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A new approach to Business Plans

Seth Godin is one of the guys I follow for consistent gems. I have reworked an article he wrote here: http://sethgodin.typepad.com/seths_blog/2010/05/the-modern-business-plan.html with the aim of making it more nuts and bolts-ish for the many people I am trying to help get their inventions and businesses going… What follows is my adaptation of Seth’s basic idea.

Normal business plans include terms like “target market” and “resources” where you end up having to learn a myriad business terms just to understand how the document is meant to work. Well Seth’s idea, with my adaption is designed to simplify the business plan format and to focus in the document on key ideas or answers.

The proposed business plan includes 5 sections:

  1. The way things are
  2. What we plan to do about it
  3. What we will do if things go sideways
  4. The people to get this done
  5. The money we will need and how we plan to use it.

The way things are section describes the world as it is. Footnote if you want to, but tell me about the market you are entering, the needs that already exist, the competitors in your space, technology standards, the way others have succeeded and failed in the past. The more specific the better. The more you can show savvy industry knowledge the better. The more visceral the stories, the better. The point of this section is to be sure that you're clear about the way you see the world, and that you and I agree on your assumptions. This section isn't partisan, it takes no positions, it just states how things are.

This section can take as long as you need to tell it. It can include spreadsheets, market share analysis and anything I need to know about how the world works.

The What we plan to do about it  section is your chance to describe how you're going to change things. We will do X, and then Y will happen. We will build Z with this much money in this much time. We will present Q to the market and the market will respond by taking this action.

This is the heart of the modern business plan. The only reason to launch a project is to change something, and I want to know what you're going to do and what impact it's going to have.

Of course, this section will be incorrect. You will make assertions that won't pan out. You'll miss budgets and deadlines and sales. So the what we will do if things go sideways section tells me what you'll do if that happens. How much flexibility does your product or team have? If your assertions don't pan out, is it over?

The people to get this done section rightly highlights the key element... who is on your team, who is going to join your team. 'Who' doesn't mean their resume, who means their attitudes and abilities and track record in shipping... what they have done in the past that tells me how they are going to use existing skills, experience and contacts to get the business done.

And the last section is all about money the money we will need and how we plan to use it. How much do you need, how will you spend it, what does cash flow look like, P&Ls, balance sheets, margins and exit strategies.

Your local VC might not like this format, but I'm betting it will help your team think through the hard issues more clearly.

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