Embed Doc
Copy Link
Readcast
Collections

1
CommentGo Back

How Not to Write a Business Plan

Writing a business plan combines art, research and expertise to create a comprehensive presentation of the inner workings of an existing or future enterprise. A business plan is adescription and plan for operating a company on paper. One of its primary aims is tovalidate an idea and challenge every aspect of the business. A business plan is a written presentation that carefully explains the business, its management team, its products or services and its goals, together with strategies for achieving those goals.Disclaimer: This section is not about how to write a business plan as much as it is acompilation of thoughts and observations from those of us in the venture capital, privateequity, financial advisory and investment banking industries on how NOT to write a business plan. We don’t claim to be able to teach someone how to write a business plan,an activity more closely resembling an art than a science. Also there are many books,guides and software programs that claim to be able to teach this art and it’s conceivablethat one or more may actually be worth reading. In terms of software programs, for example, we usually recommend Business Plan Pro (http://www.paloalto.com/ps/bp/s/

).What follows is the result of years of reading, writing, analyzing, editing and rewritingthousands of business plans ranging in quality from startlingly-original works of art toappalling confirmations of the writer’s abject idiocy and aberrant personality.Most business plans (like most film or TV scripts) are simply thrown out, not because theideas behind them are unsound or derivative but because the writer was unable tocommunicate his business concept in a manner that reasonably-intelligent people couldunderstand and evaluate. These observations come from the perspective of people whoread business plans for a living and who are always willing to give the writer the benefit of the doubt to a certain extent but who expect a few small things in return. Pleaseremember that business plans are written primarily to raise money and writers should haveenough respect for the readers to spare them from the most avoidable errors:1) We live in the age of automated spell-checkers. There simply isn’t any excusefor misspelled words in a business plan. Grammar is another issue and some business plan writers in this melting pot of ours might not start with English astheir first language. Let’s not even discuss the issue of those who have spokenonly English their entire lives and can’t write an intelligible sentence. Hire anEnglish Literature major (or graduate student) to proofread, review andcorrect the plan. This shouldn’t cost more than $1,500. Since English Litmajors have no practically-usable skills, they’re always short of money. If youdon’t think your business plan is worth investing $1,500, we probably won’teither.2) Likewise the numbers need to make sense. The plan needs to make rational projections based on some detailed assumptions. Some of the more cynicalinstitutional investors have suggested that anyone who can’t learn how to makesimple projections with a spreadsheet program is not intelligent enough to startand run a business. Sidestep the issue by hiring a business major (or graduate

student) to create, review and/or correct the numbers. This will cost more thanthe English Lit major’s effort since business majors actually learn real stuff.This will also be good negotiating practice. Make sure the assumptions arerational and spelled out. Assumptions are critical.3) Business plan writers should not underestimate the intelligence of their readers,most of whom think they are smarter than they really are anyway. A business plan is primarily a sales document for the writer’s idea or business. Talkingdown to one’s potential customers is a risky way to attempt a sale. On theother hand a business plan should be about the actual business, not about theabstruse or arcane components that go into it.4) Focus on what is important to understand how the business makes (or couldmake) money. Eliminate the extraneous and the anecdotal. Remember the oldcanard about the forest and the trees. The most important thing in any plan(after the insanely-brilliant business concept itself) is the section withmanagement’s biographies. Forget the college track medals and the Dean’s list.Describe in detail what significant business learning experiences qualify you toexcel at this new business beyond anyone’s reasonable expectation. Tell us of the astounding collection of Nobel-Prize-winning geniuses you have assembledto help you. Alan Greenspan or Jack Welch isn’t on your board yet? How sooncan you arrange it?5) You never get a second chance to make that first impression. Sorry, it’s an oldline but a true one. Spend a few dollars and put together a first-class presentation, with graphs and charts, pictures or drawings where possible butresist the impulse to do the graphic stuff yourself unless you know how. Flyinga 747 looks easy when leaning over the Captain’s shoulder but landing it could be a terminal experience without the right expertise. Alternatively a business plan shouldn’t look so slick that it seems artificial, such that the impression leftis that more effort went into the graphic design than the research anddevelopment of the business or the concept.6) The three most important things in a business plan (Sorry, Harry…) areresearch, research and research. If you don’t do the research (and thesubsequent “due diligence,” the most overworked phrase in the investmentlexicon), we will have to and we will probably be disinclined to do so, unlessthe business concept is so startlingly original and clever that it conclusivelyrefutes the old adage about what’s new under the sun (see also “geniuses,” below).7) Don’t make the plan too long, unless your name is Dostoevsky and you’rewriting something of a more literary nature. Institutions won’t read a hundred- page business plan because they figure if you can’t make a persuasive case inten pages, you just can’t make it, in more ways than one.8) There are, in fact, business geniuses and we all know who some of them are.Very few venture capitalists, investment bankers and institutional investors get

