Tag Archives: business plan

Pre-Written Business Plans Are Like Fake Medicines

Business Planning, , ,

I just saw a web ad for business plans that are already done, finished, and supposedly good to go. Believe it or not, they say you just edit some things on a pre-written plan and it’s ready for use. And they say these pre-written plans have already been tested with banks. And they already have the market research done for you. What a load of nonsense.

That makes me angry.

The very idea of selling pre-written business plans is worse than just dumb: it’s not even just useless, or neutral; its destructive. It reinforces the damaging myth of the plan as document instead of planning as process to help people run their businesses better. It makes people think they’ve gotten somewhere when in fact they’re further away.

It’s like selling fake medicine that’s supposed to help, but actually hurts.

Every business is unique. How can a pre-written boilerplate business plan possibly deal with a specific market, with a specific product/service, and specific resources, and a specific strategy? It can’t. And pretending this is business planning is pretty much preying on ignorance.

And yes, I’m biased. I’ve spent a career with actual, real business plans, and I’ve written books on how to do your own, and I’ve published software tools, and lately I’m on a soapbox a lot telling people to do less than the whole formal thing, but do it themselves, and own its contents. Make it your plan and nobody else’s. If you use a sample business plan to help you get started, read it for ideas. Then start fresh with a clean, new, empty plan. If you work with a coach or consultant, make sure they’re just helping you do it, so that it remains your plan, not theirs.

Some background here, previously posted on this blog: Sample Business Plans Suck, the Value of the Plan is the Management it Causes, and My Worst Business Plan Engagement.

(Photo credit: photofarmer via flickr)

Revising the Root Canal Theory of Business Planning

Business Planning, Plan-as-you-go Planning, , ,

For years I’ve lived with my own “root canal theory of business planning.” Do the Google search for that phrase and you’ll see that my previous writing about this comes up first. Like root canals, business plans were something people dreaded, but needed. Happily, things have changed.

Unlike a root canal, modern-day business planning should not be painful, is not something you do all at once, and ought not to be a cure for anything like a toothache. Instead, it should be fun and interesting, and a regular process. It’s preventative, not curative. I call it plan-as-you-go business planning. The plan stays alive. It’s not painful to do, you like doing it because you’re running your own business and the planning part of it is fascinating. It’s your future, your life, and controlling your destiny.

It’s only now-obsolete myths that liken the business plan to the root canal. They might have been true in the past, but are definitely not true anymore.

root canalI had the worst kind of reminder yesterday: a root canal. This one repaired one done 20 years ago. Root canals have changed. Technology has improved. But they’re still bad.

It was just after having that first root canal that long ago that I developed the root canal theory of business planning. I’d had a horrible toothache back then, a sleepless night, and by the time I got to the dentist chair the next morning I really, really wanted that root canal. I wanted the pain to end.

Back then — late 1980s — I thought about how people only did business plans when they absolutely had to, for investment or business loans; and about how when they did have to, they wanted that business plan fast, and they wanted it badly. But it seemed like nobody who didn’t have the urgent need wanted to do a business plan. Our fulfillment house noted that our business plan software orders had the highest ratio of overnight shipping of all their clients.

Today I believe what I posted on this blog two years ago: If you dread business planning, keep your day job.

(Photo credit: cc license by radiant guy, on Flickr.)

Business Planning in Times of Rapid Change

Self Promotion, , , , , ,

How does business planning change in this new world of instant media, short attention spans, and rapid change? Is it different these days? Can we plan at all? And secondly, from the point of view of the angel investor, what does an investor look at in a business plan.

I had a very friendly, fun, and I hope useful, radio session with Barbara Weltman earlier this week. We talked about how business planning is changing in the very fast-changing, short-attention-span world we live in.

Barbara has posted the interview online so you can access it now. The first part is a general review of business planning in times of change, can we plan, how do we plan, and how different is it in this brave new world:

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And in the second part, Barbara asked me about my recent experience as a member of an angel investor group, reviewing plans and eventually choosing one for investment with my own money (as part of a larger group).

http://www.wsradio.com/wsradio-links.js //
http://www.wsradio.com/wsradio-links.js

Each of these parts takes about 12 minutes.

The Ideal Length of a Business Plan

Business Planning, Venture Contests

Interesting question, which came to me via Twitter: “Does a business plan have an ideal length?”

It reminds me: I was about five years old when my granddad first asked me how long a person’s legs should be. His answer was “long enough to reach the ground.” He liked that.

And I borrow from him when I say a business plan should be long enough to set strategy, list assumptions, establish concrete metrics, list specific steps including dates and task responsibilities, and project basic numbers such as sales and cost of sales, expenses, funding, and cash flow.

It should have enough detail to establish useful and realistic tracking of results.

And that doesn’t get measured in pages. I myself hate measuring business plans by page length. I like to think of the plan as a plan on a computer, linking topics with hypertext, jumping from topic to table to chart to topic and back again, without being printed out into pages.

Still, people ask that question, so I’d like to answer.

  • The classic business plan document that prints to show to outsiders, as output of the real live plan on the computer, shouldn’t take up more than 25 pages.
  • Not that MBA-level business plan contests lead this area, but still, for what it’s worth, the topic has been in my emails lately. A group of organizers of major intercollegiate MBA-level business plan contests last week agreed to limit plan length to 15 pages. Randy Swangard, who has run the University of Oregon New Venture Competition for several years, set that limit for this year’s contest and told me the group agreed to approve it.

The shorter, the better; but only as long as you cover the information you need.

Form follows function. All business plans should cover the main points, but it’s about business, not writing. So your business plan has to adjust to the actual specific use.

Your Profits Are Way Too High!

Angel investment, Business Plan Marathon, Venture Capital, Venture Contests, , ,

Business plans everywhere. I’m reading, annotating, filling in score sheets, and getting cranky. I explained that on this blog last Monday.

So what’s with the unrealistically high profitability projections? This year it seems like I’ve discovered a new 50-50 rule of profitability in business plans, as in, 50% of the plans I’m looking at project 50% or higher profits on sales.

That reminds me of a song my youngest daughter used to play: “That Don’t Impress Me Much.”

Occasionally a very successful startup will come up with something so new that it can, for a while, chalk up very high profit margins. That’s extremely rare. Out here in the real world, though, nobody really makes much more than 5-8-10% or so profits on sales. The real startups might make 15% or even 20%.

Projecting 40%, 50%, and even 60% profitability on sales doesn’t tell me you have a great business; it tells me you haven’t done all of your homework. You’re underestimating cost of sales, expenses, or both.

I find this particularly galling in business plans with some social implications, related to health care, or education.

What would I like to see instead? First, find out average profitability for the industry you’re in. Put that number into your plan. Then explain why your company’s projected profitability is higher. Proprietary technology, specialty niche market, new processes? Okay, I can take that; just be aware of what the normal is, so you know what you’re up against. Please.

Standard financials are available from several vendors, for less than $100 per industry (and here I can’t resist adding that they’re bundled with Business Plan Pro, my company’s software product. Sorry. I’m an entrepreneur. I can’t help it.) You can also get those from Oxxford Information Technology, or the Risk Management Association (RMA).

Anyhow, that’s my opinion.