By Phil Gibbs on June 26, 2010
It takes a lot of time and effort to write good business plan. Sometimes I wonder if all that time and effort could be better spent actually starting the business rather than researching and writing and editing. It really is a lot of work!
So, if I want to start a new business, do I have to write a business plan?
It clearly depends on the nature of the business you are starting. Instead of spending months writing a business plan, sometimes it is better to lay out your plan in a simple concept paper–three or four pages. Scoping out what you plan to do helps you think through the process and is highly recommended.
Then get to it. If it seems like it is beginning to work, you can always go back and write a detailed plan. If not, you have not wasted a lot of time.
If your business requires capital that you are going to ask others to put at risk, unless it is a small amount coming from close family and friends, a business plan is a must. People who invest want to know that you have very carefully thought through the concept and have looked at every important aspect of the business.
- Can you clearly describe what you plan to do?
- What is your product or service?
- What is unique about the product or service?
- Who are the customers?
- How are you going to sell the product or service?
- Who is the competition?
- What are the barriers to entry?
- What is the experience of the management team?
- What do the financials look like?
- How much capital is required?
- What are the risks?
- How do I get paid back?
You have to be able to answer each of these, plus a few others thrown in for good measure, in great detail. Now that doesn’t mean that the investor will always read the complete business plan, but you better be prepared to answer any question that is asked. The business plan is critical in your preparation for this important exam.
When I write or read a business plan, the one thing I know for sure is that the business will not turn out exactly as the plan predicts. But it is a road map and critical planning tool.
So, if you do not need outside investors, write a concept paper and spend your time starting the business. Do not waste months writing a detailed plan.
If you need investors, write the plan. Do the research and learn the material. The test is not the quality of the plan. The test is do you know the business well enough and are you experienced enough to make the right adaptations when the plan falls apart.
Ultimately, there is only one important section in a business plan–The Management Team. The secret is that YOU are the business plan–not the document–and YOU are the focus of investors’ interest.
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