In my last post I wrote that the need to create a business plan has not changed, but that the package or form or elements of a business plan have changed.

For the student entrepreneurs that I coach, I don’t encourage a formal 15-page business plan with attached financials, resumes and so forth.  Instead, I ask that they think through how to FEED their venture.

F – Financials

E – Elevator Pitch

E – Executive Summary

D – Deck

Thinking through financials, even knowing that they will be wrong and out of date nearly immediately, forces the entrepreneur to think through how the venture plans to make money, and what it will cost to produce revenue and profit in that way.  The trick is to incessantly ask yourself “why?” and “how?” whenever you feel the urge to write a number that is not substantiated.  Once you can stand up to a grilling about the assumptions behind your numbers, you are done (with the first iteration, that is).

If it hasn’t happened already, soon someone will ask you, “So, what does this new venture of yours do?”  You’ll need the elevator pitch, a concise, upbeat, memorable, layman’s explanation, sooner than you think.

I said that I didn’t think a 15-page business plan with another 15 pages of attachments was needed.  I didn’t say that you could skip writing – or thinking through – your story.  An executive summary is your story, packaged in a 2-page form that is readable.  A deck is the story packaged for presentation.  Write them for yourself, not for investors.  The value is not as much in the end documents as it is in the journey – in what you learn as you explain your venture to yourself.

Creating all of these documents may seem like a huge waste of time unless you plan to pitch investors.  I disagree.  You want the same thing that investors want – as much proof as possible that your venture has a good chance to succeed.

So, give your venture a better chance – FEED it.

Lately, it seems that nearly every entrepreneurship blog that I read has taken a strong opinion about the value of a business plan.  The majority opinion seems to be, “No way – business plans are so 1990′s!  We’ve grown up, and we see how silly it was to create big honking business plans.”

I read comments like …

“Why create some static document that will probably be out of date within hours to days after it has been written?”

And, “Why spend time worrying about getting some plan perfect when you should be working on your product?”

And, “Just launch something and then change it if it isn’t right.”

The enlightened entrepreneurs don’t just say “no business plans” – they offer an alternative.  My personal favorite new advice comes from Steve Blank who advocates building out a business model.

For me, business plans have always served two purposes.

First, like building out your business model, building a proper business plan causes you to think through your venture – and what will make it tick.  How will it make money?  How much?  From whom?  And, most importantly, how do you know?  Yeah, I know it will change tomorrow, and you have a better chance of being hit by lightning three times in one day than of hitting your revenue projections right on – but at least you thought it through.

Second, for those who care (investors, maybe?), it is a signal that you care enough about your venture to explore and test options, assumptions, and seeming opportunities – rather than fly off down some blind alley.  A thoughtful plan signals a thoughtful team, because a superficial team cannot create a thoughtful plan.

I see this issue very strongly related to the issue of whether or not to front load innovation or product development research – or just pick some concept, any concept, and launch it.  As I said in a couple of recent posts, if you take the time to do the front end work, you reap the benefit of deep knowledge about what drives value for the stakeholders.  I think the same is true of spending time on a “business plan”, another up front learning and exploration exercise.  You learn what will drive value for your venture.

That being said, I put business plan in quotes above because I don’t believe you need to write a 75 page tome.  The need for a business plan has not changed, but the definition of how to package a “business plan” has.

And that will be the subject of a coming post.

Parents, this is for you.

In his book, The Global Achievement Gap, Tony Wagner describes how even the best schools don’t necessarily teach the skills that today’s youth will need to be successful in careers.  In his book, Linchpin, Seth Godin describes how our school system has been designed to produce “cogs” – students who, when they grow up and enter the workforce, are unthinkingly-obedient interchangeable parts.

The students that I coach are products of (and still inside) the educational system that Wagner and Godin indite – even those who are home schooled face nearly the same curriculum and texts.  But, they have chosen to pursue entrepreneurship rather than become cogs.  In many cases, it is because they had developed sincere interests in some topic that went far beyond what they could learn about in their formal school.  Similarly, my best friend’s children (aged 5 to 14) have all been taught at home, long before they entered a formal school.  Not only have they developed skills, but they have all developed interests that they have pursue on their own.

Isn’t it time that we noticed how easy it is to encourage and develop entrepreneurship among students?  When we  encourage them to be entrepreneurial students – to learn and develop their own interests on their own time and in their own way, we are planting the seeds for entrepreneurship later in life.

Parents, it is your job to make this happen.