Who Reads the Business Plan—And What Are They Looking For?

Who Reads the Business Plan—And What Are They Looking For?
A Firm’s Employees
                   A clearly written business plan, which articulates the vision and future plans of a firm, is important for both the management team and the rank-and-file employees. Some experts argue that it’s a waste of time to write a business plan because the marketplace changes so rapidly that any plan will become quickly outdated. Although it’s true that marketplaces can and often do change rapidly, the process of writing the plan may be as valuable as the plan itself.
                    A clearly written business plan also helps a firm’s rank-and-file employees operate in sync and move forward in a consistent and purposeful manner. The existence of a business plan is particularly useful for the functional department heads of a young firm. For example, imagine that you are the newly hired vice president for management information systems for a rapidly growing start-up. The availability of a formal business plan that talks about all aspects of the business and the business’s future strategies and goals can help you make sure that what you’re doing is consistent with the overall plans and direction of the firm.
Investors and Other External Stakeholders
                    External stakeholders who are being recruited to join a firm such as investors, potential business partners, and key employees are the second audience for a business plan. To appeal to this group, the business plan must be realistic and not reflective of overconfidence on the firm’s part. Overly optimistic statements or projections undermine a business plan’s credibility, so it is foolish to include them. At the
same time, the plan must clearly demonstrate that the business idea is viable and offers potential investors financial returns greater than lower-risk investment alternatives. The same is true for potential business partners, customers, and key recruits. Unless the new business can show that it has impressive potential, investors have little reason to become involved with it.
                    A firm must validate the feasibility of its business idea and have a good understanding of its competitive environment prior to presenting its business plan to others. Sophisticated investors, potential business partners, and key recruits will base their assessment of the future prospects of a business on facts, not guesswork or platitudes, as emphasized in Chapter 3. The most compelling facts a company can provide in its business plan are the results of its own feasibility analysis and the articulation of a distinctive and competitive business model. A business plan rings hollow if it is based strictly on an entrepreneur’s predictions of a business’s future prospects. Morphology, the board game company started by Dartmouth student Kate Ryan Reiling, is an example of a business that laid a firm foundation for its business plan via the feasibility analysis that it conducted very early on. Morphology is profiled in the opening feature for Chapter
                    In addition to the previously mentioned attributes, a business plan should disclose all resource limitations that the business must meet before it is ready to start earning revenues. For example, a firm may need to hire service people before it can honor the warranties for the products it sells. It is foolhardy for a new venture to try to downplay or hide its resource needs. One of the main reasons new ventures seek out investors is to obtain the capital needed to hire key personnel, further develop their products or services, lease office space, or fill some other gap in their operations. Investors understand this, and experienced investors are typically willing to help the firms they fund plug resource or competency gaps.