Wednesday, April 23

To business plan, or not to business plan

Having not come from a business, or particularly academic background, I have always been negative towards lengthy and overly pretentious business plans. My views, which have been verified by my experiences with the Kauffman Foundation are that plans should be crafted to serve a distinct purpose. There’s definitely a different view on plans in America than in the UK, where they are commonly taught as the solution to starting a new business. Having been introduced to the 7 slide business plan concept by Bill Aulet, and seen the reliance on business plans attacked by figures such as Carl Schramm and Ted Zoller which backed up my gut feelings on the matter.

I’m not saying that you don’t need to create a business plan, because I think that the process is a necessary step in the journey of starting a business. However, my belief is that the process is the important part, and not the outcome of the plan. By having a framework to work on, it’s easy to spot what the areas of weakness are in your research and be able to tackle them.

A lot of plans that I have seen are more of a research paper, than a plan for business and I this is a mistake. By all means do the research and have all the in depth information that is necessary, but don’t then just transfer this blindly into a “business plan”. My view is the plan should be succinct and to the point, it should contain only the information necessary to get your point across and should draw your audience into the story of the business, not be a bible to every last unnecessary detail.

The same is also true for the financials, in that they are a necessary step in thinking through a business, but this is where their usefulness ends. Of course completing a projected forecast for the next 3, or even worse 5 years is purely academic, what it does do is to force you to think through the different aspects of the business in detail, and it will soon become clear when you have forgotten an important aspect of running the business when you are unable to complete the forecast adequately.

I am convinced that investors are also indifferent to the business plans themselves, and what they are really looking for is the competence and awareness of the founders to create a plan that not only makes sense, but shows a good understanding of business acumen and a grasp of the financials.

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