Page 50 - Business Plans that Work A Guide for Small Business

Before You Start Planning, Ask the Right Questions • 41

Types of Plans

A business plan can take a number of forms depending upon its pur-
pose. The primary difference between business plan types is length and
detail. If outside capital is needed, a business plan geared toward equity
investors or debt providers is typically 25 to 40 pages long. This type of
plan is also a good primer for new employees or for communicating the
value of your enterprise to various stakeholders, such as a new supplier
or customer. Entrepreneurs need to recognize that these stakeholders,
especially professional equity investors such as venture capitalists and
professional debt providers, will not read the entire plan from front to
back. This being the case, the entrepreneur needs to produce the plan in
a format that facilitates spot reading. This book investigates the major
sections of business plans. Our general rule of thumb is that less is more.
For instance, we’ve seen a number of plans receive venture funding that
were closer to 25 pages rather than 40 pages.
A second type of business plan, the operational plan, is primarily for
entrepreneurs and their team to guide the development, launch, and ini-
tial growth of the venture. There really is no length specification for this
type of plan; however, it is common for these plans to exceed 80 pages.
The basic organization format between the two types of plans is the same;
however, the level of detail tends to be much greater in an operational
plan. This effort is where the entrepreneur really gains the deep under-
standing so important in discerning how to build and run the business.
The last type of plan is called a dehydrated business plan. These plans
are considerably shorter than the previous two; typically no more than 10
pages. The purpose of this plan is to provide an initial conception of the
business; a more concise articulation of the people, the opportunity, and
the finances required. As such, it can be used to test initial reaction to the
entrepreneur’s idea. It is a document that the entrepreneur can share with
confidantes to receive feedback before investing significant time and effort
on a longer business plan. This book illustrates the more traditional plan
that can be used to raise capital and inform other stakeholders.
What type of plan will you write? Our guess is that you will use all
three. In our experience, the dehydrated plan is good as an initial cut at
what the business is. If you are working with a team, a dehydrated plan
can be a road map to ensure that everyone has the same vision. Then you
can delegate the writing of different portions of the plan to other team
members. For instance, one person may write the marketing plan and