What's In a Business Plan and Do I Really Need One
Business plans cause a lot of anxiety for the new entrepreneur. I think it stems from the fact that they are a lot of work and putting one together, especially if you have never done one, is quantum leaps harder than working 14 hour days on your MVP.
The answer really depends on the situation, investors and the purpose. Below are some great questions and answers that explore this dilemma.
Business Model Business Plan Business Canon
3 Answers
Nowadays, most startups struggle on whether or not to do a formal business plan simply because the vast majority of investors will ever read it. It maybe the case that an investor might want to see it but may not dive into the details.
The most important thing about business plans is to have thought through the sections enough to answer the questions investors have. An investor wants to know that their money will be used wisely, that they can trust you and that you know what you are doing.
Take a look at this Q&A’s to get a better idea on how to approach business planning and some ideas on how to write a business plan:
- Great Idea, What To Do First : this one explores the critical steps in the formation of your business and what success might look like.
- Elements of a Business Plan : Discusses the various components of a business plan, depending on the audience.
- What Should I have in a Business plan has a lot of good advice.
- Guides to a Good Business Plan : Even if you don’t do a business plan, you should have answers for the elements within one.
- Business Idea Inspirations : details the process of coming up with ideas and whether is worth it to pursue a new venture.
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I disagree with the first paragraph. While it is true few actually read the business plan, it looks bad to not have one. The rest of the answer is quality stuff. – Sold Out Activist 13 years ago
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I agree with Activist, every investor I know of private, and angel, requires a business plan, and a good executive summary. They might not read it, but you have to have it. One common misconception about the business plan is that it's a road-map for your company. This is false, view the business plan as a yardstick, not a road-map. You use it to set goals, measure your performance, and keep important information in the front of your mind. Also be aware: The average startup revises their business plan monthly, and rewrites yearly. – Bwasson 13 years ago
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Good comments. I modified it a bit to capture what I think is the true case. Feel free to edit it as well. It is community wiki. – Jarie Bolander 13 years ago
Incubators will tear apart your ass if you don't have a reasonable idea of how to make money. Only dumb angel investors will go forward on just enthusiasm, and if you get a dumb one, congrats to you. Everyone else at least wants to know there's a business plan on file. And then en lieu of reading that plan themselves, want you to give them the 10-cent overview.
Having a formal business plan helps you put together that overview. Instead of "uh, well, there's the mobile market, of course," you hit 'em with: "The mobile market is primed for such an application. And we'll get them hooked with the social network integration when they see their friends posting through the app." Few people pull sparkling wine out of their ass, the rest have to smash the grapes, ferment the juice, and then let it age.
The hardest part of any business plan is answering the question, "Why would someone pay for this?" When you can answer that question, the rest is numbers. And Jarie Bolander's answer contains a lot of links on the topic.
If you can't answer the question, you don't need a business plan yet. But if you can't answer the question, you have to wonder about what you're doing.
In the most basic sense a business plan is a plan for how you are going to start your business.
There are two kinds of business plans, the first, and the one most people think of when you talk about a "business plan" is the document you give to potential investors, I think of this as a sales document designed to sell your company to the investors - unless you are actually looking for investment this document is useless (but it is required if you are looking for investment).
The second kind of business plan is just a description of how you are going to start your business - it could be as simple as a just list of steps you have to follow to become profitable.
The importance of the second kind of business plan is that buy writing down how to make your business profitable you have to actually think about it, build a plan you can actually follow, and hopefully find all the traps and problems that can make your business non-viable (and either plan how to overcome them or abandon the current idea and do something else) before you invest too much time and money in your business.
