When it comes to the business plan there are multiple trains of thoughts. Some consider it a must, an undeniable requirement. While others see it as an impediment to achievement. Since I’m in the process of working on a business plan of my own, I actually agree with both sides. On one end the structured approach of a business plan forces you to consider and analyze your project thoroughly. On the other end, this time consuming process may prevent you from efficiently moving forward and executing. It seems you’re constantly in a planning phase. This is especially relevant when you’re starting your business on the side, working outside your day job. This may result in delayed execution.
The problem here is that investors usually make the business plan a requirement – especially if you’re looking at getting government backed loans or grants.
From your own experience, do you feel the BP is a must or a timer waster?
In practice, I found that the BP was more for me as a founder than for investors, in the sense that it gave me the tools to be convincing and knowledgable about all aspects of the tech I’m bringing to market, not merely about the tech issues. I found that the best was to have a business guy to focus on the BP while the tech team achieved actual product work.
But the problem goes deeper than that. In the current Montreal business climate, investors require all business unknowns and risks to be tackled before even considering the investment opportunity, hence their focus on the business plan. Are you willing to caution the mandatory loans in the first round? No? Too bad. Have you identified all your key personel and your complete offering? No? Come back when you do. Do you have a solid market penetration strategy? Decent financial projections? Signed customer intention letters? Love money put aside? A registered corporation to accept the financing? Strategic distribution channel contacts? No? Well, don’t waste our time.
You’ll probably require the help of banks and government investment agencies in your first year; will they invest in your project without the bases being covered? Even if you could raise money with a half-baked plan, the valuation of your company would suffer greatly.
The BP is a selling tool. Realistically speaking, can you sell hundreds of thousands worth of first-round equity with the product/tech alone?
“I found that the BP was more for me as a founder than for investors, in the sense that it gave me the tools to be convincing and knowledgable about all aspects of the tech I’m bringing to market, not merely about the tech issues”.
Étienne, you touch a very important point with your above statement. I think it’s definitely a great tool to help you build a solid foundation for your business. I personally wouldn’t go without it quite frankly. If I didn’t need to pitch to investors I would spend less time on the document, but would nevertheless do the same research and answer the same questions as we need to in a business plan.
I hear what you’re saying about Montreal VC. Not big risk takers, that’s for sure.
It seems like you’re in the process of starting up a business. Am I right?
Thanks for your feedback!
Yep, guilty as charged. On the subject of BPs, I’m currently dealing with a bad case of missing co-founders (hint!) due to conflicting day-job opportunities…
If someone else is responsible for writing the BP, do as I did and make sure that you legally own the BP IP when these things happen. And the equity too!
Etienne, sorry for the slow reply. Been sick the past few days. I saw your email and will reply.
regards
Alex