Why Tiny Business Plans Are Best

through Messangers

 

Writing Tight: Why Tiny Business Plans Are Best

Over the course of the past ten years, I must have been involved in the writing or reviewing of 12 dozen business plans, or more. I shudder to think at the hours I have spent blathering on in some Word doc about the purported benefits of some feature in a long list of features, or the reasons why some competitor would never, ever catch up to my company's awesome technology.

A recent survey by Inc. magazine shows that less that half of new companies have formal business plans (oh, and by the way, start with limited funds, a subject for another post). No surprise that modern, agile companies might jettison mindless time-wasting documentation in favor of spending more time on the actual business of business. But I think the time invested is well spent if it leads to the management team getting zoned in, and agreeing on what is important for the business and what isn't.

As you can tell from my tone, I have grown somewhat disenchanted with much of the overkill that surrounds business plans; however, I think that a certain approach to business plans can still be valid and helpful. And, given the demands of angels and VCs, entrepreneurs will have to continue to produce business plans, no matter what their views on them may be.

The Ten Page Business Plan

My approach is simple: write a ten page business plan. In ten pages you have enough room to get to the heart of the business: the product, market, competitors, and how it will grow and make money. Even enough room for an abbreviated consolidation of the financials.

But there is no room in ten pages for flowery superlatives, or run-on sentences, or rambling marketing descriptions that blur into unsupported dreamscapes. There is only enough room for the stripped down essentials of the business.

For those of us reading business plans, this is all good news. Bios are truncated to the absolute minimum, so we don't have to read the heart-warming story of a founder's Phi Beta Kappa ceremony, or the epiphany when the company's president and CTO took a two week raft trip down the Zambezi river.

Depending on what is put into those ten pages, we have a document that provides the key facts about the business, and a capsule summary of what is going on in the heads of management.

For those writing this sort of business plan, however, it can be quite difficult. Most people, no matter how intelligent or educated, do not approach writing with the rigor that this sort of writing calls for, and writing a ten page plan that is effective, clear, and compelling is at least twice as hard as writing a bloated, rambling, and superlative-laden 50 page plan.

Here's the outline for the Tiny Business Plan that I use with many of my clients and companies:

1. Executive Summary -- 1 page
2. About The Business -- includes company legal status, history, and trimmed-to-the-bone bios of the management team -- 1 page
3. The Product (or Service) -- the description and value proposition of the company's product or services -- 2 pages
4. Market and Competition -- description, size, and trends in the market; and trimmed-to-the-bone description of competitors -- 2 pages
5. Technology (or Processes) -- A condensed overview of the technology that underlies the product (or service). (Note: I believe that tech companies need another docuemnt, geared for techies, that details the product's design, status, and proeduct roadmap in detail, as well.) -- 1 page
6. Sales and Marketing -- How are people going to find out about the product/service, how do you engage with them to get them to pay for it, and how much does it cost? -- 2 pages
7. Financials -- A condensed description of the companies finances, especially with regard to sources and uses of cash. (Note: the company will need more in depth financials, as well, but they should be represented in different formats, not in a business plan.) -- 1 page

The problem with getting a ten page plan done is that people don't want to approach writing with constraints: they want to be free-form, basically writing whatever comes to mind until they run out of things to say. The reality is that in a business plan you should only address critical things, and then you should say just enough to make your case, and no more.

For each section, I work with my clients to create the topic sentences of the few paragraphs that will exist in the final document. We then focus our discussion on what those sentences are, what they state, and what is left out. Only after this is resolved do we descend into writing the complete paragraphs. Perhaps it is no surprise that the initial arguing is hard, but once it has been accomplished, writing the actual paragraphs is straightforward (although bloat always seems to creep in).

Contrasted with the alternatives, the ten page approach focuses the attention of the management team on deciding what is central and what isn't. In many situations where a longer format is being used, I have witnessed very cursory discussion at the outset, as if everyone involved somehow organically knows what is important and what isn't. This is often followed by a parceling out of various sections of the document to different people: the CTO should write the technology section, the marketing guy will write about the market, and so on. This leads to a very uneven document, and often a general mismatch with regard to what is critical.

I strongly recommend the ten page technique, and the accompanying collaborative style. Candidly, I am writing this précis about it because I am involved in the development of several business plans at this point, with several groups, and I am hoping to head off multiple attacks of the "business plan blah, blah, blahs" before they happen. Ultimately, the time invested in a ten page plan is not necessarily shorter than in creating a longer document, despite the size. But the way that time is invested is vastly different, and that makes all the difference.