7 Things to Know About the All-Important Business Plan

By Alex Day

Having a business plan is an absolute necessity for any business.  Now the concept of the "Business Plan" has changed over the years.  The venture capital model on the West Coast requires such high throughput that the whole concept of the business plan has changed. We in the mid-west like to adopt concepts that develop in Silicon Valley, so we like doing "Business Canvases" as well.  These are abbreviated business plans and allow venture capitalists who need to churn through hundreds of deals, to make quick evaluations as to their interest, by reviewing a minimal amount of information.  I am a big fan of condensing down your message, but I also hold on to some of the traditional notions of needing a "real" business plan, not just the Cliff Notes.

Also remember that there is a difference in "Planning your Business" and your "Business Plan".  The business plan is a result of planning your business.  It is the document that is used to communicate what your business is, how it will work, and why it will succeed. 

I have written dozens and reviewed hundreds of business plans over my 25 plus year career. Based on this experience I have put together a few pointers for the first time business plan writer. 

1.      Remember that brevity is the soul of wit.  When I first started writing business plans, I wanted it to have weight.  Both literally and figuratively.  I thought that the more I knew about a subject, the more information it should contain.  This was one of the many mistakes of youth.  As I have gotten older, I know that the more I can communicate, with the least amount of words, the better off I am. 

2.      Understand the different types of business plans.  Oftentimes people think that a business plan, is a business plan, is a business plan.  This could not be further from the truth.  A business plan that you are going to present to a bank is going to be different than a business plan you are going to present to a venture capital investor.  Be sure to know your audience.  The business plan should always tell the story of your business.  But depending on who the audience is, will depend on HOW you tell the story. 

3.      Your business plan is a communication document.  Your business plan is designed to communicate and explain your business to YOU and to others.  The hard part is using it to explain your business to others.  It is so easy to get too close to your business and make statements that are completely apparent to you, but may be completely lost on someone who is not familiar with your business.  EFFECTIVE communication is difficult.  Remember this document is you, communicating what your business is and what you want it to accomplish. 

4.      Never have someone "write" your business plan for you.  You will find dozens of people who will "write" your business plan.  Beware of those service providers.  What you need is someone who will "help" YOU write YOUR business plan. It's your business. No one can capture that business like you.  It is fine to have someone help you verbalize your plan and get it into a written form.  But don't ever think that someone else can "write" it for you.  They can only help.

5.      When someone asks you if you have a business plan, the answer is ALWAYS "yes".  Just because you have not taken the time to "codify" your business plan, does not mean you do not have one.  If you are starting a business, then you have a business plan.  It may only be in your head right now, but you do have a business plan.  When they ask if you have a business plan, you answer yes.  If you do not have it written yet, you immediately let them know that it is in an early form. 

6.      Be careful using business plan writing software.  Having managed small venture capital funds, I reviewed a lot of business plans.  When they came across my desk, it was immediately obvious when business plan software was used, by the formatting.  I am not saying whether this is right or wrong, or if other people draw the same conclusions, but I immediately jumped to the conclusion that they were inexperienced.  The software can be helpful, but be sure that you change the formatting, so that it does not look like you used a template. 

7.      The most IMPORTANT part of your business plan is the executive summary.  This is your shot.  This is the part that is most likely to be read.  Therefore, everything else hinges on this document.  My recommendation is that it never go over two pages, and in the best case scenario, will be one page.  Sir Edward Montagu (Lord Sandwich) said, "If any man will draw up his case, and put his name at the foot of the first page, I will give him an immediate reply. Where he compels me to turn over the sheet, he must wait my leisure."

Remember that the true "business plan" is that idea which you have conceived.  You may not be the best writer, and you may not be great at using the written word to communicate your "business plan".  Don't let this deter you from your dreams.  Don't be afraid to get help translating your plan to a written document.  Great ideas can get funding from mediocre business plans, but rarely can a mediocre idea get funding from a great business plan.