Wednesday, April 2, 2014

Why You Need a Functional Business Plan

Business plans are nonsense.  

That is, FINANCIAL Business Plans are nonsense.

What is a Financial Business Plan?  It’s the plan that a business owner or prospective business owner writes in the vain hope of obtaining financing from a bank, an investor, an angel or a Venture Capitalist.  This type of business plan is at best described as pie-in-the-sky fiction, based on base-case scenarios and wishful thinking.  

Think I’m overstating this? Read my post:  The Myth of Venture Capital
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Personally, I wouldn’t waste my time or my money if for no other reason than no one reads them and if they do, they do not believe what’s in them.  To quote author, CPA and small business consultant, Ebong Eka, in his recent book, Start Me Up

Business plans are bullshit.”  

I can’t argue his conclusion about financial or funding business plans.  They are at best exercises in mental masturbation and at worst, a rip-off if you hire someone to write it for you or you purchase software to put it on paper.

A FUNCTIONAL Business Plan is entirely another matter.  This is a working document that gets a lot of use.  Not by possible backers, but by you, the owner.  No one but you or your key advisors ever see it.  If you own a business or are considering starting a business, a functional plan is a good thing to consider developing and maintaining, and keeping on your desk in front of you.

What is a functional business plan?
As I mentioned above, it’s a working document that you, the owner, keep and keep near you.  In it you keep, in no particular order ~
  • the original research you did on your business idea (that you keep updated),
  • your original analysis of your business concept, which would include 
    • descriptions of the market or markets you serve (demographics, geographics, psychographics and so on.)
    • your cost and pricing models, (kept updated)
    • an updated version your original staffing model, 
    • notes on your basic assumptions about your product or service, 
    • profiles and analyses of your competitors and their products or services, 
    • a copy of your start-up budget, (usually pretty funny to read two years later)
  • a copy of your “elevator statement”, 
  • a copy of your company’s mission statement,
  • a statement of your personal and business goals, 
  • your marketing and sales plan, outline or notes,
  • and any other document or note you want easy access to – and don’t want to misplace.
Include a Futures File
Your functional plan should also include what journalists and free-lance writers call a “futures file.”   A futures file is a section in which you either write down or paste ideas and concepts that apply to your business, ideas that you do don’t have time to explore now, but hold promise as business-builders or time savers.  A futures file should include your notes from books and articles of ideas you may want to pursue.

Like me, I’m sure you have had the frustrating experience of cleaning your desk or files and coming across a note or a clipping of an article that you wanted to explore and act on, but had misplaced.  

“Gee, that’s where that went.  I totally forgot about this.”  And an opportunity to grow your business is lost due to human memory or a misplaced piece of paper.

The futures file section of your functional plan becomes your company’s memory. Your future files section is especially important due to one very human characteristic.  Research shows clearly that if you or anyone, for that matter, reads an article today at three p.m., you will have forgotten 70% of what you read just 24 hours later.  If you attend a workshop today, you will have forgotten 70% of what you “learned” by the end of the day tomorrow.  It keeps all this information in one place – in a three ring binder, in a section of files in your personal filing cabinet, or in a file on your computer desktop.

Your Business Calendar
Probably the most important section is a calendar for listing important deadlines, events and promotions for your business.  Perhaps you’re a wedding planner, so your business calendar might include dates and contact information for upcoming bridal and related shows. Or for an auto mechanic, it would list upcoming auto shows or car races that might be good promotional ideas.  For a busker (street musician), the dates of upcoming street fairs or music events at which you perform.  In short, this section is your business’s appointment book, separate and apart from your personal appointment book.

Is a functional business plan a must?  


It’s a convenience and an organizer, a single place in which you keep all of those things that impact or might impact your planning and operations. 

Is there a standard model for a functional plan?  


Whatever works best for you is what works best for you.

But a Functional Business Plan can be a great help in keeping both you and your business organized and growing.

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