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Get your business plan right

D. Murali
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Effectual Entrepreneurship Stuart Read, Saras Sarasvathy, Nick Dew, Robert
Wiltbank, and Anne-Valérie Ohisson.
Effectual Entrepreneurship Stuart Read, Saras Sarasvathy, Nick Dew, Robert Wiltbank, and Anne-Valérie Ohisson.

Sample this: “Business plans have their time and place, though perhaps not in planning a business.” A shocker, but that is the opening line in a chapter on ‘business plans and business models,' in Effectual Entrepreneurship by Stuart Read, Saras Sarasvathy, Nick Dew, Robert Wiltbank, and Anne-Valérie Ohisson (www.routledge.com).

The authors note that the business plan is one of the most ‘taught' aspects of entrepreneurship. They elaborate that as a work project it provides a wonderful learning platform. “The creation of a business plan requires that all the different functional areas relating to the venture be detailed: financial plans and budgets, assessments and assertions of market need, the four Ps (price, product, promotion, and placement) of marketing, the key talent needs of the venture, risk assessments, competitive details, and comparisons and on and on.”

Substance over form

The chapter is not meant to teach you how to write a business plan, because ‘you can Google the topic and find all the outlines you need.' Rather, it focuses on the principle of substance over form in business plans. The authors remind that the business plan is largely a marketing tool, used for communicating perspective, insights, and guidance on how others might evaluate and interface with your venture. They add that, as with any marketing communication, you must know your audience and the objectives you want to accomplish with that communication. The audience for business plans being diverse — encompassing lenders, private investors, potential employees and board members, customers, upstream suppliers, and channel partners — the book recommends learning the details of their different ‘screens,' the shorthand rules that help them process the information you provide more quickly than you might think.

Mastery of the opportunity

An insight of value is that business plans are not about selling the upside of your venture; they are about sharing your mastery of the opportunity, which involves upside, downside, inside, outside, and blindside. The authors rue that one of the most under-addressed topics in business plans is risk management. “No one wants to ‘spook' potential partners with frank discussions of negative possibilities while in the midst of selling the winning potential of their venture.”

Yet, if we take to heart ideas about influencing and being influenced, staying committed to means more than goals, working with affordable loss, pre-committed partnership, and leveraging contingencies, then we must also take to heart the idea that things will go wrong. For, “Business plans that sell the upside with a mere nod to the risks are considered naïve by good investors and useless by expert entrepreneurs.”

Co-create value

While a business plan has components — such as the revenue model, operating approach, people approach, and differentiators — the business plan is not any one of these, but all of these, the authors instruct. They fret that under-specified business plans generally detail the revenue model and touch on differentiators, but overlook the approach to operations and people/ talent.

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(This article was published on September 7, 2011)
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