Professor Cornwall on Business Planning
I was asked recently by an entrepreneur whether he should hire someone to write a business plan. I remembered that Professor Cornwall at The Entrepreneurial Mind had written about the answer to this question. I also know what a treasure trove of information is available by searching a blog full of useful posts like the Entrepreneurial Mind. So after conducting a search on business plans on Professor Cornwall's blog, I came up with the following advice, quoting the three posts cited below:
"Unless a would-be entrepreneur needs to raise substantial startup capital from institutional investors or business angels, there is no compelling reason to write a detailed business plan before opening a new business...
Business plans are a way to document sound analysis and good planning of your new venture. Whether you actually write this document is to a large degree irrelevant. What does matter is that you go through the process of evaluating the market for the venture, analyzing the potential profit margin it can produce, and reflect honestly on your personal readiness to make it happen. So it is the process of planning, not the actual plan, that really matters...
Too many people think that a business plan is the beginning, middle and end of starting a new venture. The business plan is simply a reflection of a sound process -- it is not the actual process.
In reality, investors like venture capitalists use it in the same way. They want evidence of sound analysis and planning, and the business plan is a way to capture the work an entrepreneur has done in these critical steps...
First you need to figure out why you need a plan. A plan you write for yourself is very different from a plan you write for an investor. Know the audience of the plan. You probably will need to write a couple of different versions for different uses: one for you, one for your investors, and one for creditors. If the plan starts to break down financially or in your ability to make it happen, give it up and go on to your next idea.
A business plan starts with you and your needs. And equally important, it provides a process that helps you learn about the business. It is a process with many exit points that you need to pay attention to so you don't get in too far too fast.
You'll need to intimately know all the details and nuances that are discovered. And when it comes time to use the plan to raise funding, the banker, creditor or investor will expect you to know the plan inside and out. Only the person who writes it will have that knowledge. And it would not look good for you to drag me or some group of college students along to explain everything for you...
When you develop your plan, work on it in the order that they [investors] will evaluate it (other than the Executive Summary, which you write last). Start with market research of the industry, competitive environment and potential customers. Use that to develop a strong and compelling marketing plan. Then forecast your revenues based on the marketing plan. Take your time. This is probably the hardest step of writing a plan if you do it correctly. Revenues are simply price times quantity, but those are two of the most uncertain issues you will face. Do you homework to show that you are making reasonable assumptions.
Then work on the operating plan and expenses. This is usually easier for most of us. However, don't worry about getting it right down to the last dollar. Too often we waste time on these sections. We feel safer here, so seem to want to work on that which we feel most comfortable with. Be accurate and complete, but never overly obsessive with every last detail.
When you finally put it all together you will put it in the traditional outline that most of the books and software suggest, as that is a fairly commonly expected standard format. But, when you write it free-style as I am suggesting, you have the best chance of ending up with a powerful story that holds together for even the most experienced business plan reader.”
Sources:
To Write a Business Plan, or Not to Write a Business Plan
Write Your Own Plan
The Danger of Short-cuts in Writing Business Plans
