Do I Really Need a Business Plan?

by John Freisinger

“Genius is one percent inspiration and ninety-nine percent perspiration.” We have heard this so often that it has become an entrepreneurial platitude that has lost its meaning. But as funding becomes more scarce, Thomas Edison’s words ring truer.

The idea for a business is actually the easy part, the one percent. The world is full of great, unrealized business ideas; unrealized because few of us are willing to commit to the next ninety-nine percent. The success of any idea is contained in the work that happens after the initial flash of brilliance, the humbling transition to opportunity.

Taking an idea and turning it into an opportunity requires substantial mental discipline. In the vacuum of our inspiration we often overlook the obvious demands that the crowded, unforgiving market will impose on our idea. It is much easier to jump ahead in our thought narrative and focus on the rewards instead of acknowledging the risks.

The disciplined mind of the entrepreneur works through these risks and explores them fully. Apparent risks such as manufacturing (Can I make it?), marketing (Does anyone want it?), sales (Can I sell it?) and funding (Where can I get the money to start?). Overlooked risks such as management (Can I put together a team that can run a company?), intellectual property protection (How do I keep people from stealing my idea?), and economics (If I do sell any can I ever make money?).

As these risks are explored the details of the assumptions, research and the gaps in our knowledge emerge. More questions are created and explored. More research, assumptions and unknowns come forward until a point is reached where there is overwhelming evidence that the idea has a viable chance in the marketplace, or it does not.

In my experience with entrepreneurs, and in my own flashes of genius (it could happen), I have found that most ideas will not mature to opportunities. Sometimes it is a risk that cannot be mitigated, such as government interference, and sometimes it is an aggregation of risks, such as the snowballing cost of mitigating dozens of smaller risks. The important thing is that the idea is fully investigated before substantial capital is risked. Regardless of the financial environment this investigation is critical.

Occasionally an idea does have merit and can be developed into an opportunity. The details of the execution of this idea should take the form of a business plan. I know that the words “business plan” scare many people because they believe that business plans can only be written by MBAs with advanced studies in spreadsheet and diagramming. I prefer to think of the business plan more like an exam in math where you are asked to solve a problem and show your work. The right answer is only worth a small fraction of your grade.

Most of the work is already done by the time you sit down to write the plan. If you have already undertaken the mental exercise to figure out how you will turn your idea into an opportunity the business plan is simply the narrative of your risk mitigation strategy. If you have not, the creation of a business plan helps lead you through the questions that need to be asked and the assumptions that need to be tested.

The business plan allows others to understand your solution and the soundness of your plan. New ideas are risky and without this understanding of your fully-developed risk mitigation strategy it is easy for others to reject your idea. Writing a business plan helps to eliminate the risk that others will understand and support you.

The format of the plan does not have to be scary, either. My colleagues and I will often advise that a well-written plan is 20 to 30 pages of narrative that discusses things like business definition, market and customer analysis, sales and marketing, intellectual property, research and development, management, exit strategy and financial forecasting. These topic areas provide a great structure for your risk mitigation storyline but are no means all encompassing. Each business is different so each plan is different.

What should not vary is the inclusion of an executive summary, the concise, two-page overview of the entire plan. Ideally this should be written last and can borrow from the expanded business plan. Think of it as a movie trailer for your plan. If you cannot generate interest in two pages no one will ever read the next thirty.

In recent years a number of investors have begun asking for video business plans. These are typically visual representations that rely on the executive summary as a script; truly a movie trailer. A word of caution, however: your audience expects that there is a plan behind these teasers. If an investor cannot trust you to write a business plan how can they trust you to run a company with their money?

So do you need a business plan? A well-thought-out plan can help save you wasted effort on unrealistic business ideas. The business plan represents your risk mitigation strategy that can help you determine how much money you will need and what obstacles you will have to overcome. The plan can help others understand your idea and allow them to invest money and expertise to your success. And the business plan is an essential part of your operation strategy. I guess you only need a business plan if you plan on being successful.

John Freisinger is a director of project development
and business assistance at Technology Ventures Corp.

This article can also be viewed online
and downloaded as a PDF file.

Professional Speaker

Known as the 'Orange Tie Guy,' John's animated style, humor, and widespread experience in the business world makes him the perfect speaker for your organization or conference.

Click here to get in touch with John and discover he can help make your event — and you — a grand success!

Public Speaking Trainer

Leaders are supposed to have a powerful stage presence which exudes confidence and professionalism when they deliver critical messages.

What happens when you don’t?

John can help you polish your skills in private or small group sessions.

Messaging Strategist

Translating an idea into an impactful message is difficult. With extensive work in entrepreneurial, corporate and religious organizations, John under-stands the complexities of creating a concise, yet actionable message. His broad experience in finance, marketing, operations and sales will help you create a messaging strategy for communicating your critical ideas.