Business plans are near and dear to my heart. They were at the center of entrepreneurial curriculum when I was in graduate school during the late 90’s. Business planning was a skill that helped me understand how to communicate my inherent need to create and innovate. The plans provided me with a tool for converting my ideas into something I could share, vet and possibly pursue. During that time, a business plan was also an adequate proposal for soliciting a legitimate investment.
Times have changed. Business plans still represent critical investments in marketing and financial research. However, they are lousy predictors of business relevance and financial projection. To paraphrase Eisenhower, business plans are useless but business planning is everything!
If you are interested in starting a new venture, should you create a business plan? In my opinion, absolutely! However, the look and feel of the finished plan should be very different than the plans you typically create as part of a business school course. You need to extract only the parts of the plan that are core to communicating the value of your new venture. The specifics will vary with every new idea, so learning what that core is can be very difficult to communicate to new entrepreneurs. A venture capitalist once summarized it for me in short form. “So what? Who cares? And, Why you?”
So what? – your product or service description and how it relates to current competitors.
Who cares?- a description of the the market for your new product or service
Why you? – the management team that can bring this idea to the market.
Every deal is different and every entrepreneur has different capabilities. It seems that the market for new venture ideas has moved away from the 50 page business plan and towards the 5 minute pitch that manages to clearly articulates the entrepreneurs understanding of 50 pages of material that no one else wants to read.