to meet them or see any of their new projects because they simply don’t needus. If we get to see a business plan for a new venture from Bill Gates, PaulAllen, Larry Ellison or Jim Clark, you can be sure there’s something seriouslywrong with it. So we assume you’re not a genius and don’t expect you to beone, but we will, for the moment, assume that your idea is original andinteresting. PLEASE don’t disappoint us. This is a corollary of doing theresearch. Nothing makes professional investors twitchier than reading a business plan that proposes to do something that someone else has alreadydone or already proposed to do. Actually there are two things that are worse – receiving the same business plan from two different investment bankerssimultaneously and receiving the same business plan a year later.9) We’re thrilled that you’ve been a great success in the _________ business.We’re as certain as you are that the skills you have so painstakingly acquiredmake you more than qualified to start and run a company in an industrycompletely unrelated to your previous business. But we are even moreinterested in the reasons you believe the new business will be so much better than the old one that you left to jump into this exciting but definitely uncertainfuture.10) We’re not stupid (see 3, above) but we are not necessarily familiar with all the jargon and buzzwords of your particular industry, particularly if it isn’tdeveloping (i.e. you read about it in Wired), fully-developed (i.e. you readabout it in Forbes), maturing (i.e. you read about it in The Wall Street Journal),fully-matured (i.e. you read about it in Fortune) or history (i.e. you read aboutit in Time Magazine), so ease up on the neologisms. Remember, you want us tounderstand your business as much as we do. We can’t find it as intriguing asyou do if we can’t figure out what a frammis or a dongle is.11) There’s no need to talk about “risk factors” and other quasi-legal mumbo- jumbo (an investment banking term of art) in your business plan. Weunderstand risk a lot better than you do because we evaluate it every day. Our attorneys will handle the language issues so we can concentrate on figuring outwhether or not we will reach the point of calling them.12) Please don’t make speculative and complex financial exit plans (“We’reanticipating an IPO in the third quarter of next year at a valuation of seventytrillion dollars…”) a part of your business plan. It’s hard to understand what’sgoing on in the market unless you’re in it and if we don’t understand it as wellas we would like to, it’s really hard for us to believe that you do. Besides,that’s what you’re going to pay us a lot of money to worry about. If you promise to stay out of our business, we’ll promise to stay out of yours, unlessof course it’s extremely successful and profitable, doubling in size every year,in which case you will probably need a very sophisticated and experiencedinvestment banker to be your CFO or EVP of Corporate Development. Forgetthose guys from Arthur Andersen – they are clueless (Editor’s note: This waswritten before Enron even escaped the business plan stage and shortly after Arthur Andersen’s Seoul office had ruined the $500M recapitalization of a

of 00

RaheelAhmed09

HELLO Please grant me to download this article my papar of entrepreneurship will be conducted on saturday on 19 dec 09.I must read it carefully, hence to solve cases. plz..................

reply12 / 17 / 2009

How Not to Write a Business Plan

An informal (possibly irreverent) guide to things to avoid when writing a business plan, from the point of view of a venture capitalist and investment banker.

2,202 Reads

Info and Rating

Category:	Business/Law
Rating:	(9 Ratings)
Upload Date:	01/26/2009
Copyright:	Attribution Non-commercial
Tags:	Business plan business planning Business plan business planning (fewer)