4 ms·

I 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 do

I 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 ago
I'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 ago
  What 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 ago
    Try (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.
- apsurd 18y ago
  Actually there are two types of accounting balance sheet methods so by definition, you should have and it would be better to have 2. The first is an historical value based balance sheet where you record everything at what they cost you. For example lets say you bought real estate in 1920 for $1k and now its worth $1million. Historically you paid $1k and you can actually write that in, and you'd want to do that to show you "little" money your company makes, for things like taxes and such The second case is a market value balance sheet where you record the market value of everything. If your company has inventory, you'd list its value at what it's worth, rather than what it cost you to make it. The interesting thing here is inventory is recorded as an asset. So at the end of the year if you have $50million of market value inventory sitting in a warehouse, a balance sheet will show how much money you MADE (even though you have not sold it). This is very good if you want to attract investors/loans and very bad for paying taxes .... The point is both are legitimate and needed. The market value sheet will obviously produce a more accurate picture, but seeing as how inventory is an asset, there really is no "super accurate" picture, which is why it is important to keep accurate records for different scenarios. I recommend an oldie but goodie: "Buy low, sell high, , collect early, pay late" - Dick Levin edit: i realize I am not in disagreement with you, rather just want to highlight what I think for other HN that there is a need for different versions of the same thing, and its quite legal.
mixmax 18y ago
In theory I agree with you - but in practise I don't. There are a number of reasons why business plans don't seem to work as a plan to run the company. - The business plan of many companies tends to be a stale document that never gets rewritten, and gets more and more out of whack with reality until it is completely obsolete. - If there are many stakeholders (investors, founders, banks, partners. etc.) they will all need to give their consent whenever changes are made. This easily turns into political hell with you in the middle. - The more specific you are in your businessplan the more it will come back to haunt you. If you wrote it and it turns out not to be the way you said it's your falut. - Nobody actually reads updates to business plans, thus rendering them unusable. Some of these can of course be remedied, but it's a lot of hard work. And maybe that effort is better used building a product or getting customers.
- Skeletor 18y ago
  If you have an internal planning business plan document and things don't turn out the way you said they would. You should be 100% accountable to yourself, your partners, and your employees about why your projections were wrong.

brk 18y ago

I'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 ago
What 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 ago
  Try (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.
apsurd 18y ago
Actually there are two types of accounting balance sheet methods so by definition, you should have and it would be better to have 2. The first is an historical value based balance sheet where you record everything at what they cost you. For example lets say you bought real estate in 1920 for $1k and now its worth $1million. Historically you paid $1k and you can actually write that in, and you'd want to do that to show you "little" money your company makes, for things like taxes and such The second case is a market value balance sheet where you record the market value of everything. If your company has inventory, you'd list its value at what it's worth, rather than what it cost you to make it. The interesting thing here is inventory is recorded as an asset. So at the end of the year if you have $50million of market value inventory sitting in a warehouse, a balance sheet will show how much money you MADE (even though you have not sold it). This is very good if you want to attract investors/loans and very bad for paying taxes .... The point is both are legitimate and needed. The market value sheet will obviously produce a more accurate picture, but seeing as how inventory is an asset, there really is no "super accurate" picture, which is why it is important to keep accurate records for different scenarios. I recommend an oldie but goodie: "Buy low, sell high, , collect early, pay late" - Dick Levin edit: i realize I am not in disagreement with you, rather just want to highlight what I think for other HN that there is a need for different versions of the same thing, and its quite legal.

mixmax 18y ago

In theory I agree with you - but in practise I don't. There are a number of reasons why business plans don't seem to work as a plan to run the company. - The business plan of many companies tends to be a stale document that never gets rewritten, and gets more and more out of whack with reality until it is completely obsolete. - If there are many stakeholders (investors, founders, banks, partners. etc.) they will all need to give their consent whenever changes are made. This easily turns into political hell with you in the middle. - The more specific you are in your businessplan the more it will come back to haunt you. If you wrote it and it turns out not to be the way you said it's your falut. - Nobody actually reads updates to business plans, thus rendering them unusable. Some of these can of course be remedied, but it's a lot of hard work. And maybe that effort is better used building a product or getting customers.

Skeletor 18y ago
If you have an internal planning business plan document and things don't turn out the way you said they would. You should be 100% accountable to yourself, your partners, and your employees about why your projections were wrong.