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I've written more business plans than I care to think about. This is my experience: 1) A business plan is a marketing document. Usually you are using it to sel
by mixmax 18y ago
I've written more business plans than I care to think about. This is my experience:
1) A business plan is a marketing document. Usually you are using it to sell your business to banks, investors or partners. You have to think of your audience when you write it. An investor likes to see projected revenues that are high and don't mind that there's a risk - banks are the other way around.
2) Don't use business plans as a plan of how to run your company, write a one page strategy note instead. I have never seen a businessplan that was followed 100% and turned into a successful business. Everything changes fast in a startup, and you have to adapt accordingly.
3) Make sure you don't write something in your businessplan you can't honor. Investors and banks will look at it and blame you if they invested money and you don't live up to what you have written. Make sure to have escape routes. (If this and this market condition is true we will do such and such, if it isn't we can't do jack shit, we expect to do such and such but require this or that to reach these lofty goals) This will give you leverage and deniability in later negotiations.
4) Make sure you use a lot of sources to underpin and validate your assumptions (Gartner projects that within the next five years this trend will do something, making it inevitable that we will make loads of money since we're currently the only ones in this business) This will lend you credibility.
5) Make good budgets, and talk about your assumptions in the business plan. Budgets are the first thing investors look at. Particularly the assumptions behind the numbers.
6) Beware of investors that think everything in your business plan is a road map that simply needs to be followed in order to attain fame, glory and fuck-you money: They don't know what they're talking about.
- deleted 18y ago[deleted]
- tptacek 18y agoDo you have any stories about how any of those business plans helped companies you were working on? I'd love to hear some.
- mixmax 18y agoThey helped get funding for two companies I started :-) I've found that it's really hard to write business plans for other people, and for companies you aren't directly involved in. It's probably a bit like when biz types ask a programmer to write what it says in their business plan - they haven't really thought about a lot of the underlying assumptions and how much work it is to do right. It works the other way around too. I just wrote a somewhat related blogentry here: http://www.maximise.dk/blog/2009/01/business-plans-for-hackers.html http://www.maximise.dk/blog/2009/01/business-plans-for-hacke...
- Skeletor 18y agoI don't like your statement about a business plan not being a plan to run your company, that is exactly what it should be. Though maybe your 1 page strategy document is your real business plan. The business plan is just a name though, you should have 2 sets of books/plans: 1) Internal accounting that is very pessimistic and realistic and assumes the worst case scenario and prepares for it. 2) External accounting that is incredibly optimistic and assumes every possible best break will happen 100% of the time.
- brk 18y agoI'm not sure if this is what you were saying, but you should NEVER have 2 sets of actual accounting books. The numbers are the numbers, the truth is the truth. You can create and present a document that shows your expectations and assumptions, but you can't say you made X amount of sales and Y amount of profit when the real numbers are different. In reality though, the data you show and present should be realistic and perhaps slightly cautious. This is what you are going to be measured against. Being "incredibly optimistic" when you do not believe this to be true is really kind of fraudulent. Set expectations for what can reasonably happen with the resources/constraints you are working with. Internally, manage your capital as if it were your last dollar. If you do not meet the expectations set, determine why.
- Skeletor 18y agoWhat if you rebate the cost of your software to customers for a trial period? Do you think that counts as revenue or as nill? What if you prepay for a year of office space before the end of your fiscal year to show no profit in a year? Did you make a profit or not? These are different ways to interpret the same numbers.
- brk 18y agoTry (as much as possible) to stick to GAAP standards and you'll be fine. Choosing how/when you depreciate certain assets, or if you use a FIFO or LIFO inventory process is all well and good. But you would still have 1 single set of accounting books/data. I never enjoyed the accounting part of the companies I've started, but I've learned there are things you could do, things you should do and things that you shouldn't do. There is not a whole lot of room for interpretation, especially if you want to try to raise money or sell the company at any point.