How to Change the World

A practical blog for impractical people.

January 21, 2006
The Zen of Business Plans
In my day job, I not only hear a lot of PowerPoint pitches, but I also read a lot of business plans.
The PowerPoint pitches explain my Mnire's disease, but the business plans explain my recent
need for reading glasses. One of my goals for blogging is to reduce the external factors that are
causing the degradation of my body, so this entry's topic is the zen of business plans.
Write for all the right reasons. Most people write business plans to attract investors, and while this is
necessary to raise money, most venture capitalists have made a gut level go/no go decision during the
PowerPoint pitch. Receiving (and possibly reading) the business plan is a mechanical step in due diligence.
The more relevant and important reason to write is a business plan, whether you are raising money or not, is
to force the management team to solidify the objectives (what), strategies (how), and tactics (when, where,
who). Even if you have all the capital in the world, you should still write a business plan. Indeed, especially if
you have all the capital in the world because too much capital is worse than too little.
1.
Make it a solo effort. While creation of the business plan should be a group effort involving all the principal
players in the company, the actual writing of the business plan--literally sitting down at a computer and
pounding out the document--should be a solo effort. And ideally the CEO should do it because she will need
to know the plan by heart. Take it from an author, for writing to be cogent and consistent, there needs to be
only one author. It's very difficult to cut-copy-and-paste several people's sections and come out with a good
plan.
2.
Pitch, then plan. Most people create a business plan, and it's a piece of crap: sixty pages long, fifty-page
appendix, full of buzzwords, acronyms, and superficialities like, All we need is one percent of the market.
Then they create a PowerPoint pitch from it. Is it any wonder why that the plans are lousy when they are
based on crappy pitches? The correct sequence is to perfect a pitch (10/20/30), and then write the plan from
it. Write this down: A good business plan is an elaboration of a good pitch; a good pitch is not the distillation
of good business plan. Why? Because it's much easier to revise a pitch than to revise a plan. Give the pitch a
few times, see what works and what doesn't, change the pitch, and then write the plan. Think of your pitch as
your outline, and your plan as the full text. How many people write the full text and then write the outline?
3.
Put in the right stuff. Here's what a business plan should address: Executive Summary (1), Problem (1),
Solution (1), Business Model (1), Underlying Magic (1), Marketing and Sales (1), Competition (1), Team (1),
Projections (1), Status and Timeline (1), and Conclusion (1). Essentially, this is the same list of topics as a
PowerPoint pitch. Those numbers in parenthesis are the ideal lengths for each section; note that they add up
to eleven. As you'll see in a few paragraphs, the ideal length of a business plan is twenty pages, so I've given
you nine pages extra as a fudge factor.
4.
Focus on the executive summary. True or false: The most important part of a business plan is the section
about the management team. The answer is False.* The executive summary, all one page of it, is the most
important part of a business plan. If it isn't fantastic, eyeball-sucking, and pulse-altering, people won't read
beyond it to find out who's on your great team, what's your business model, and why your product is curve
jumping, paradigm shifting, and revolutionary. You should spend eighty percent of your effort on writing a
great executive summary. Most people spend eighty percent of their effort on crafty a one million cell Excel
spreadsheet that no one believes.
5.
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Keep it clean. The ideal length of a business plan is twenty pages or less, and this includes the appendix. For
every ten pages over twenty pages, you decrease the likelihood that the plan will be read, much less funded, by
twenty-five percent. When it comes to business plans, less is more. Many people believe that the purpose of a
business plan is to create such shock and awe that investors are begging for wiring instructions; the reality is
that the purpose of a a business plan is to get to the next step: continued due diligence with activities such as
checking personal and customer references. The tighter the thinking, the shorter the plan; the shorter the
plan, the faster it will get read.
6.
Provide a one-page financial projection plus key metrics. Many business plans contain five year projections
with a $100 million top line and such minute levels of detail that the budget for pencils is a line item.
Everyone knows that you're pulling numbers out of the air that you think are large enough to be interesting,
but not so large as to render urine drug-testing unnecessary. Do everyone a favor: Reduce your Excel
hallucinations to one page and provide a forecast of the key metrics of your business--for example, the
number of paying customers. These key metrics provide insight into your assumptions. For example, if you're
assuming that you'll get twenty percent of the Fortune 500 to buy your product in the first year, I would
suggest checking into a rehab program.
7.
Catalyze fantasy. Don't include citations of some consulting firm's supposed validation of your market. For
example, Jupiter Research says that the market for avocado-farming software like we make will be $10
billion by 2010. No one ever believes this validations because the entrepreneur who pitched at 9:00 am
said this about USB thumb drives; the one at 10:00 am said this about online dog food sales, and the one at
11:00 said this about smart antennas for cell phones. What you want to do is catalyze fantasy: that is, enable
the reader to make her own mental calculation that this market is big. Every Nokia Series 40 and Series 60
owner would buy this--Wow, this is a hot market!
8.
Write deliberate, act emergent. I borrowed this from my buddy Clayton Christensen . It means that when
you write your plan, you act as if you know exactly what you're going to do. You are deliberate. You're
probably wrong, but you take your best shot. However, writing deliberate doesn't mean that you adhere to the
plan in the face of new information and new opportunities. As you execute the plan, you act emergent--that is,
you are flexible and fast moving: changing as you learn more and more about the market. The plan, after all,
should not take on a life of its own.
9.
Written at: Atherton, California.
* Note: the question is what is the most important part of the business plan, not what is the most important part
of the business itself. The management team is more important than the executive summary to the business, but
the discussion of the management team is not the most important part of the business plan because if the
executive summary sucks, people won't get to the management team section.
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Umesh
I have an Businees idea for the field of Banking and Telecom ,
Kindly let me know whom I hve to contact..

