The “business plan event” is any business development that requires you to show a business plan to somebody. The most common business plan events relate to getting investments or business loans. Both of these business events require presenting a business plan to somebody outside your company. A Divorce or death in the family might require a business plan. Or opening a merchant account, bringing in partners, selling the business, and so forth.

Lean business planning is the lean plan you maintain all the time. The formal plan comes on special occasions only.

Investors do Read Business Plans

In investment, don’t get fooled by people who say investors don’t read business plans. I can’t speak for all, but I can speak from my experience in working with venture capital and as an angel investor. Investors will reject some businesses without reading the plan. They can often tell, from the pitch or the summary memo, that they don’t want to go further and won’t even want to see the plan. But — and this is important — every investor I actually know and have worked with (about 60) will either read the plan or have somebody they trust read the plan, and thoroughly, before agreeing to invest. In investment, we call the process of investigating a startup “due diligence.” And it includes poring over a business plan.

Investors do read business plan before they invest. But they often reject a startup from just summaries and pitch, without reading the plan. The plan comes in when they are really interested.

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And what happens with banks and commercial loans, in my experience, is that having a business plan doesn’t guarantee you’ll get the loan. But not having one, especially before you know the bank well, can guarantee that you won’t.

Don’t do the Big Plan Until You Hit the Business Plan Event

Don’t do the extra work of the full formal business plan unless you have a business plan event scheduled. Keep your lean plan up to date. When you run into the event, then you go from your lean plan to a formal business plan. The lean plan lives on your computer and isn’t polished or edited for outsiders. The formal plan is tailored for the specific business need.

For example, that formal version of your plan that you send to investors ought to have good descriptions of management backgrounds and exit strategy. And the one you send to the bank has more on the personal assets of the owners, payment history, and ability to cover the interest expense. Don’t confuse these formal versions with your lean plan. Your lean plan stays alive and flexible on your computer and gets reviewed and revised each month. Both the formal versions are outputs from your plan, intended to serve some specific business need.