IS BUSINESS PLANNING NECESSARY OR DO YOU JUST NEED A BUSINESS MODEL?
This was a question that we were asked when we first started this site. We assumed that the question was really a joke, but similar questions have been asked so frequently that we decided to respond to it.
YES! YES! YES! It is critical that you have a Plan of Business. That’s the short, simple answer. A more comprehensive answer gets somewhat more complicated.
What is a business plan, and how do you put one together? We thought that the answer to those questions were simple, after all, when we were in grad school a business plan was a business plan, but in doing research for this site we learned that the academicians and consultants have been busy, and that there all kinds of business plans.
Apparently, the “business plan” developed a
dysfunctional reputation so it was decided that there should be different
types of business plans depending on function.
First, there is the “Business Model”.
The Business Model is not really a plan at all, but we have found
that most consultants and professional investors like to call it a plan (of
sorts!.) The Business Model is a quick look at how the business plans
to generate its revenue stream.
Are you going to put your products on a web site, and promote the web site?
Are you going to sell your product to manufacturers that make an
already popular product? Like
microchips being sold to computer manufacturers.
Or, are you going to generate income with brick and mortar stores?
And the like.
Then it was decided that there are different types of Business Plans depending on function. So now we have the Working Business Plan (which is what we always thought a business plan was). The Working Business Plan is intended to guide operations day-to-day, week-to-week, month-to-month, quarter-to-quarter, year-to-year. It is the basis for the operating budget of the business and cash requirements.
Next is the Presentation Plan. This is the plan that you want to present to banks, and other people that will loan the business (really you) money. It may also be the plan that you initially present to a professional investor when you’re business makes their short list. It can’t be too long or too short. It needs to be just right, and for that you need to judge the investor and reflect on the conversations that you've had. It should be well organized by subject matter and the subject matters should interconnect and relate to each other. It should be light on numbers, but provide sufficient information to show breakeven and cash flow requirements. And it should be pretty.
The Mini-plan comes up next. The Mini-plan is comprised of the highlights of your Working Business Plan. The Mini-plan is intended to make people that have already invested in your business feel like you really know what you’re doing.
Next, we came across a business plan that we thought was very creative and original; the Electronic Business plan. The best we could figure out was that the Electronic Business Plan focuses on where the business is going to get its primary revenue “charge” and how. The Electronic Business Plan focuses on the really exciting, energetic and electric part of the business. (Do you catch the play on words?) The Electronic Business Plan seems to be more comprehensive and detailed than a Business Model, but less comprehensive and detailed than a Mini-plan. The Electronic Business Plan might be what a professional investor will ask you for after they have shortened their short list to just a few businesses.
Then, of course, there’s the Strategic Plan which seems to deal with competitive forces and how the business intends to overcome them. Finally, there’s the Tactical Plan which is a look at how you’re gong to do things in the next few weeks to the next few months.
With all of these different types of business plans it’s no wonder why so many businesses fail. They just don’t know what kind of planning to engage in, and when.
This article will be continued under the title "A Working Business Plan"
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