“Business Planning” refers to the ongoing process of strategic thinking, analysis, and decision-making that drives a business’s activities, while a “Business Plan” is a formal written document that encapsulates the outcomes of the business planning process, providing a detailed blueprint for how the business will operate and succeed. Both are essential components of building and managing a successful business.
Writing a business plan is a rather common exercise for entrepreneurs, but it can also be a deadly trap business owners keep falling into. They work hard to build a deck that makes sense and feel confident presenting it, but then something goes wrong, and a big opportunity is lost.
The story is typical, but most of the time, the entrepreneurs have no idea of what just happened and no real way to analyse the situation. Still, there is a pattern, and it can be avoided with a little bit of discernment and anticipation.
In particular, one idea is a game changer: nobody cares about your business plan if all it is for you is a piece of paper.
What potential partners (entrepreneurs, investors, etc.) are interested in is something very different: your business planning skills.
What you think isn’t what they expect
In essence, the issue is that (inexperienced) fund-seekers and (seasoned) funders do not operate the same way.
On the business owner’s side, the thinking is usually the same. The idea sounds awesome, and there is a problem to solve. The market is big, and the potential is huge – that’s worth a lot of money! – hence the business plan can be done quickly in just a few days.
Except that on the funding side, the perspective is not the same at all.
I’ve worked with a few entrepreneurs and investors in my line of work, and one thing they have in common when it comes to investing in a business proposal is the need for efficient business structuration.
Structured thinking, to start with – as in, where exactly are you trying to get and how hard have you been thinking about how to make it happen?
Financial structuration, also – what is the plan, how much do we need to make it happen, and how much will we give back when we succeed?
And, of course, legal structuration – because nobody will invest a cent in a company that looks like a risky black box.
In many cases, however, the business plans they receive are far from their expectations.
The pitch deck is mostly built on a great idea, but it lacks serious business foundations. It lacks serious thinking and brainstorming. The financial and legal parts of the proposal are loose. And the deck itself isn’t investor friendly – too long, too wordy, not illustrated enough, not inspiring.
On the investor’s side, the reaction is then very simple.
“They’re looking for a small fortune, but this proposal is just a big ‘if’. The idea is probably good, but there’s no product-market fit, no proof of concept, no market validation, I can’t do anything with this.”
“The deck isn’t concise, and it’s not inspiring at all. I don’t have time to read twenty pages of black and white!”
“We receive hundreds of applications and only fund a couple a year because only a few are structured enough to be able to scale.”
“The money they ask for the equity they give is simply disconnected; they have no idea of what they are talking about.”
Business plans without business planning skills are worthless
In short, and to repeat myself, just a business plan isn’t worth anything.
What your future partners want to know isn’t that you have a good idea. They want to see if you are the right person to invest in and if the way you plan to invest their money gives them any chance of getting a return on their investment a few years from now.
The business plan, said differently, should showcase your business planning skills more than your great idea. And it should show that because you can think ahead and come up with a convincing strategy, you are worth investigating further.
Yes, wondering how to write a business plan is a perfectly legitimate question! But it only makes sense if you are willing to walk a mile in your future partners’ shoes and if you are ready to take your business idea a lot more seriously.
Only those who understand this nuance make it to the next stage.
Source: e27
