Approaches to Writing a Business Plan
By Akira Hirai
You have four basic approaches to preparing your business plan:
- Prepare it yourself the old fashioned way. This means scouring websites and reading books to learn how to prepare a business plan.
- Prepare it yourself using business plan software. Most software packages cost less than $100. They guide you through the process by asking you a series of questions about your business.
- Hire an inexpensive business plan consultant to write the plan for you. Caveat emptor. You get what you pay for.
- Hire an excellent business plan consultant to write the plan for you. If you do your homework, you get what you pay for.
The advantages and disadvantages of each of these methods are as follows:
|Do it yourself WITHOUT software||
|Do it yourself WITH software||
|Hire an INEXPENSIVE business plan consultant||
|Hire an EXCELLENT business plan consultant||
Do it yourself WITHOUT software
- It costs relatively little (the price of a few books).
- Many free outlines can be found on the web.
- It can be a great way to think through the many issues facing a young venture.
- It will force you to learn about subjects that fall outside of your core expertise, whether it be finance, marketing, sales, risk management, product planning, competitor analysis, or whatever.
- Very expensive in terms of your time, especially if you do not have a strong business and financial background (you can count on 300-500 hours in most cases).
- Mistakes can be very costly, especially if you are seeking equity funding (you only get one shot with most investors).
- If you're not a good writer, you'll have to find a good editor.
- If you're not adept with accounting and finance, creating a financial forecast that is free of errors will be extremely difficult.
- This is probably most appropriate for an Idea Business Plan or an Operating Business Plan that will not be shown to investors.
- If you need help, here is a methodology for putting together a simple four-page business plan.
Do it yourself WITH software
- Relatively inexpensive.
- Some software comes with sample business plans for many industries that you can use as a starting point.
- The rigid structure makes sure that you don't leave out anything important.
- Most software packages are not very flexible.
- The result looks "cookie cutter."
- You still have to write all of the text yourself, so if you're not a good writer, you'll have to find a good editor.
- Still quite time consuming, although less so than doing it without software.
- This option may be appropriate if you plan to start a low-tech business like a restaurant or a store and are seeking bank or possibly even angel funding.
- However, you should be very wary about using this plan for VC or corporate investors, since a poorly written business plan will blow the only chance you have.
- If you go this route, check out LivePlan.com or Business Plan Pro.
Hire an INEXPENSIVE business plan consultant
- Relatively inexpensive (under $5,000, and sometimes even under $1,000).
- Saves you time.
- Quick turnaround times.
- Most mass produce business plans using business planning software. They ask you a series of canned questions, fill in the blanks in the software, and send you the results with little or no value-added consulting. You are essentially paying them to type your responses into the software for you.
- Many are part-timers who have never started a business themselves.
- More often than not, the business plan will require a complete rewrite if you plan to seek equity funding.
- Same comments as above. If you are lucky, you may find one of the few inexpensive consultants who produce reasonably good results. But do you really want to rely on luck as a strategy?
Hire an EXCELLENT business plan consultant
- The best consultants have written many plans that have raised capital, and they understand what investors want to see
- You can save literally hundreds of hours. This is time you can spend building your business: team, product, intellectual property, customer base, distribution channels, etc.
- They can generate value-added ideas in all areas, and can help you position your company for success.
- They provide an objective outside perspective, and will challenge your assumptions.
- They perform independent market and competitor research.
- Fairly expensive (usually well over $10,000).
- It can be difficult to distinguish between the excellent and the average business plan consultant (hint: look at their track records).
- If you are preparing an Equity Funding Plan and you have never written a funded plan before, you should give this option serious consideration.
- Even if you know how to write a plan, you should be devoting your time to building your business.
- The business plan is often the only basis a potential investor has to decide whether or not to invite you to their office for that all-important first meeting. If you need medical attention, you hire a good doctor. If you need a contract, you hire a good lawyer. If a business plan is critical to your success, why wouldn't you hire the best consultant you can find?
You don't have to choose just one of these, of course. You can create a draft yourself or use an inexpensive consultant to get the basics down on paper, and then have a more experienced consultant put on the finishing touches.
If you are a high-tech entrepreneur planning to raise equity capital, we invite you to contact us to schedule a free initial consultation.
If you decide to prepare your own business plan, whether with or without software, you may want to explore the resources in our Entrepreneur's Library. You may also want to read about Why Business Plans Don't Get Funded.