Do You Have a Business Plan Event? 1

Do you have a business plan event? That’s when you have to show a business plan to somebody. The most common business plan events, just to give you examples, are related to getting investment or a business loan. Both of these business events require presenting a business plan to somebody outside your company. Other less obvious business plan events are triggered by divorce, death, opening a merchant account, bringing in partners, selling the business, and so forth.

In investment, don’t get fooled by people saying investors don’t read business plans. I can’t speak for all, but I can speak for my experience in working with venture capital and as an angel investor: investors will reject some businesses without reading the plan because they can tell, from the pitch or the summary memo, that they don’t want to go further and won’t want to even see the plan. But — and this is important — every investor I actually know and have worked with (about 60) will either read the plan or have somebody they trust read the plan, and thoroughly, before agreeing to invest.

And what happens with banks and commercial loans, in my experience, is that having a business plan doesn’t guarantee you’ll get the loan, but not having one, especially before you know the bank well, can guarantee that you won’t.

The reason you care about business plan events is that you go from your plan, that lives on your computer and isn’t polished or edited for outsiders, to a version of your plan tailored for the specific business need. Just as an example, that version of your plan you send to investors ought to have good descriptions of management backgrounds and exit strategy, and the version of your plan you send to the bank has more on the personal assets of the owners, payment history, and ability to cover the interest expense. Neither is your plan: your plan stays alive and flexible on your computer and gets reviewed and revised each month. Both are outputs from your plan, intended to serve a specific business need.

I posted more on this last week on the Industry Word blog hosted by the SBA community site.



About the Author Tim Berry is the founder of Palo Alto Software and Follow him on Twitter @Timberry. Follow Tim on Google+ Read more »

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  • MicroSourcing

    Business plans are important, but as the post says, a lot of them go unread by prospective investors when they feel that the business pitch by itself is already lacking.