Standalone Business Plans: Mostly Worthless
Last week a colleague—let’s call him Joe—sent me an email asking if I could recommend a good business plan template for a potential client. I was in a time zone that didn’t allow us to connect live, so I sent him an email about writing a business plan. Here it is. ~~~~~~~~~~~~~~~~~~~~~~~~ Hi Joe, A few questions about your business plan template question, then some comments.
What type of business?
In what stage: Start-up, high growth, flat growth, preparing for exit?
What’s the purpose of the plan?
Who wants the plan and why?
In general, standalone business plans are worthless.
Why?
They are usually written because a senior person expects a written business plan. Other than keeping your job, that’s a bad reason to write one—it leads to drafting a hollow document. These types of plans end up on computer archive disk, to be used as a template during next year’s business planning cycle charade.
They are written in a vacuum, without a strategic financial planning model that grounds—justifies—the proposed business case.
What you wrote in your email to me, “I've seen so many bad ones and have my own opinions about what makes a good one . . . ”, is revealing; the plans you've seen likely don't have a financial planning model or a strategy behind them. The writer tried to craft a business plan with words only, which is meaningless. It's like building a house without a complete foundation—it falls apart. Without a financial model, you don’t know if the business case is valid, if you’ll need to raise capital, if the business case will yield an adequate return, or if the future valuation will justify an investment of time or money. Key Point: You can’t write a business plan with only words. You must build a detailed financial planning model that reflects the strategy that is tied to the plan. Also, you know that I counsel my clients to write outline business plans that take less than 5 pages. Senior management, investors, and board directors won't read more than that. So, why does your potential client want a written business plan? What’s underneath the request? Find out before they spend precious time and money on a pointless writing exercise. ~~~~~~~~~~~~~~~~~~~~~~~~ Do you need help writing a business plan, developing a compelling business case, or strategic financial planning model? Call or schedule a one-hour call with us here to discuss your situation and how we can help. All the best,
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