Nothing sends shivers down the spine of the new entrepreneur more than the idea of writing that business plan.
Over the past several weeks, I have had the pleasure (?) of reviewing a number of business plans. Some were for a business plan competition, others were for companies that I have been advising and still others were presented as part of a class that I have been taking.
It is very instructive to me to see how people treat their business plans.
A very few build their plans so that they can be used as a real guide to build and grow their business, much as an architect uses a blueprint to guide the building of a house. However, often they forget that another reason to write a business plan is to sell your idea to an investor or a banker or a vendor. You need to have that hook in there that explains the mystery of WIIFM (What’s in it for me?) for the reader.
Others use the business plan as a marketing piece. The more graphs, flowcharts and photographs the better. If you can find a way to throw a video in there, it must be golden. Market size, the entire population of the US? Develop a comprehensive financial or operations plan? — they figure they’ll get those sorted out when they get the investor bucks. Um, sorry, but investors want to understand how the business will make them money. That WIIFM concept comes back to haunt us.
In reality, the business plan is an exceedingly hard document to write. It has to function in both modes, as a management tool and as a marketing piece. If you look at writing the plan as something that you have to do to check the item off the entrepreneurial checklist, I can almost guarantee that the final product will not achieve what you want. If you do not have a few trusted people edit the document and provide feedback, it will not achieve what you want. If you do not take the time to lay the document out clearly with a title page, table of contents, headers, footers, section headings, spell check, grammar check and possibly footnotes, it will not achieve what you want. If you don’t make sure that your financial statements tie together and are reasonable, it will not achieve what you want.
And the sad part is that an investor or banker probably sees hundreds of business plans a year. They probably spend an average of 5-10 minutes scanning the document to see if they should invest the time necessary to evaluate the plan. You may have the best widget or service on the planet, but if the plan doesn’t sell in the first 5 minutes, you may not get a chance to present to the target.
The business plan has to be able to clearly explain what the business is all about, why it is necessary, who will buy from it, how you will operate it, who will have what responsibilities, what the financials are projected to be and what kind of returns an investor can expect.
In the past several weeks, I haven’t read one plan that met all of these criteria. But I remain hopeful that I will find the Holy Grail sometime soon.