Assess Your Specific Needs

All business plans are definitely not created equal. Don’t believe the experts who treat the idea of a business plan as if it’s a well-defined standard thing, with components that must be included. That’s just not true. Although most of the lean business plan applies to most businesses, the more elaborate formal business plan should exist only to deal with a specific business plan event.

If you don’t have a business plan event, stop here. Don’t do all of this extra work. There is no business purpose. Do your lean plan and stick to the lean planning process.

Business Plan EventBusiness plan events aren’t equal either. Make sure you understand the real need for your specific business plan event. Your lean plan alone may be all that you need, and you may not have to do the elaborate business plan document at all if you decide to combine your lean plan with a pitch presentation or summaries. Always know who will read your plan and what they’ll be looking for when they do. For example:

  • Investors review a summary memo or executive summary, not the whole plan. If they like the summary, then they’ll look for a short pitch. If they like the pitch, then they’ll want a full plan to use for due diligence – and sometimes the lean plan is enough for due diligence purposes, without the elaborate plan. Always keep the summary, pitch, and latest plan (lean or elaborate) aligned so they all say the same thing, but for different media. Investors normally want to see potential growth, scalability, defensibility, exit strategies, and a management team with relevant experience. If the lean plan isn’t quite enough (ask your investors), then even the elaborate plan has to be relatively short in text; 20-30 pages maximum, and 10-15 pages of text is okay. Tables, projections, illustrations are always welcome, and they don’t add to the page count. So a 30-page plan with 15 pages of tables and illustrations is shorter than a 20-page plan with no tables or illustrations.
  • Bankers want to see the company legal details and serious past financial results, along with a fairly standard description of the business, product, market, and team. They’ll also want to see the business owners’ personal financial statements. And they like a good executive summary so they don’t have to read the whole plan, just leaf through it to find the financials. Bankers are much more likely than investors to expect the full plan document, not just a summary, and not just a pitch.
  • Academics want a complete plan with detailed market and industry analysis and sophisticated financial analysis such as NPV (net present value) and IRR (internal rate of return). I won’t define either of these here because if you’re in the academic mode you have plenty of information on that already; and if you aren’t, you don’t need them. Real investors and bankers pay no attention to either of these analyses.
  • Applying at a commercial bank for a government-guaranteed SBA (Small Business Administration) loan requires a standard business plan covering the standard topics, from summary to financial projections.

These are just a few examples. There are also plans related to new expansions inside larger companies, divorce settlements, retirement and estate planning, selling a business, valuation for tax purposes, and other business plan events.

Tip: “Business plan” means different things to different people. If you’re not sure what’s required for a specific business plan event, ask. Ask a person who will be reading the plan. Ask for a sample of one they like. Ask what format, how long, what it should cover. You shouldn’t have to guess.

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