5 Ways A Business Plan is a Promise, not a Product

Tim Berry , Founder , Palo Alto Software

11 Jan 2012

One of the questions I hear most frequently is how to find consultants to help with developing a business plan for investors. Often it seems as if people are thinking that the right prose and formatting could make the difference between investor interest or lack of it. Too bad. A lot of time, money, and stress gets wasted on producing a plan as if it were a product. That doesn’t work.

I can tell you, from having spent years as a business planning consultant, after having raised VC money as an entrepreneur, and as a member of an angel investor group: that’s not how it works. Your business plan is a collection of promises, not a product. Here are 5 reasons why:

1. What matters is the content — the people, the market, the defensibility, the potential for exit, and so forth — not the wording or formatting of the document. The real plan is what’s going to happen, why, when, who’s responsible, and how much it costs and brings in. It’s the information from which the document is written.
2. Just like the military folks say no battle plan ever survives the first engagement with the enemy, so too, no business plan ever survives the first engagement with reality. Investors know that. They take the plan as a promise only to the extent of good thinking, information, and resolve; nobody ever got kicked out by investors for a pivot that succeeded. All business plans are wrong because they guess the future and we’re human, so we’re bad at it. What matters is that the dots connect, and the plan stays together as it flows down through all the revisions.
3. Not that you don’t want a plan that’s easy to read, with highlights easy to find; you do. And if you have the money to get an experienced business plan writer to dress up your plan, it won’t hurt. But the risk of having somebody else messing with your plan, resulting in not knowing every word, number, and nuance in in it, is a much greater risk than that of having a poorly produced document.
4. Investors don’t read your business plan until after they’ve heard or read a summary and listened to or seen a pitch and liked what they see. The document isn’t the critical medium that communicates the business. You are.
5. All things equal, Investors mistrust relationship with consultants. They want to invest in the business and the team that conceived it, not its vendors who walk away when their invoices are paid.

Conclusion? Sure, optimize the communications for the investors. Get things in order, highlight the right things, show off your best points. But understand that investors aren’t buying into a document. They don’t invest — not ever — in a business plan, but rather, the people who will implement it. Work on the plan, constantly; but do it in house.

All opinions expressed are those of the author,  and do not necessarily represent those of Gust.

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