportune Reviews' (Market Changes), please don't commit yourself to a 'knee jerk' change - make sure that you retain some flexibility. Anyone looking at the Stock Market on a Daily basis will have a different perception to someone who checks every hour - and likewise, someone who checks only once a month.
Constructing a Business Plan is not a simple matter - I recommend that you start the process on Day 1, and as you firm up on your business ideas, market, etc, update the Plan as you go.
And whatever you do, don't just write an 'appealing Business Plan' as a 'one-off', to be put away when the Business is underway. That way leads to an uncontrolled, unmanaged business, with no Accountability or Traceability that will be required.
Finally, how big should your Plan be ? Well, how big and complex is your Business ? To answer that, you simply need to set down your Process, from Start to Finish, with all the Dependencies and Interactions. Start at a very High Level, first, then break it down to Measurable Steps/Phases. Try to perform (regularly) a Critical Path Analysis, and ensure that you have Milestones to denote various actions Completed. There is absolutely nothing wrong with PERT Tools and GANNT Charts, and today, instead of buying vulnerable (single source) Business Software, remember that Excel and Access and Word can cope with ANY Project.
You first need to write a Text Summary, then construct your Plan Network, and check it for consistency.
Put simply - if you and your Staff/Client(s)/Lender(s) cannot read and understand it in an hour - it's too complex. Personally, I prefer Executive Summaries of not more than 4 pages, and probably 16 further pages of details. Most importantly - and this is why I suggested Access - ensure that every testable item/stage is indexed. If you have done your job properly, preparing Report Writers should be simple. A Business Plan of 40 pages is probably going to contain repetition - use of a Relational Database would ensure consistency.
And never forget the old mantra --> Garbage In = Garbage Out.
The business plan is far from dead. The two most important section are the Executive Summary and the Sales forecast which answer what is the problem you are solving and how much revenue will your business generate from your solution. Business Plans must be fluff-free. The length of the plan is how long does it take to identify the problem and cost of the solution, the marketing, sales, financial operations and proforma are essential. If you are looking for investor funding or a bank loan, you need a business plan. Even if you are self funding your operation, you want a business plan.
Your business plan is your navigator, your sextant, if you will, to keep you on track and on course. Without it you are without direction. Forty pages are necessary if you are selling a piece of big technology and looking for VCs or Angels, but keep in mind, the reader of your business plan is only interested in how are you going to generate revenue and how soon can a return be expected. Your business plan must demonstrate precision, uncluttered thinking and a financial plan that is tight and rock solid. To sweeten the plan, you should be able to cite statistics achieved from your minimum viable product, then your sales forecast is valid.
Personally, my business plans run 3 years and I teach job seekers to develop a business plan. I view a business plan as a friendly advisor that keeps owners on track and on target in creating objectives which are measurable and achievable.
Thanks for the question, Kimberly. Hope this helps.
Not a chance. Everyone needs a plan. Just prepare what is needed to achieve the objective.