What do you think of when you hear the phrase “business plan?” Does that bring to mind a formal document that starts with a summary and includes modules describing your business’s products, market, strategy, team, and essential projections? If so, let me introduce you to the concept of the business plan event and explain why this is worth thinking about.
The more common business plan events
Sometimes, in the normal course of running a business, growing a business, or starting a business, you need a business plan. I refer here to situations that require showing a business plan document to somebody outside the organization.
For example, the most common business plan events are:
- Banks often require the business plan document as part of a business loan or other commercial credit. Most SBA loan programs, which guarantee bank loans made by local small business banks, require a formal business plan.
- Angel investors usually require a business plan from a startup as part of the process of seeking investment. Unlike the common myth, they don’t use the business plan as an introduction to a business. Instead, they use it during what they call the due diligence phase, after they’ve met with founders and had a pitch, when they study the details before making a final decision.
- Business plans are usually part of the process of buying and selling a business. That applies to the small business transactions that happen all the time, as well as to major acquisitions by big businesses.
There are other business plan events that come up. When I started my business 30 years ago, I needed to show a business plan to my bank just to get authorized to take credit cards. And I’ve heard of business plans used as part of negotiating divorce settlements and inheritance claims.
Widespread confusion between plan and planning
If you answered yes to my question in the first paragraph above, that you do think of a business plan as something hard to do that has only specialized use, then I say you are in good company. Let me suggest that you’d be better off, as a business owner, with an attitude adjustment.
My recommendation is that you dismiss the idea of the daunting big formal business plan, but adopt business planning instead. The distinction, in my mind, stands out with the famous quote from former president and military strategist Dwight D. Eisenhower: “The plan is useless; but planning is essential.”
I love that quote and use it a lot because it leads to what I call good planning process.
- The process starts with a simple, lean business plan that covers the main points you need to write down. You can do this with simple bullet point lists and tables. Set down strategy, tactics, major milestones, metrics, and essential projections.
- Then, as you steer your business with ongoing planning process, take that lean plan and review results regularly. As results uncover insights, revise that plan. Keep it lean, and review and revise it often.
The business conclusion: planning, not plan
My suggestion for business owners: Think about what business plan events are. Separate, in your mind, the business plan required for a specific business plan event from the business planning you can use on a regular basis to run your business better.
Then, once you’ve seen the difference, manage a lean plan that’s always fresh, with regular reviews and revisions. And when you face an actual business plan event, then and only then take your latest version of your lean business plan and dress it up, adding descriptions and summaries, as a formal business plan document.
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