March 09, 2005
MYTH: "A Good Business Plan must Convince Investors"
REALITY: “A Good Business Plan must Convince You”
[this is slightly revised from the original posted as “ONLY ONE BUSINESS PLAN MATTERS... THE PLAN WHICH CONVINCES YOU!!!” in Ecademy Clubs: Global Capital Access Club - Forum — cgm]
The only business plan that matters is "the one you write FOR YOURSELF" ... that's the plan you must write long before you ever attempt to write a plan to convince others ... The Key is that you don't want to wake up one morning 5 years from now and wonder why you wasted the last 5 years of your life on such a "stupid idea."
Therefore, the most important person to convince first is YOURSELF. And you need to be tougher on your own ideas and more fully vet your plan than anyone else ever will ... because it is YOU who is going to give up part of YOUR LIFE for YOUR PROJECT ... Your life should be worth alot more to you than any combination of investors and employees and therefore — you should respect yourself enough to write the toughest business plan first — YOURS!!!!
Therefore, before you ever write a business plan to convince investors TO INVEST THEIR MONEY, you must write a plan TO CONVICE YOURSELF TO INVEST 5 YEARS OF YOUR LIFE.
I believe it's much better for someone to invest a year or two of their life researching and planning, BEFORE they decide to commit five years of their life on something that you haven't fully convinced yourself is worth it.
As a VC, we can tell immediately whether or not the founders have gone through this process of convincing themselves (selling themselves to themselves) ... we see it in the plan they submit, the way they discuss their project, they way they think about the market, the way they approach their strategy and execution, etc. etc. ... It's night and day ... People who have THOROUGHLY VETTED THEIR PLAN for themselves hold up to the most detailed due diligence because, no matter how hard we dig to discover weakness -- "THEY HAVE ALREADY BEEN THERE" and then some ... the net result is that you have thought through, more thoroughly than anyone else ever will, about you plan ... problems, challenges, whatever ... nothing will take you by surprize since you have thought through all of the logical consequences of your plan ...
So it isn't the one page executive summary of the 40 page business plan with financials and assumptions that gets you your funding ... it is the 500+ page plan you wrote that no one ever sees which resulted in a 300+ page market analysis and a 200+ tactical planning document from which you finally wrote your 40 pages business plan from which you developed your assumptions which drive your detailed financial plan from which you wrote your one page executive summary from which you summarized into your 10 slide powerpoint presentation and finally distill into your two minute "elevator pitch" ...
I'm actually not joking about the 500+ pages and two years of research ... That's actually what it took to convince ME to give up (commit) 5 years of MY life and before I was willing to write the first "short plan" to present to investors in the early 1990's for my first Venture-backed company ...
I needed to sell myself to commit myself long before I could ask others to commit their lives and their capital for my dreams -- so I was always the most critical of everything ... my dreams needed to be HARSHLY REALITY TESTED ... After I finished that 500+ pages of analysis, no one ever came up with anything I hadn't already thought through ad nauseum ... Recruiting the rest of the team and capital was then a trivial exercise, because I was convincing ... and
I WAS CONVINCING BECAUSE I WAS CONVINCED
Over the years since, I've written lot's of business plans, and have refined my methodology, so that it no longer takes me two years of research and 500+ pages of detailed analysis before I write a plan -- but the same objective must be achieved: I must convince myself first before I try to convince anyone else.
I realize most people aren't as compulsive (thankfully) as I am so, I recommend they think through their project completely using a tool which has only gotten better over the years -- I know Tim Berry from the late 1980s and he has been responsible for creating THE TOOL for writing "THE PLAN TO CONVINCE YOU"
It's called "Business Plan Pro" and it is still the best and the only business planning tool I recommend (all the rest focus on the mechanics of writing a plan to convince others ... which is trivial once you have written a plan which convinces yourself) ...
BTW, Although I have an abbreviated methodology these days, I still use Business Plan Pro to generate first cut financials on almost any project I plan (of course I will deny this to my colleagues but it is true and it is an amazing tool and a great time saver for me)
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