The Real World Business Plan

Business PlanLately we’ve been helping a lot of people with writing a business plan. But I spend a lot of time reminding clients of what a business plan is… and what it isn’t.

A business plan is a business tool. It can be a road map for you to use to get where you are going. It can be an explanation to a bank of exactly how you intend to repay the money you are asking them to lend to you. Or it can be a marketing tool to entice venture capitalists to invest in your business.

What it isn’t is an end in and of itself. A business plan is not identical to the business. The map, as they say, is not the territory.

Your Road Map

What I am about to suggest is a little bit of heresy: You do not need a formal business plan before you launch your business. In fact, over-planning can result in a failure to launch. Sometimes, what you need to do is to just jump off of the cliff and figure out how to swim once you hit the water.

So if you are starting your business, sketch out your idea of what you want your business to be. Figure out what it will cost to get started – bare bones minimum – and how you are going to pay the bills while you get the ball rolling (maybe you just keep the day job for a while). Then, go for it. Get a few sales under your belt and refine how you deliver your services. Then you have a proof of concept. Then you have an idea of where you need to go.

By over-planning and over-thinking your business launch, you can stifle your ability to pivot in the direction the market thinks your product or services need to develop. You can get locked in to technology that becomes obsolete, for example, or you can lose sight of customer feedback on your product. You can limit yourself.

That having been said, a one or two page business plan can be a great way for you start out. Know generally what you plan to build, sell or do. Know generally how you plan to market your services. Do a SWOT analysis so that you’ve thought things through. Know what it will cost to operate. But don’t overdo it. You’ll find pretty quickly that some of your assumptions were wrong, that things cost more than you thought, or that customers want something you didn’t think to offer them. Stay flexible and be ready to change the plan if need be.

Getting Money with A Business Plan

The time to write a formal business plan is when you are asking someone else for money. Do not waste much time on a formal business plan until you reach the point where you need outside investment.

A bank wants to see a three-to-five page business plan outlining what you do, how you market your product or services, and what your balance sheet looks like for two or three consecutive years, plus two years of financial projections. Even then, the business plan is looked at only after they examine your personal credit rating and finances. Yes, even if you are going after an SBA loan. The business plan has to be there, but it really only comes into play when the banker is undecided as to whether to lend you the money. So keep it short and sweet and factual.

At the other extreme is the business plan you need to raise venture capital. Unless the financier is your mom, the people you will be asking to give you money want a marketing presentation. They want to see that you have your act together financially, too. But what they really want to see is that you are serious, that you know your industry and your market, and that you are good at selling your product or service. In this case, you can take the basic business plan you worked up for your banker and beef it up with market research, a detailed marketing plan, and some slick graphics showing your market share, your projected growth and, basically, how you will pay the investors back on their investment.

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