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Are business plans a waste of time?

In the past month of doing our radio program called The 40 Year Old Business Virgin, we have met many different types of successful business owners.   One theme that seems to be arising from the conversations with successful entrepreneurs is this notion of whether or not you need a business plan.

I think business plans certainly have a place and time especially if you are going to try to raise capital to grow your business.  However, writing the next Atlas Shrugged for investors to look at will likely end up being a waste of time.   You need to get a really strong 5 to 10 page executive summary in place so an investor or bank can really get down to understanding the high level of the what and how around your business plan.   Most of them don’t want to read a 100 page business plan, and it all reality most of your plan will have very little relevance 6 months into the business.

For most small start up business, you’ll likely get quicker where you want to go by taking action with whatever your product or service is and then doing constant evaluation to figure out how to adjust your ship.  You certainly want to have a vision of where you are headed, but I wouldn’t spend a ton of time running 10 years of pro forma calculations.  You will likely learn from your mistakes which is what happens from most small business owners.

Check out the past The 40 Year Old Business Virgin Radio Show’s  VIDEOS and AUDIO here!!!

Below is a neat article on this topic from the Wall Street Journal.

http://online.wsj.com/article/SB10001424052748703312504575141832683785168.html?mod=WSJ_Small+Business_LEADNewsCollection

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.
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oXYGen Financial, Inc. co-CEO Ted Jenkin  is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.

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About the author  ⁄ Ted Jenkin @ Your Smart Money Moves

Ted Jenkin @ Your Smart Money Moves

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Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express. He is the co-CEO of oXYGen Financial. You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

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2 Comments

  • Avatar
    April 6, 2010

    As a former strategic planning executive and current entrepreneur who has reviewed and prepared a significant amount of business plans, I would not be so quick to toss out the full business plan. However, to your point, 100 pages are far too long a plan. An executive summary of 10 pages max is always important, especially when raising capital; however, the business plan has been somewhat replaced by the investor pitch presentation. Guy Kawasaki is famous for creating the “rules for a successful pitch presentation” and they can be found here: http://blog.guykawasaki.com/2005/12/the_102030_rule.html

    A business plan is important for an entrepreneur to put together his operating model/revenue model, ensuring he has analyzed the competitive landscape, can demonstrate this is an attractive market and that his/her product is fulfilling an unmet consumer need.

    If you are not seeking private equity financing, the extensive plan may be less critical; however, any astute investor will want to see thorough documentation that you fully understand what you’re doing and that you have the people, processes and product to make your idea a reality, and a high-return reality at that!

  • Avatar
    April 7, 2010

    Great point about business plans as they can be a lost art. The key is not writing Atlas Shrugged, but something your investors can really understand in a manner that will allow them to make investment decisions in your business plan.

    ~Ted

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