Every investor I know is frustrated with the quality of the typical business plan they get. I’m amazed at this, since “how to write a business plan” is no doubt the most frequent topic found in every business journal, every web site for startups, and the business section of every book store.
You can get free download of sample business plans from the Internet, and there are thousands of customized samples for sale highlighting every business area. I offer a free sample on my own website, which is a version of my own plan. You need the plan for you own efforts, even if external funding is not a requirement.
What is the definition of a good business plan? In simple terms, it is a document which describes all the what, when, where, and how of your business for you, your cohorts, and potential investors. Forcing yourself to write down a plan is actually the only way to make sure you actually understand it yourself. Would you try to build a new house without a plan?
Make sure your plan answers every relevant question that you could possibly imagine from your business partners, spouse, and potential investors. That means skip the jargon and include explanations and examples. A plan that generates more questions than it answers is not a good plan.
Finally, hone the result into a professional document. Remember that you only get one chance to make a great first impression. Make sure it has a cover page, table of contents, headings, page numbers, and is organized logically.
Notice that I didn’t say anywhere that a good business plan has to be at least 20 pages, or have ten sections, or must start with an executive summary. These are good things, but I’ve seen great business plans that are ten pages, or have totally non-standard formats.
But, if you ask, ten sections is a nice round number, and would include the following:
The tougher case is where you really don’t understand the business you are about to enter, so you don’t know what to write. This is a recipe for failure that most investors and professionals can quickly see, so no investment will be forthcoming, and your startup will likely wither and die.
My advice here is to swallow your pride, and find a partner or give it away to someone who has the “domain knowledge” and the business experience to get you going. Your idea may be right, but dead right is not very satisfying to anyone.
Keep in mind that thoroughness and clarity of the plan are factors that will play key roles in successfully financing, starting, and operating your business. A great business plan is one that your team can learn from, attracts investors, and will guarantee your species a future.
Marty Zwilling
You can get free download of sample business plans from the Internet, and there are thousands of customized samples for sale highlighting every business area. I offer a free sample on my own website, which is a version of my own plan. You need the plan for you own efforts, even if external funding is not a requirement.
What is the definition of a good business plan? In simple terms, it is a document which describes all the what, when, where, and how of your business for you, your cohorts, and potential investors. Forcing yourself to write down a plan is actually the only way to make sure you actually understand it yourself. Would you try to build a new house without a plan?
Make sure your plan answers every relevant question that you could possibly imagine from your business partners, spouse, and potential investors. That means skip the jargon and include explanations and examples. A plan that generates more questions than it answers is not a good plan.
Finally, hone the result into a professional document. Remember that you only get one chance to make a great first impression. Make sure it has a cover page, table of contents, headings, page numbers, and is organized logically.
Notice that I didn’t say anywhere that a good business plan has to be at least 20 pages, or have ten sections, or must start with an executive summary. These are good things, but I’ve seen great business plans that are ten pages, or have totally non-standard formats.
But, if you ask, ten sections is a nice round number, and would include the following:
- Executive summary
- Problem and solution
- Company description
- Market opportunity
- Business model
- Competition analysis
- Marketing and sales strategy
- Management team
- Financial projections
- Exit strategy
The tougher case is where you really don’t understand the business you are about to enter, so you don’t know what to write. This is a recipe for failure that most investors and professionals can quickly see, so no investment will be forthcoming, and your startup will likely wither and die.
My advice here is to swallow your pride, and find a partner or give it away to someone who has the “domain knowledge” and the business experience to get you going. Your idea may be right, but dead right is not very satisfying to anyone.
Keep in mind that thoroughness and clarity of the plan are factors that will play key roles in successfully financing, starting, and operating your business. A great business plan is one that your team can learn from, attracts investors, and will guarantee your species a future.
Marty Zwilling
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3 comments:
Martin,
I hear your frustration although I must say I now advise entrepreneurs to NOT write a formal business plan but provide me with 3 alternate documents:
1) a One page brief
2) a Pitchdeck (< 15 slides)
3) a fully baked financial plan (0-5 years)
I find that #3 is of particular importance and I can tell quickly whether the team truly understands the market they are in/entering by looking at the plan. Two stats are often very telling:
a) the expense percentages (R&D, benefits, marketing etc)
b) cost of customer acquisition (people, marketing, sales etc)
I have personally found it very informative if the team can clearly articulate the COGS and understand what it takes to gain market share and sell in the market....
Just my 5 cents..
Happy Holidays,
Ken
I try to get people to write a business plan whenever they come up with what they believe to be a "good" idea. Generally the idea sounds good to the person but when they are forced to develop financial proformas and marketing plans and then defend them it can change the perception of the idea. I am a total believer in the value of the business plan which if done correctly becomes the ongoing implementation tool for the business. As you get into the out years you go back to the assumptions and projections you made in the initial plan and make corrections etc.
Great article-- glad to see the solid reasons for drafting a plan articulated so clearly.
Writing a business plan seems to be going out of fashion lately, but what most detractors don't understand is that a good business plan is primarily a framework for researching, analyzing, understanding, and of course, planning your business.
Also, like Dennis says above, it is useful as a filter for good/bad ideas. We have worked with a couple of startup clients where, by the time we were done with the plan, we all realized the business would: a) take way too much money to get going; or b) really never make much money. Or sometimes, after spending some quality time researching the market and competitive environment, we realized the idea wasn't as compelling or unique as we'd thought it was. In short, I have seen several instances where developing a business plan helped entrepreneurs avoid spending 5 years and their life savings going down a false path.
Finally, assuming that after writing the plan, the business concept is still a "go", I would like to re-emphasize Martin's point that presentation matters. There are few things more tedious than reading a poorly-written business plan. Make it easy for investors to read, and they will do so; make it tough, and they will quickly tune out.
P.S. I am going to link to this on my blog-- I wrote a rather lengthy defense of the value of the business plan called "The Business Plan Is Dead: Long Live The Business Plan" (bit.ly/26exgX) and your article gives great support.
Nathan Beckord
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