The Evolution of the Business Plan

Management science used to tell us that we needed to plan carefully and intelligently for any new business venture, document our assumptions clearly – and then execute.
As a professional accountant I’ve always been leery of projections – or as we like to refer to them “FOFI” (i.e. future-oriented financial information). The thing is, accountants built their reputation for honesty on the accurate reporting of historical information. What’s more we’re pretty good at that.

Steve Blank – the well-respected academic and entrepreneur out of California said it very eloquently:

No business plan survives first contact with customers

 

The thing about projections is that, especially in the case of a new business, they’re almost always wrong. For a startup trying to commercialize a new technology in a new market space, projections are almost always wildly over-optimistic.

In fact most investors in early stage companies discount projections heavily – or more likely just ignore them.

Some years ago I watched a video put out by Sequoia Capital. In it Jim Goetz (the founder) said essentially that you may be wasting your time writing a 120 page business plan – since the projections are almost always wrong…

https://the-hatchery.org/wp-content/uploads/2018/04/sequoia-capital.m4a?_=1

If you like what you’ve heard here is a link to the complete Youtube video…

But in spite of the fact that they are inaccurate – and most experienced investors discount or ignore them – sometimes my clients still need to prepare them. So what is the answer?

From my perspective at least, the answer is STRATPAD.

Originally developed for the iPad – StratPad is a web-based business planning tool that most entrepreneurs can learn to use in the course of a one day workshop. Which means it costs lest than having your CPA or your management consultant write it for you – and more important, keeps the entrepreneur at the centre of the process. Since is a business plan is really a living document, management needs to keep it up-to-date, or at least re-visit it on a regular basis. If you outsource your business plan that means you always have to outsource your plan….

And you’ll never own it!

 

Published by Rob Farrow

accountant, entrepreneur, former chef, occasional artist, angel investor, business advisor, corporate tax specialist