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Friday, August 14, 2009

Business Plans - To Have Or Have Not

I deal with numerous budding entrepreneurs that are extremely confused about the need or un-need of a business plan.

When I was in graduate school (MBA), I learned about and wrote several business plans. On my first attempt, I wanted to do such a great job that I researched and found every single template that I could, took each and every section and category and tried to incorporate all of that into this first plan as I wanted to ensure that every single possible section was included in some form or another.

What I end up with was a bloated 50 page worthless document. The feedback I heard was that 1) it was way to big (too many pages) and 2) that I ended up repeating myself over and over which made the document very hard to read.

Since that time, I have written and read several hundred business plans and have come to the following conclusion:

Business plans are great tools for the business owner - and only for the business owner. One of the reasons that I put so much information in my first plan (why I tried to cover every possible section known to man in this plan) was that I was not writing it for myself but for my audience. While writing for an audience is great for communication - it does not work very well with business plans. Business plans should be written for you (the business owner). Thus, they do not have to be all inclusive (like I tried to do on my first plan) nor do they have to be very formal at all. The idea behind a business plan is essentially to create a somewhat structured environment in which a potential business owner will think through all or most of the issues that will effect the company over time - to include identifying markets and target customers, competition, operating logistics and to ensure that your efforts will or can be profitable. There is no real formal way that each business has to follow to achieve this. Plus, since business plan can change daily for new ventures, I have drawn the conclusion that much of what is contained in these plans does not even have to be written down in any logical sequence. Simply jotting down some notes or random journaling about issue that arise can be just as helpful and much less time consuming for the business owner.

The goal of business planning is not to create a formal document that will sit in a drawer and collect dust but to prepare a document that will guide the entrepreneur through the upcoming trails they will surely face. Anything else is just killing trees.

Lastly, most new business owners will only contemplate writing a business plan when they are seeking funding of some sort. Keep this in mind: No one reads these plans in their entirety. Bankers may peruse your financials but most likely will glaze over everything else. Other investors many spend more time on your management section or marketing analysis. Both should and usually do read your Executive Summary.

Thus, if you find yourself in this situation - writing for an audience like bankers or investors and want to save a ton of time and headache - try to understand what sections your audience is really interested in and focus on those. Remember, writing a business plan for an audience does not really provide you much insight - thus save time and effort by giving them only what they need. Your time will be better spent on actually developing and growing your business.


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