I spent the better part of last year writing a brewery business plan for the brewery that I plan to open in Monterey, California. It’s all so new to me. I talked to some small business owners in the area. Looked up a ton of stuff online. I attended the Startup Weekend and entered the Startup Challenge. And learned a lot doing it all. I don’t feel like my time was wasted writing the business plan. However, I’ve learned that it’s not as necessary as I once thought.
The lean canvas is becoming the predominant model
Through all of the Startup Weekend, Startup Challenge, and other classes that I took at the Small Business Development Center, the “business model canvas” or the “lean canvas” was emphasized as the most urgent business model.
The Business Model Canvas was created in 2008 by Alex Osterwalder and released in his book, Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers. (2010)
It identifies the 9 key elements of any business model, and organizes them onto one sheet of paper. It’s a good exercise and the visual representation of how it all works together is enlightening.
9 key elements of the Business Model Canvas:
- Customer segments
- Value propositions
- Customer relationships
- Revenue streams
- Key resources
- Key activities
- Key partners
- Cost structure
The Business Model Canvas, and spinoffs such as the Lean Canvas, have become so successful that there are many desktop and mobile apps to help you design them. Here’s a new one for your iPhone that looks pretty good: Lean Canvas – Bytesize
Let’s face it:
Business plans take too long to write, are seldom updated, and almost never read by others.
– Spark59 (Founded by Ash Maurya, inventor of the Lean Canvas)
The Business Model Canvas is the newer, faster, more actionable, more flexible, and more relevant way to plan a business.
Plans don’t get funded, people get funded
The best plan in the world is nothing without the right people behind it.
What someone can do with an instrument (such as a business plan) is more important than the instrument itself. Don’t believe me? Give Tiger Woods your golf clubs and see how well he scores. Give Kelly Slater your surfboard and see what he could do on the face of a wave. (Or even give Kelly Slater your golf clubs, for that matter.)
And an awesome instrument without the right person? Take Tiger’s clubs out for a round and see how well you do. You might want to keep your handicap.
The same goes for business. Any investor knows that the plan is only the beginning—execution is key. You might have the best idea they’ve seen, but they want to be sure that you can execute on that idea.
And we’ve all heard about the startup getting millions of dollars in funding from just a few notes on a napkin. It’s not the plan that was funded so much as the person who sketched it.
Friends and family don’t read a business plan
Unless you’re just plain rich, you’re probably going to be funded by friends and family. But they’re not going to read your plan.
And if they did they wouldn’t know what the heck you were talking about. They’re not experts on your crazy idea, so they lean on you to draw the picture for them. In real world terms. Not in a 20-page thesis on the market analysis, financial projections, management plan, valuations, and all the whateveritis that banks look at.
Heck, I’ve had work supervisors who took one glance at a 16-page report and asked me what it meant. Probably didn’t finish the first sentence. But I digress.
In California, to receive funding from friends and family, you’ll need a 25102f exemption. It’s kind of minor, but it’s required. This video explains it succinctly and well. (The part about the 25102f exemption starts around 5:50.)
And there’s crowdfunding. It’s online social media meets funding from friends and family. And the passage last year of the Jumpstart Our Business Startups (JOBS) Act should give crowdfunding a jolt for investors. Previously, crowdfunding was allowed only on a reward or donation basis. JOBS Act allows crowdfunding to give equity in the company. SEC has yet to release rules. So keep an eye on that.
God bless them, for friends and family (and crowdfunding) love you so much that they are willing to overlook the faults in your plan, or just to see the dream in your eyes. And when you succeed in convincing them to fund your hair-brained idea, the real investors will see that as clout. If the people who know you well are willing to fund you, then maybe you just might succeed. The investors might give you funds to expand.
And they‘ll likely want to see a business plan.
Banks still want to see a business plan
If you’re trying to get money from “traditional funding sources” such as a bank, you will need a business plan.
Business plans would certainly be required for any of these traditional funding sources for small businesses:
- Small business loans
- Venture capital
- Angel investors
There are a number of websites online where you can read example business plans. I found several site with seemingly hundreds of business plan examples in almost any type of business.
Sample business plans are good for giving you an idea of what a business plan should look like, but do not even for a moment, think you can swap out the names and called it your own.
You need to do the homework. You need to do the research. You need to check sources and make sure that your plan is viable and that the numbers are positive. It takes time. It takes work. It will raise questions that you haven’t thought of. It helps with planning.
For more help writing your business plan, try these resources in your area:
- Small Business Development Center
- Service Corps of Retired Executives (SCORE)
- Local university or community college
One more reason to make a business plan
I heard Michael Hyatt say this on This Is Your Life podcast Episode #093:
Thoughts disentangle themselves passing over the lips and through pencil tips.
Hyatt doesn’t know who said it. Checking the interwebs, it seems often attributed to Dawson Trotman, but maybe he said something similar. I don’t know, but I like the ring.
And the concept is true. It can be described infinitely, but the idea is the same. Putting your thoughts to paper (or computer screen) helps to flesh it out. It will help you fill in the details, plan contingencies, and find solutions. Not to mention set a goal!
So put your plan into writing. But remember, plans change. Your business plan is a living document. Review it periodically. Make adjustments. Set new goals. And the most important part: A plan is nothing without execution. Start your business!
When will you finish your business plan? Set a goal for yourself and add it to the comments below as accountability.