Documenting Business Plans
I’m in the midst of attending a workshop that was titled “Starting a Business”, but which I’ve learned would be better titled “Writing a Business Plan” since that’s what is being focused on. This raises at least one question, which is how fundamental is writing a good business plan to starting a business?
This came up during one of the sessions, when one attendee asked what it would cost to get a business plan written professionally, and the instructor replied that it cost about $3,000. However, he added the caveat that he would not recommend that an entrepreneur, or, as he called the class, micro-entrepreneurs, have someone else write the plan for them.
This evolved into a quick discussion about the fact that there are actually a few types of business plans, and the course is focused on one in particular. There is the plan that you use to show bankers or investors, for which you might pay someone else to write it to be sure it caters to the expectations of the readers. There is also the formal plan which may be several pages long that you use internally to help you manage and grow your business. Last, there is the brief, informal plan that I feel is the most important for people starting out in business.
The formal business plan has many guises, but it essentially runs through all aspects of any business, and summarizes them as it pertains to your business in particular in a single document. Starting with an Executive Overview, running through Market Research and Cash Flow Analysis, it brushes Marketing, Development, Sales, Distribution, and a variety of other topics. It is, all in all, a fairly detailed and comprehensive piece of documentation.
For many businesses, this document is much more than they need.
That’s not to say there isn’t value in it, but that for starting a business, you don’t need this much. What you really need is the much shorted business plan, the one that can fit on one or two pages. You need to know what it is you’re selling, an example of someone you might sell to (or already have), and a vague idea of where you would like your business to go.
In the class were a few people who had already started their businesses. Some of them described the fact that their business evolved as they found new customers. I don’t think anyone in the room already had a business plan, but I think that some of the people in the room would have been misled into believing that they needed a plan to be successful.
You can be successful running things by the seat of your pants. It’s been done before, and it continues to happen all the time. However, if you don’t run through the exercises that writing a business plan forces you to do (how can you fill out the Market Research section if you don’t know who else is in the industry, and what they’re doing to be successful?) then you strongly hinder your own ability to succeed.
The catch is to not get hung up on the document itself, but all the questions and answers it generates. If you choose to write it down in long-form, it can help you when it’s time to look for outside capital, or if you are trying to get a partner to join you. But it’s not a requirement.
Answering the questions, or at least identifying which questions need answering, is absolutely crucial.