An economic downturn is a great time to start a business.
It sounds paradoxical, but think about it. Costs are lower, and more talent is available, thanks to layoffs. Prospective clients are more likely to try a new supplier who can help them cut costs or increase their competitiveness. Established players, too, are focused on cutting costs instead of increasing market share.
All of this helps clear the way for the next venture with the better mousetrap—but only if the entrepreneur can write a clear and convincing business plan.
Anything less is heading straight for the bin. Because, let’s face it, the intended recipients of such business plans—investors and lenders, family and friends, anyone with capital to invest in the project—are all much more wary of risk now in these turbulent times.
Truth be told, most business plans fail to make much impression on potential investors. Most aren’t even read in full. Their shortcomings tend to be obvious even in a two-page executive summary, largely because they are written before enough real work has been done to create a solid foundation.
I set out to understand why most business plans don’t deliver. Drawing on the hundreds of plans and pitches that I’ve seen over many years of working with entrepreneurs and early-stage ventures, I searched for common patterns in plans that gained no traction. The result? Five oh-so-common varieties of plans that go quickly into the trash without further consideration.
JOURNAL PODCAST
John Mullins speaks with the Journal’s Jennifer Merritt on how entrepreneurs can divorce their passion for a big idea from the business sense required to build a strong business plan and put their idea to work.
[audio: /wp-content/blogs.dir/3/files/mp3s/pod-wsjjrmerritt.mp3]
To help budding entrepreneurs avoid these traps, I also identified the three key elements that go into a successful business plan: a logical statement of a problem and its solution; a battery of cold, hard evidence; and candor about the risks, gaps and other assumptions that might be proved wrong.
In what follows, I will expose the deal-killers found in the five most commonly rejected types of business plans, and share tips for creating plans that should get you invited back for a second meeting and, if all goes well, raise some capital and attract some initial customers.
Here I Am, Never Mind the Problem
In this kind of plan, the writer is smitten with
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VERY INSIGHTFUL FOR PREPARING 10 SLIDE PRESENTATION TO VENTURE CAPITAL FIRM TO BE DONE IN 20 MINUTES. THANKS.
I am happy that someone is here to bring sanity to the perspectives on the making of a business plan.
Over seven years in a state owned SME funding institution I had wondered about how a ‘proposal’ (the then Indian word for biz plans) so good on paper floundered on the ground! Yet advisor after advisor had 9mis)guided entrepreneurs to say only the good things about their plans!
This is a good reality check indeed!
Thanks for bringing back realism and pragmatism into what was otherwise a piece of fiction.
I used to say “I stopped reading fiction. I now read financial statements and business plans instead.”
Some how I am not fully convinced there is something more to it.
“Business plans” are not plans. They are the (dominant) marketing approach to get funding. And even for this purpose they are less and less useful.
If they were plans they would be the blueprint of the business, the project plan, the sailor map: used everyday to track,correct or even change the course of the ship (even changing the target harbor if required). They are often put in the last drawer as soon as financing has been secured (and forgotten). After that come “business as usual” practices. Cynic? Realistic?
As Vc, I just can confirm these flaws. Here’s my point of view. First, we expect a two-pager that is crystal clear. If our neighbor or brother-in-law read it and don’t understand the opportunity, you missed it. Second, have a 10 to 15 slides simple Powerpoint (not to much text, pictures, no animations). Third, a 10 to 20 pages Business plan that support the two first pieces. Four, get introduced by someone who who knows us well. Fifth than you could finish in the less than 2 % that we invest in.
Good luck!
Paradoxical for sure. Insights, strategy, plan, execution and, at least once a year, review and, if need be, adjust the plan. These are the pillars that result in it being much more than a proposal – a solid blueprint that justifies funding to anyone and aims all business resources.
Phill Barufkin
Paradoxical for sure. Insights, strategy, plan, execution and, at least once a year, review and, if need be, adjust the plan. These are the pillars that result in it being much more than a proposal – a solid blueprint that justifies funding to anyone and aims all business resources.
Phill Barufkin is a strategist, planner and researcher who works with businesses to deploy integrated marketing programs.