New York Times: Business plans relics of the past?
When I was contacted by a New York Times reporter writing an article about whether startups still need to write a business plan, I was happy to offer what I'd learned after writing two business plans for two, different companies that secured two microloans - and helped get them paid in full. Since the numerous conversations by phone and email were cut to two short paragraphs in the actual article (here), I thought I'd make use of the time spent thinking about why I'd still recommend entrepreneurs sit down and write a formal business plan and sum it all up right here.
"If you think your startup company is too fast and hot to bother with a business plan when the business model has to be flexible to allow it to constantly change at the hyper-fast pace of business today then you probably don't have a viable business." This was cut from the article but I enjoyed saying it and now I've enjoyed typing it, since it encapsulates the point and offers a little dig at some tech companies with an app or a lot of followers but no real, underlying business.
The process of sitting down and writing a formal business plan demands that the owners and potential investors know exactly how the company will generate income. It requires you to figure out the ideal target markets, prioritize one over another, and understand the buyer profile in each audience. It forces you to consider which products and services would be in demand among these prospective companies, and for how far into the future, along with what they would expect to pay. Though some of today's business plans sport more digital sizzle than the rather nondescript Microsoft Publisher docs I'd written in 1998 and 2001, the core reason for the business to exist really does not change. Either it's viable or it isn't, regardless of the format or presentation style. Whether pleading your case to a bank or venture firm or on kickstarter, you still need to address the same issues.
In writing the business plan for epr Marketing, Inc., I concluded I'd need between three and six client companies to move forward with the plan for world domination. From a marketing and business development standpoint, it meant I could be very targeted in determining which companies to approach. I didn't want just any three to six companies from out of nowhere. I invested a lot of time in considering which industries were in a growth mode and crossed that with the industries where I already had some knowledge and experience, and then crossed that with the industries I really liked. I'm lucky to be involved in several of these industries nearly 15 years later.
When the reporter asked about the marketing approach used to support the initial business development effort, it seemed off topic. But since this still applies to nearly every startup today, I offered this answer:
Even though I only intended to approach 3-6 companies, I recognized that this required the same, professional quality literature and presentation materials as would be needed if I was targeting hundreds of clients. I invested in the same type of literature that I would recommend developing for my clients, using offset quality printing. Digital printing was in its infancy and not even close to offset in quality. It seemed crazy to print 500 (a short run) when I intended to only need 3-6 pieces, and I still have more than 400 left today, but it was effective in demonstrating professionalism and instilling confidence in people who otherwise didn't know me or my young company. Of course, this coordinated with a new Web site. It was loaded with knowledge, insights and information to help people learn about effective marketing for b2b, industrial companies, as well as for b2c. Visually, I'd describe it as acceptable for the times, clean and not unprofessional.
The epr biz plan in concept bears great resemblance to the business today. While it's subject to change to adapt as times change, having a plan in writing doesn't make the company any less nimble. In fact, having a written plan provides a valuable reference to remember the mission and core competencies when assessing whether to enter new markets, introduce new products and services and when considering how best to serve client needs as their needs change and evolve over time.
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