This is “Approaches for Developing Business Plans”, section 12.2 from the book Creating Services and Products (v. 1.0).
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There are several approaches for developing a business plan. The first approach is to thoroughly develop the business plan and then make a presentation to investors, other entrepreneurs, interested parties, and family members. The feedback from the presentation is then used to rewrite and modify the business plan. The updated business plan is then presented to the relevant parties. The major criticism of this approach is that too much time is spent developing the business plan and not enough time on refining and streamlining the business model.
The second approach consists of writing an executive summary, or a business concept paper, and then to prepare a presentation and deliver it to the relevant parties without any modification from presentation feedback. We have used this approach for over 10 years. Guy Kawasaki uses a similar technique called the pitch and plan approach.Kawasaki (2008).
Kawasaki believes that one purpose of the plan is to attract investors, but that the most important reason for developing a plan is to solidify the management team’s objectives. He believes that the executive summary plays a critical role in attracting investors and creating focus for the management team. He recommends pitching the idea first and then developing a full-blown plan.
As noted above, we completely agree with that assertion and have used a similar approach for years. The FAD template, the Business Plan Overview template, the executive summary, the business presentation, and the full-blown business plan are in reality prototypes of the business. They are all abbreviated business models. They give the management team, the founders, and the investors an opportunity to focus on something that represents the actual business. How many times have you heard the following refrains?
They just don’t understand our business model!
They just don’t understand what we’re doing!
One of the most important duties of the entrepreneur is to educate and facilitate the learning process of the management team, the founders, and investors. The objective should not be too obscure the way the business works, but rather to help interested parties understand why the business will work. The Ten–Ten planning approach coupled with the executive summary, the presentation, and the full-blown business plan should facilitate the learning process and lead to better communication. Better communication will in turn lead to an improved business model.