I Hate Business Plans
Mar 09, 2020 by Roger Scherping
If you're an entrepreneur, you will probably at some point be forced to write the dreaded Business Plan. You'll need to raise money, either debt or equity, and the person giving you the money will want to see what your plans are.
Why did I call the business plan "dreaded?" Just Google "I hate business plans" and you'll see what I mean. You'll see topics like, "10 Reasons Not to Write a Business Plan," and "Business Plans and Why I Hate Them," and "Why Business Plans are Worthless." Really makes you want to jump in and start on yours, right?
The traditional business plan could include 10 sections or more, covering in great detail your company description, a market analysis, product or service details, marketing and sales plans, and much more. A typical business plan can exceed 50 pages and take weeks or months to write. It's a monumental exercise.
The really bad part is that a business plan is typically written solely for the purpose of raising money. Once the money is raised, the plan typically goes on the shelf and is never looked at again.
What kind of a "plan" is it really if it just goes on the shelf? Is it really your business Plan, or is it just something you were forced to do?
Smarter Business Planning
Our Bob Voss raised over $6 million for his companies during his entrepreneurial career, and he learned a few things about writing business plans. We've distilled what he's learned into The Proof Plan and his mantra, Finances First.
Bob was like all entrepreneurs and went through the torture of writing business plans because he had to if he wanted to raise money. When he met with potential investors, he gave them copies of his business plan before he made his investment pitch. But he noticed two things. Investors never read his business plans; all they did was flip to the back to look at the financials. And they always asked him the same questions. He got basically the same questions in every investor presentation he gave.
So Bob asked himself: Why am I working so hard on my business plan if no one reads it? And since I'm raising money without people reading it, why is it considered so important?
Bob thought, instead of continuing to write a traditional business plan that no one seemed to care about it, why not just answer the questions that I got asked by the investors after every presentation? That seemed logical Those questions seemed to reflect what really mattered to them.
That's when he created the Proof Plan. The Proof Plan covers only the questions that Bob was asked most frequently by investors. This approach makes the Proof Plan far simpler to complete than a traditional business plan. It takes far less time but delivers a result that has real impact with investors and lenders.
Before he launched the Proof Plan, Bob had the students in his business class write their business plans using the Proof Plan. He showed the results to a panel of investors and bankers, and the group overwhelmingly said that they would much prefer to receive a business plan written in the format of the Proof Plan.
So not only is the Proof Plan easier to write and better received than a traditional business plan, it has the additional advantage of being a living document. One of Bob's mantra is: Business planning isn't something that you do once. Business planning is something you do once a month. In Bob's vision, your Proof Plan will be your actual business Plan, so it won't find it's way to your shelf like a traditional business plan.
Bob advises entrepreneurs to spend an hour every month reviewing their financial statements, looking at what's working and not working in their business, and quietly reflecting on everything. He then tells them to update their business plan! What a radical thought.
By constantly incorporating what you're learning about your business into your business plan, your business plan becomes your business Plan. It becomes your business roadmap, documenting what you've learned, where you intend to go, and how you intend to get there.
This monthly review gets you out of the day-to-day details of the business for a brief time. It forces you to stop working IN the business and gets you working ON the business instead. This is something that small business owners sorely need to do because they are typically so overwhelmed by working IN their business. But this monthly review and update of your business plan is critical to your success.
Another of Bob's mantras is: "Finances First." As a business entrepreneurship instructor, he has helped many people investigate potential new businesses. He noticed that they'd start with an idea, and then write an extensive business plan to flesh out that idea. Once all of that work was done, then they'd get a spreadsheet and work on developing the numbers of their business. Bob found that very often the unfortunate entrepreneur learned that their great business idea made no sense financially. It was not going to be able to make a profit, and it would never be able to pay them enough to support them and their family.
Again Bob thought: Why do we do business planning this way? Why put in all of that hard work up front when the business wasn't going to work anyway? Why don't we turn that around?
So that's when Bob created the phrase "Finances First." Now in his entrepreneurship classes Bob has the students figure out if their concept makes sense financially before starting on the business plan. The finances will tell you whether this a viable business. Figure that out first, and if it passes, then start on the rest of the business plan. It if doesn't make sense financially, then you can just develop another idea and see if that makes sense.
ProjectionSmart and the Proof Plan
We've combined everything that Bob learned about business planning and everything that I know about financial modeling and have packaged them together in our ProjectionSmart Startup Suite. A subscription to our ProjectionSmart Startup Suite includes both the Startup financial model and the Proof Plan.
Do your Finances First: Start with our Startup financial model. Put in what you intend to sell, your pricing, your overhead, and your startup costs and financing. Then let Startup do all of the work for you. You don't need to find a complicated spreadsheet. We've eliminated the spreadsheet! Startup will do all of the calculations to tell you how much cash you'll need, how profitable you'll be, and whether the business will support you.
Startup is your simple-to-use go/no-go decision tool!
The Proof Plan: If Startup tells you to go forward, only THEN do you start on your business plan. The Proof Plan is the simplest way to write a business plan. It includes only the questions most frequently asked by investors and bankers. It is also your guide to your business as it will become your living and breathing plan for your business, and it will guide you as your business grows.
Then combine your completed Proof Plan with the professional-quality financial statements that Startup created for you, and you have a business plan that will impress investors and bankers who you approach about your business.
Your subscription to the ProjectionSmart Startup Suite also includes access to our small business library of videos, where you will learn about financial statements, financial terms, financial projections, and much more. The ProjectionSmart Startup Suite is everything you need if you're considering starting a business.
We're here to help. Email me with your questions.