Sunday, August 17, 2008

Tackling The Dreaded Business Plan - Or Maybe Not

Time For A Business Plan?

People are telling me about their ideas all the time. Inevitably, we get onto the topic of what they should do next and I often give the classic response: Time to write up a business plan.

I offer this advice for one key reason: it's imperative that you take a first step in the process, and switch from talking about an idea to actually doing it. And boy is this first step a tricky one. The good news is, the vast majority of your competitors will never get beyond this (a key principal in The Dip, a book worth reading at the start of every project). There's just something about taking the thoughts that are swirling around in your head and putting them to paper which is daunting. But, it has to be done.

A Business Story

Luckily, I quickly follow up with a second recommendation which is that when I say "business plan" I don't really mean one in the traditional 23 point format sense. What I actually recommend is that you create a PowerPoint presentation that conveys Business Story. Why PowerPoint?

  • You won't have to deal with filling up pages and pages of text
  • You'll be encouraged to draw pictures, use photos and other multimedia
  • You'll end up with a presentation that you can give to others such as friends and family, potential business partners, possible vendors, etc.
  • You'll be forced to put your idea into a structured and logic flow

This last point is probably the most beneficial of them all.

As for the contents of this story, I'd suggest that you describe how the system will work, give the business case, outline competitors, etc. As you continue to grow the idea, this deck will grow as well.

You may absolutely end up writing a formal business plan at some point, but using that as a starting point seems like an awfully painful way to start a business.

Another Take On The Business Plan

So, this has been my recipe. That is, until I recently saw Mike Michalowicz's presentation on Things You DON'T Need To Launch Your Business.

There, on slide 4 is Mike's clear view on business plans:

How many people have told you to write a business plan? Everyone! Now, ask those same people how often they refer to their own plan and work directly from it. No one! That’s because business plans are not effective business tools. In my opinion, a business plan is a huge waste of time.

So, we are in agreement - a business plan is not essential first step. Mike, however, takes it one step further and recommends a variety of key documents that you will want to create:

First write your Prosperity Plan: The detailed vision of what your business will be like within the next 10 years.

Next, write a Quarterly Plan: This is a list of goals that you must accomplish in the current quarter to make the most progress toward your Prosperity Plan. Every quarter evaluate where you are, and write the next quarter’s Quarterly Plan.

And finally, you need Daily Metrics: The daily numbers that show the heart beat of your company. For example, this may include yesterday’s sales, cash flow, or customer support calls.

Mike even provides templates for these forms for you to grab from his website.

While I still think my recommendation of creating a clear story that you can share with others still holds, I definitely think Mike's advice is invaluable. The documents that he's recommending you write up are straightforward and concrete, and definitely seem like they would get you on the path for success.

Write up a business plan? Yeah, maybe, eventually. But there are definitely some other options out there when you are just starting up.

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