Regards
Umesh
getumeshtp@gmail.com
Leigh Honeywell
How to Change the World: The Zen of Business Plans - http://blog.guykawasaki.com/2006...
Felix Wong
How to Change the World: The Zen of Business Plans - http://blog.guykawasaki.com/2006...
Energy Heretic
How to Change the World: The Zen of Business Plans - http://blog.guykawasaki.com/2006...
Max Sinclair
How to Change the World: The Zen of Business Plans - http://blog.guykawasaki.com/2006...
Kevin
We used predict5 to build the financials for our business plan...it was seamless. What I liked about it was that I could put in
simple formulas in the way I think and let the software build the P&L Cash Flow and Balance Sheet for me. It save me
HOURS and am using to track financials on the actual company!!! predict5.com rocks!
Free Loan Amortization Schedule Tool
Butler Consultants has the experience to do Business Plan Projections and Financial Models .
Jack Zufelt
Great post. So many articles tell you to make a business plan, but very few help you do it. This is a great resource.
Anonymous
I found a really good site that offers free business plans in MS Word and MS Excel format.

http://www.thefinanceresource.com/freebusinessplans.aspx
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Raj Anand
Found the tips really useful Guy. Thanks for taking the time to list them. I feel my business plan template follows most
of the principles you mentioned. Thought it might be useful for your readers:

http://blog.kwiqq.com/2009/04/14/business-plan-template-to-grow-a-business/
Jennifer
Guy- I really like this post- especially where you advocate to "pitch, then plan!" Writing a great business plan is not always
easy, and empowering women in business to do this when they don't have a good idea of the market-place is tough.
Sometimes, I advise clients to get out there and toss around their ideas/ pitches/ presentations in their chosen marketplace a
bit before filling in all the details of their business plan, so that they a better idea of how to sculpt a really beautiful plan (i.e.
effective one). I appreciate your "putting zen into a business plan," and feel "zen all over" just reading your post (because
you come from a place of service!). Thank you for that!
Lewis
Thanks for sending me the link to this post. Extremely valuable information, and I would love to pass you along my executive
summary sometime to hear your yoda thoughts.
Matt Carty
I noticed on your suggested length for exec summary here states one page but on an april 02 blog, it suggested 2-3 and one
pg is only for those with ADD. Which would be better? Thanks....Matt
David Cramer; PhD Candidate
As a PhD student in his last year I find myself reminiscing of the ventures I may have lost out on until my most recent (lol
recent is relative in academe) decision (as of 02/07) to finally follow my gut and pursue a business idea. I wish I found this
blog earlier as I had to find out through much trial and error the highs and pitfalls in business planning. Guy Kawasaki's #9
brings a company, Zpryme Research & Consulting to mind. Though the comment emergent has mixed meanings in it's
context; Zpryme's slogan is evidence enough that we are now in position that to find success in your business plan (especially
in business expansion) it's imperative to recognize emerging markets. Zpryme (there very slogan is 'A Global Perspective on
Emerging Markets') was a critical resource in our plan becoming a realization. I may be rather late in my addition to this blog,
but is anyone aware of a company that may help with 3rd phase VC funding? It has been difficult to find companies that
place ideas/businesses with VCs - perhaps I will review TheFunded.com site to get some ideas.

Cheers,
David Polzin
EE PhD Candidate
J. Crawford
I was able to start a traditional business with no funding. It's an over looked option I think. Create momentum and let
it build, it build quick with in demand idea, It's much eaisier to get funding at that point. Getting funding is an art. I
found it productive to be able to say. I'm looking for 1.3 million it looks like I have a portion of that, let me show you
what I want to do... I was young and really wanted to grow, I'm not sure of a specific source though. Belief was key
for me and being in the best business to start for me was key to. Things click.
Alberto O. Cappas
I enjoy your wonderful web page and added it as a link on my site: Aneducationalpledge.com, the reference section.
Can you add our site as a link?
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Social Networking by
Yours
Alberto O. Cappas

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