How and Why Business Plans Have Changed The fundamentals of business plan writing remain the same, but there are some crucial changes these days that you should keep in mind when crafting your plan.
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I encountered my first business plan in 1974. I worked on international plans for multinational companies in the 1970s, then on entrepreneurial plans for Silicon Valley startups in the 1980s, and on plans from startups everywhere in the 1990s and throughout this millennium. To this day, I read about 100 business plans a year as a member of a local angel investment group, and a judge of several major international business plan competitions.
The fundamentals of business planning have been remarkably stable for several decades. But the how, how much and even the whys have changed enormously.
The main fundamentals remain the same:
- It's about business and results. The value of a plan is its business impact, the decisions it causes, not its ideas, formatting, writing or appearance. A beautiful plan, unexecuted, is worth nothing. A mediocre plan, well executed, creates business value.
- It's the planning that matters, not the plan. Without regular review and revision, a plan is just, at best, an interesting exercise. It's not a document, it's a process.
- Form follows function. A business plan should be just big enough to cover the business need. It should grow organically. The plan contains only what's required for its business use.
- Planning manages change. Change doesn't negate planning. A well-formed plan connects dots and decisions to improve management and business results as assumptions change.
- Planning isn't accounting. Even though the projections look like accounting statements, the context is completely different. Where accounting needs infinite exact detail, planning is about aggregation and educated guessing.
Still, like so much else in business, planning has changed as the world changes.
- Time spans are shorter. In the old days, a plan might last a few months without revision, but today a plan is obsolete in a few weeks.
- The plans themselves are shorter. Hard as it is to imagine today, there was a time when potential investors wanted to see 75 to 100 page business plans full of validating information. Of course formats depend on the actual context and the business use, but all variations of business plans are shorter now than they once were. Business plans for angel investment are rarely more than 25 pages of text, not counting tables and illustrations and can be as little as 10 or 15 pages of text. In fact, business plans for competitions are often limited to 10 or 15 pages.
- Tools and techniques are different. Good business planning involves collections of components or modules including some texts, bullet points, lists, projections and illustrations. A single business plan might generate a pitch presentation, elevator speech and executive summary as outputs. And most plans stay on a network for easy access, and exist on a network in digital form, rather than on paper. Printouts are obsolete.
Business planning today reflects a rapidly changing world, but it hasn't lost its fundamental purpose since I picked up my first business plan nearly forty years ago.