A New Perspective on Business Plans
I remember being in business school. One of the modules was business planning whereby we had to write a business plan for a fictitious company. Of course, we all produced a cliched 70 page behemoth of a document. We made sure that it ticked all the boxes so we could get the most marks. When I finished and entered the real world, I firmly believed that I should write a similar plan for my start up. How wrong I was.
This approach to teaching business planning is common place. There’s probably a teacher preaching this right now in a masters degree online course. Most people who leave a business school have a distorted view of the business planning reality.
Some people recommend that people write a detailed business plan just for their own management use. I agree with this. However, I believe that they should only use one A4 page and a pen. They should write their internal busness plan in the form of a scorecard and they should regularly check their progress.
With regard to a business plan for investors, since then, I have seen the light, and now advocate a more practical approach to writing one. Now, I view a business plan as a story. It’s a story about your business so far, and a best guess on what is going to happen in the future, based on your current conversion rates etc. It should be presented in the quickest to read format. Potential investors should understand your business model within five minutes of picking up the plan. In general, I agree with the new consensus that you should write your business plan on a 10-15 slide deck with notes.
The more you can back up your assumptions with hard evidence of actual conversion rates, cost per customer acquisition, positive product reviews by industry experts and glowing customer testimonials the better your business plan will be. In other words, if your plan is packed with real world evidence, you have a great chance of getting investment.
However, the same amount of background work goes into a plan in this format. The difference is that you don’t have to spend two weeks writing, formatting and proofing a massive document that will never be read in it’s entirety. See, as a start-up entrepreneur who requires investment to scale, your job is to make investing in your business a no brainer.
Think about it, the easier you make it for investors to understand your business the better the chance that they will invest. It has been proven that business plans are not as important as they are made out to be. Research from University of Maryland’s business school shows this. Your business plan is not an investment tool, it’s a communication tool and just one component of many a potential investors will consider.
In conclusion, if you tell an interesting story about your business that points to future success you are onto a winner. On the other hand, If you produce a 70+ page document, potential investors will have another cure for insomnia and your message will be lost. Remember, the work isn’t in the writing, it’s in the building of a business model that gets results.
