Only the brave will benefit from this blog post because it is about business plans. No one likes to read about business plans unless they’re creating a new business and looking for funding. So most of you are readers (I’m sorry to say) are going to skim this first paragraph and click somewhere else. But if you’re brave enough to continue reading, I’m going to tell you how YOU (yes, even you) can benefit from a business plan.

A business plan is a bit of a misnomer. That’s because we refer to a business plan as if it were a single document. Unfortunately, it has 3 very distinct purposes and there really should be a label for each of the 3 kinds. You might only need one kind for your business or you might need all three. There’s a business plan for getting money out of banks, there’s a business plan for investors (like venture capitalists or angels), and there’s the business plan for you. While there is some information that is the same from one plan to the next, much of the plans serve very different purposes and therefore will contain very different information.

BUSINESS PLAN FOR THE BANK: Banks are in the business of lending money. They want to know what their risks are, how much money you need, and most importantly, how they will get the money back (with interest). So a business plan for a bank is a business plan that covers those aspects and assures lenders that your business is a safe “bet” to earn back their loan plus interest. A bank-purposed business plan needs to back up all of the dollar figures you need, why you need them, why each is a good investment, and how you’ll earn additional income to cover the loan and the interest and grow your business. You’ll also need to cover various aspects of guarantees so that the bank knows that, should your business fold, they’ll have assets and collateral to sell to cover their losses.

BUSINESS PLAN FOR INVESTORS: At first glance you might think that angel investors or venture capitalists or investment partners are similar to the bank. However, their needs are extremely different and therefore they require their own business plan. These investors are rarely loaning money with the expectation of repaid interest. More often than not, they are investing money in trade for partial ownership, some short-term repayment, and a share in the increased equity over the long term. Therefore, their business plan requires less emphasis on how you’ll pay their money back and more emphasis on how the business will grow. This means that you’ll want to cover items like why the market is hungry for your product or service, how the leadership team is experienced and able to bring the product to market, and what each person is investing into the business as well as realistic growth projections. Angels and VCs are willing to take on some risk (often more than the banks), but rather than being scared off by those risks, they need to weigh it against potential rewards.

BUSINESS PLAN FOR YOURSELF: Your business may not need money from a bank or money from an investor, so the above plans may not apply to you; but if you have a business you SHOULD have a business plan for yourself. Unlike the bank plan (which is often pretty dry) or the investor plan (which is often fairly detailed with market projections and ROI assessments), your plan should be a dog-eared, well-worn document with lots of notations and sticky notes throughout. It should be a practical, hands-on, step-by-step document that describes EXACTLY how you intend to run your business and includes contingencies for various anticipated situations. This should be a plan that never gets put on your shelf but is referenced and modified daily. Here’s how this plan should be formatted: If you are out on the golf course tomorrow and you’re suddenly struck by a golf ball and develop amnesia, you should be able to enter your business the day after tomorrow and easily pick up where you left off without missing  beat. This kind of plan keeps you on track when the storms of the market batter you. This kind of plan helps you to make decisions, weigh choices, and wisely consider any option presented to you.

Three kinds of plans. Your business requires at least one, and perhaps more. And if you’ve read this far, congratulations! This puts you well ahead of the curve. Do you have any questions about business plans? Have you written one before, and have advice or experiences to share? Leave any of these in the comments!

photo credit: Candie_N