Whether it's conceptualizing a new business or updating an existing one, for the past 30 years the idea of doing either without a professional business plan would lead to a lot of eyeball rolling - and for good reason. Any consultant or business school professor will tell you that every great business begins with a plan that outlines measurable goals and the methods for achieving them. Plans, done correctly, can be a great roadmap.
Surprising to many, the idea of a written business plan is relatively new. Essentially it became a standard business instrument about the same time as the Silicon Valley revolution in the 1970's - and it's become almost sacrilegious to start a business without one. However a number of business leaders are starting to ask if the existing model of a Business Plan may be out date.
Newer startups may be shocked to hear that long-time serial entrepreneurs almost never do a business plan. Often they simply call up a buddy in business and on a sheet of paper outline the next moneymaking idea. The apocraphyl stories of great tech companies that started by being sketched out on a napkin in a bar are very close to the truth.
Everyone would agree that you need some kind of a plan to build a cabin, take a major vacation or build a business. The question is: Just how detailed does your plan have to be?
I have seen entrepreneurs walk in with a doorstop of a plan of a hundred pages or more. The question is who is going to read it?
Your banker needs to know that you have thought out the process and that you are realistic in your projections. But any business banker will tell you that she never gives your handsome plan more time than a quick glance at the rationale and the spreadsheet - where it's understood that revenue projections are at best a good guess. The most impressive thing that walks into your banker's office is you. How you present yourself, your level of confidence and your sense of passion are all elements that help your case much more than the written document.
It's time to rethink the Business Plan
So who is it supposed impress? Customers of course are never going to see your business plan and we've already talked about your banker's level of interest. Increasingly even investors are becoming less fond of them.
Financial guru Edward Simpkins of the Silicon Valley Investment Network says that his people would rather that entrepreneurs spend the time working on their product and talking to users and potential buyers.
"What we care about is: Have you built a prototype product? How much market research have you done and is it credible? Have you spoken to users?" When it comes to revenue projections, the size of the market is considered a greater indicator than a guess as to how may people will buy the product or service.
An alternative to the traditional approach is the 'Lean Canvas.'
OK so we can forget about writing a small saga but some form of written plan is required since it's still important to map out your business model and document your thinking. Increasingly the buzz is around something called a "Lean Canvas."
Here on Wikimedia is a sample of a Lean Canvas http://commons.wikimedia.org/wiki/File:Lean_Canvas.png
You'll notice it's really a system of bullets that touch on your product/service and your market. Each point is then extrapolated with a short paragraph making it a quick and easy read. A good approach is to write your Business Plan on six to ten PowerPoint slides. If you can't do that - it's too wordy!
If this all seems a bit too brief for you I suggest you watch a few episodes of Dragon's Den or the Shark Tank where six billionaires make quick judgements on investing their own money in the entrepreneurs standing before them. Their decision whether or not to begin due diligence is based on a half dozen pointed questions about the product and the experience of the presenter.
Of course you need a plan and you should consider all of the potential scenarios involved in costs, revenues and market penetration. Your best work will come however from 'management by walking around', talking to your potential market, talking to your potential competition and staying right up to date on trends in your industry. You need to find out where the parade is going and get in front of it!
Now take all of that intelligence gathering and put it in writing - but remember you're not writing a book - you're just sketching out a map.