Let’s go through the B.S. here and take an honest look at the Business Plan. It’s responsible for more business-related errors than any other plan and is responsible for the demise of many businesses before they begin!
Why? It’s a bit complicated. However, with a little determination, we can cut right to the meat. Here are a few misconceptions about business plans:
“You aren’t able to get traditional financing without having a plan for your business.”
Bankers will need business plans they can present to their committee for loan approval. Bankers generally do not take risks. They cannot endure a loss rate that is greater than the two or one percent mark of loans they issue. Similar to how HR departments make use of your resume to dismiss your candidature (rather than hiring you), banks employ your business plan to discover reasons to deny your application. In reality, if you require financing to start your business, it will typically only be loaned to you on a personal basis, using your home or another asset as collateral. Personal lines of credit and credit cards of credit are the method by which many entrepreneurs finance their new business.
“Venture Capitalists require a business plan in order to fund your.”
While Venture Capitalists have to endure more than 20 percent failings and average performance on 75% of their ventures, however, they must make their money out of the 10% of projects that “hit the jackpot.” This is one reason why they get the most significant share part of their pie. Ask any experienced V.C. what percentage of their stock they include on a business plan, and they’ll reveal in full transparency that they don’t really study more than an Executive Summary. They’re more dependent on factors such as I.P. (Intellectual property you have) or credentials, as well as the track performance for management. Management Team. Orders for purchase from established companies or from the government or even Letters of Intent or Memoranda of Understanding may carry some weight based on the market conditions or other conditions.
“The business plan will guide your marketing strategy.”
Professionally trained managers and sophisticated Venture Capitalists are aware that the business plan is in good shape until the first marketing campaign is launched. The plan becomes a matter of improvising and adapting. The business plan goes through every day and often hourly changes. The initial document is nothing but a historical document, which often bears almost no or minimal resemblance to actual. Inputting too much effort and time into forecasting, in the beginning will only delay the start-up rather than aid the process. It is better to create a short plan that you can modify in the future instead of a rigid and cumbersome plan before even attempting to test the market.
So, what’s the purpose of the business plan?
The actual value lies in its construction from the beginning.
Writing the plan creates “management muscles” and shows the ability of the team to forecast things to come. Advanced readers (think prospective investors) think about checking the box that says “ability to create an outline and then present the data.” Then they go to the section on contingency plans… The “what is ifs!”
A lot of potential entrepreneurs believe that they require an outline of their business to obtain finance. In the end, they waste endless hours, financial resources, and emotional energy in putting the plan together. If they’d devoted the time to even get a small number of customers who pay, they would be a step ahead in recognizing and presenting the worth of their business.
According to us, a one-page business plan is not enough for a truly game-changing business idea. For the majority of entrepreneurs, a 10-page plan is enough. Let it work for you until you’ve got some actual sales or you really need to take your money to a bank.
The main point is that a business plan is a process that is constantly in revision. Make use of it to aid in your planning; make sure it doesn’t be a hindrance if you’re a “planning fanatic,” spend your time and energy working on your marketing strategy. It’s where the action will be!