I was part of a discussion with someone on a public board recently, the focus of which was executive summaries for business plans. An entrepreneur was meeting with a SCORE advisor, who had asked for the ‘exec’. The drafted exec was 3 pages long! The SCORE advisor responded by saying that that 3 pages was almost what he would consider a business plan (of 5 pages max)! The entrepreneur had drafted a business plan that was 30 pages long. Now, SCORE, for those who are unfamiliar with the service, makes available volunteer retired business people to assist new venturers.
So – why the confusion and disagreement?
Viewpoints on Business Plans
As the discussion unfolded, various people weighed in. Here are the viewpoints expressed.
- The business plan should be written before the executive summary
- The plan should be for you (as well as the investor), so make it work for you
- SCORE volunteers often worked for enterprise-class operations
- Take into account the framework coming from SCORE, but add your own experience
- SCORE clients are often in ‘lifestyle’ businesses and are seeking SBA guaranteed loans
- VCs have ADD, want 4 bullet points per page, and will not read 40 pages
- Business planning is a process to generate ‘questions’ for you to answer
When I said that we did not write business plans, just modelled and then wrote executive summaries, the entrepreneur was aghast. The entrepreneur expressed that if modelling was the only way to go, the reaction would be to sit down, cry and give up forever. Sticking with sentences and sentence fragments was the solution for this entrepreneur.
Entrepreneurial Style
Entrepreneurs come in all shapes, sizes, and tendencies. Not all of us are in a for-profit business, as the entrepreneurial spark can just as easily be seen in not-for-profits, social organisations, churches, and even politics. And with that range, come all types of different strengths, and relative weaknesses. Sometimes commented on as comfort zones, or as management styles – there is an analogous entrepreneurial style.
In my experience, there are three poles of preference.
Do or do not, there is no plan. There are those who like to get out and immediately start selling – meeting people, talking face-to-face, buying and selling without policy or infrastructure, and with only the haziest of plans. As initiators, such people do startling things and can achieve impossible results in a very short time.
Numbers are an evil conspiracy. There are those who like to plan, and whose strength lies in communication. The business takes on some reality when the business can be described in text. The envisioning and planning of the business is highly verbal.
Numbers rule, words drool. There are those who like to plan, and their strength is in numbers. Once again, the business takes on some reality when the business is described in numbers, either a set of calculations on a serviette/napkin/envelope/placemat, or in a spreadsheet.
Here’s mine : What you tell me 3 times is true. Do. Model. Write.
Each of these styles represents a comfort zone for that entrepreneur’s existing talents. And that is great. A business must exist in the entrepreneur’s head – that is its reality.
The problems arise when trying to convert the inner reality to the outer reality – so that other people can see it, taste it, grasp it. That is when the entrepreneur needs to stretch themselves past their comfort zone. A very large number of entrepreneurs are not comfortable with numbers. They find it tedious, unreal, counter-productive and downright painful. Unfortunately, modelling numbers is required, because at the end of the day, reality demands that you pay your bills, and that requires money, and money IS a number.
The Measuring Stick
It is axiomatic in economics that money is the measuring stick of the economy. The reason for this is that as a medium of exchange, the only way to convert hours of labour, pounds of material, square footage of a plant facility, and the efficiency of technical know-how into common units IS through money. A business plan describes the units of input, the process for conversion, and the value of outputs in money. There is then, no coherent, rational business plan without numbers.
The rubber will hit the road when you attempt to describe the business to an outsider. Since they are not privy to the entrepreneur’s inner mental workings, they will have to be offered alternatives to understanding. This can be text, it can be graphics, movies, flowcharts, diagrams, prototypes, 3D walk-throughs – each audience will have a different preference. Mostly, the audience for a business plan will be someone trained with numbers. No numbers – no communication. The reason is simple. It is their experience that plans with no numbers fail. The answers to tough questions have to have numbers, because the inter-relationships are too complex to be described efficiently in words, pictures, or even real tactile existence.
Those business relationships are conditional on their quantifications to be viable. A plant in the garden can be described. You can take pictures. You can write an “Ode to the Beauty of the Dahlia”. But the plant will not grow without the correct temperature, the appropriate quanta of light of a particular spectrum, and the necessary level of nutrients in the soil. Some plants need 1 litre of water per day, others, a teaspoon a day will kill them. If you are a professional or commercial gardener, lacking these quantifications is a pathway to failure.
Does this mean that if you are not comfortable with numbers that your garden will be empty? Not at all – you turn to references that assist you. You develop rules of thumb. You ask for advice. And you do attempt to increase your level of comfort.
Successful entrepreneuring demands that you stretch your comfort zones. Crying and giving up because of the requirements of a business plan, while terrific hyperbole, is not a good plan for an entrepreneur. So lets stretch that comfort zone, in the next two posts, shall we?
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