How to Write a Great Business Plan

Hr consulting

Posted by Jim Woods @smallbiz_guru

What’s wrong with most business plans? The answer is relatively straightforward. Most waste too much ink on numbers and devote too little to the information that really matters to intelligent investors. As every seasoned investor knows, financial projections for a new company—especially detailed, month-by-month projections that stretch out for more than a year—are an act of imagination. An entrepreneurial venture faces far too many unknowns to predict revenues, let alone profits. Moreover, few if any entrepreneurs correctly anticipate how much capital and time will be required to accomplish their objectives. Typically, they are wildly optimistic, padding their projections. Investors know about the padding effect and therefore discount the figures in business plans. These maneuvers create a vicious circle of inaccuracy that benefits no one.

Don’t misunderstand me: business plans should include some numbers. But those numbers should appear mainly in the form of a business model that shows the entrepreneurial team has thought through the key drivers of the venture’s success or failure. In manufacturing, such a driver might be the yield on a production process; in magazine publishing, the anticipated renewal rate; or in software, the impact of using various distribution channels. The model should also address the break-even issue: At what level of sales does the business begin to make a profit? And even more important, When does cash flow turn positive? Without a doubt, these questions deserve a few pages in any business plan. Near the back. […]

Read full article via How to Write a Great Business Plan – Harvard Business Review.

About

Jim Woods is president of The Jim Woods Group. A management consulting firm. Go here to see his work www.jimwoodsgroup.com. He advises and speaks to organizations large and small on how to increase top line growth in times of uncertainty and complexity. Some of his speaking and consulting clients include: U.S. Army, MITRE Corporation, Pitney Bowes, Whirlpool, and 3M. See more at his website www.jimwoodsgroup.com.

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Posted in Leadership

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