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July 15, 2004
BBBT: Business Planning
Question: The difference between business plans and business planning is one that you highlight in your book. Can you give an example of why this distinction is important?
Answer: Recently a really smart guy referred to business plans with what I consider the perfect word: currency. Business plans serve as a form of currency—a fluid and temporary repository of information (and imagination) that fuels conversations between the players and potential players in any venture. Business plans have two fundamental purposes: to engender meaningful dialogue among participants about how to move the venture forward, and to foster real learning about how to achieve the goals.
Therefore business plans must be realistic. Any seasoned investor will fail to be swayed by outrageous promises of return on investment if the players lack credibility. Having great numbers only makes sense if the plan displays a seasoned and well-reasoned explanation of how the particular business plan author will achieve the stated goals. This means having the right resources (people, strategy, context, etc.) to make this plan happen.
Planning is a constant process of conversation and testing and reflection and action and learning. Business plans are static documents that may or may not be proven accurate. In fact they will invariably be proven inaccurate, for few if any business plans are ever fully realized in terms of financial projections. The important function of the plan is to guide the principle players towards high-leverage action.
Oh yeah, a slick and credible business plan can help someone raise money, which is a good thing. But again, this usually generally benefits individuals who were already well-positioned to receive funding in the first place.
Posted July 15, 2004 02:40 PM
Comments
The points you bring up are very interesting. Is it true that ideally you want to reach for the stars as realistically as possible in your business plan? I am in the process of creating one for a start-up entertainment company and someone told me that if you create a plan that is too short-term or too easily attainable, than it is almost as though you have achieved your purpose and you're done before you have ever REALLY started. I do believe that this also depends on the purpose of the start-up entity- to make a quick buck and be done with it or to cultivate a passion (such as what Jim S. referred to in the first question of the day). I know the company that I am working on is something that I am dedicated to pursuing day in and day out and consider it to be a relatively long-term project. All this to say that I like/agree with your comments regarding the business plan/business planning. (I refer to the internal business plan not the external brief business plan for potential investors). I agree that the business plan is laid out to stand as your company's overlying purpose and while it should be a consideration in day-to-day dealings, it should also be learned from. I feel that this goes along with the self-assessment and realizing your limitations within the company and planning new avenues to go forth with.
Posted by: Tiffany Preti at July 15, 2004 03:37 PM
I have found it interesting to hear several differing views on business planning/plans. Some of the speakers have stuck very closely to their plans, while others have strayed from it. From the sounds of it a business plan should be a guideline to get a business rolling, but should never constrain a business from heading in a new direction if this way shows promise. But the key to success seems to be that the planning, not plan, needs to be done properly to launch a venture successfully.
Posted by: Bill Baker at July 15, 2004 05:52 PM
at Belmont University in Nashville, Tennessee. He consults with a variety of businesses on start-up and growth related issues, and with larger corporations on re-establishing entrepreneurial cultures within their organizations. Dr. Cornwall's current research interests include entrepreneurial finance and entrepreneurial ethics. He has authored or co-authored four books.
