Wednesday, January 10, 2007

Do Start-Ups Need Plans?

On Tuesday, Jan. 9, 2007, the Wall Street Journal's "Enterprise" column asked, "Do Start-Ups Really Need Formal Business Plans?"

Some academics say - no - unless you are seeking venture or angel capital. Big plans of 50 pages aren't worth the time. It's better to execute. That said, a good summary and PowerPoint, plus detailed financial projections are all start-ups really need to raise money.

I would agree. I haven't written a full 30-page plan in years. But I do write excutive summaries for clients, and they have raised capital with the summaries and financial projections.

Just doing the summary makes you, the business owner, think through the elevator pitch and the business model. It makes you go out and get relevant data about the market. And doing financial projections lets you know how much money you need to raise in order to achieve success. It also tells you how fast you'll burn cash and when you'll break even. These are crucial pieces of information.

The planning process also helps some entrepreneurs realize that they really don't need outside funding. Or if they do, they could take on some debt, rather than giving away equity and ownership to investors. Several entrepreneurs I've worked with have discovered that organic growth -- plowing profits back into the business -- is the best way to grow.

Bottom line for me -- do plan -- do an excutive summary and financial projections. And get together an excellenet management team.

You can read the WSJ article at: