Business Plans – Why Write Them?

August 16 2010 No Commented

Business Plans – Why Write Them?

Too often you read about investors who suggest to entrepreneurs that business plans are unimportant and they never read them.  I think this is poor advice for entrepreneurs, because business plans are not just written for investors.  Writing business plans forces entrepreneurs to think through and then describe in writing all aspects of their business.

Entrepreneurs tend to be totally focused on their technology, innovation and/or products, sometimes to the extent that they begin talking to investors before they have given serious consideration to a management team, customers, sales channels, competition or the capital required to be successful.  Writing a business plan forces entrepreneurs to consider all aspects of starting a business and is an excellent experience for entrepreneurs new to starting and running businesses.  Most of the time, going through the process of preparing a plan changes somewhat the design of the product or the direction of the company.  Customers are the key to success of any business.  A serious plan must considers customer satisfaction and customer acquisition, in the face of the competitive environment.

I am often asked to recommend tools to assist entrepreneurs in writing business plans.  Frankly, there are many available, but my favorite is The Business Mentor, available for $24.99 from Kauffman FastTrac by calling the US toll-free number, (877) 450-9800.  (This product is temporarily unavailable online.)

And, by the way…most investors do read entrepreneurs’ business plans during the process of making an investment.  Angels in groups (and VCs) generally do extensive “due diligence” (an in-depth study of the opportunity) prior to investing.  The entrepreneur’s business plan provides the outline for that effort.

Stay tuned!  More on business plans in upcoming posts.

It’s a GREAT time to be an angel.  Find a group and jump in!

Bill Payne is the 2010 BNZ University of Auckland Business School Entrepreneur In Residence.