Business Planning Papers:
Insights into a Business Plan

1. Introduction to Business Planning Insights

This white paper takes a very practical view of the task of preparing a business plan. It is based on the results of a survey (see Online Surveys) which explores the processes and difficulties associated with the compilation of a plan.

The results were derived from complete, valid responses submitted between March 2000 and August 2001 by almost 450 site visitors who signified that they (a) were currently preparing a plan or (b) had compiled one in the past. Because of guaranteed anonymity, no specific information is available about these respondents. However, based on our visitor logs and results of other polls, the majority are likely to have been US-based and either entrepreneurs planning new business or owner/managers of smallish business. A substantial minority would have been professional advisers or managers within larger businesses.

As the survey is ongoing, visitors who have been directly involved in preparing a plan are invited to contribute their own experiences to the survey - it will take only a minute or so and no personal information will be sought. Other visitors are very welcome to see the latest results without completing the actual survey. The questionnaire and very latest results can be found here.

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2. Overview of Findings about Business Plans

The survey found at that a "typical" business plan had the following general characteristics:

• Had 10-25 pages excluding appendices etc.
• Needed between two and four drafts
• Took 2-3 months to research and write
• Required much more time to research than write
• Had limited inputs from external advisers/consultants
• Was somewhat more difficult to prepare than expected
• Financial projections presented the greatest difficulty
• Was critically important/useful to the business
• Used to help raise venture capital/equity.

Two main types of plans were identified with the following general features:

• Basic plans were short (often under 10 pages plus appendices etc.); relatively quick to prepare (under one or two months); used limited external assistance; needed few drafts; and required much more researching than writing. They were somewhat more difficult to prepare than anticipated - all parts equally difficult. They were frequently used to assess the viability of a business or for internal/personal use and they were rated as important/useful for the business.
  
  
• Comprehensive plans were longer than basic plans; required some months to prepare; made slightly greater use of external help; and required somewhat more time researching than writing. They were more difficult to prepare than anticipated, especially the financial projections and market analysis parts. They were often used to help raise venture capital/equity or bank loans, and they were viewed as being critically important/useful to the business.

Based on the survey findings, the following table characterizes "typical" plans written for different purposes:

For detailed guidance on compiling a plan, review the white paper on How to Write a Business Plan, Free-Plan (a free 150-page Business Plan Guide and Word-based Template) and the Checklist for Preparing a Business Plan.

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3. Main Lessons to be Learnt for Business Planning

The principal lessons for business planners to be drawn from the survey results include the following:

1. Decide the underlying purpose of the plan at the very outset - to raise money, secure approval etc. - as this will largely determine the comprehensiveness and length of the plan, amount of research required, use of external help and overall time scale.
   
   
2. From the outset, specify the structure of the plan in the form of a detailed table of contents. Use this to identify critical issues requiring research and/or external assistance.
   
   
3. Create a work program and timetable which allows adequate time for researching, writing and redrafting.
   
   
4. Recognize that the process could be much more difficult than expected and consider seeking external assistance, sooner rather than later, for the most vital areas.
   
   
5. The more important the plan, the longer it will be and the longer it will take to complete.

For more detailed guidance on preparing a plan, check the white paper on How to Write a Business Plan and Free-Plan, our free 150-page Business Plan Guide and Template (Word format). Also, refer to the 30-point Checklist for Preparing a Business Plan.

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4. Findings: Types of Business Plans & Primary Purposes

At the outset of the survey, respondents were requested to classify their plans as being either comprehensive or fairly basic. As indicated in Figure 1 below, just over half of respondents' plans were categorized as fairly basic.

When asked to indicate the primary purpose of their plans, respondents indicated that basic plans were most frequently used to assess the viability of businesses and for internal/personal use. Comprehensive plans were most frequently used to raise venture capital/equity and bank loans. Figure 2 below indicates the range of purposes specified by respondents.

More detailed analysis of responses indicated that comprehensive plans were compiled in two-thirds of all cases where respondents sought venture capital/equity. Basic plans sufficed most frequently for internal/personal use or where the viability of a business was being assessed. Comprehensive and basic plans were used in almost equal proportions to seek bank loans or approvals from shareholders/directors.

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5. Findings: Length of Business Plans & Number of Drafts

Respondents were asked to specify the number of pages in the main part of their plan (excluding appendices, attachments etc.). Figure 3 below indicates that the main parts of almost half the basic plans were under ten pages long whereas comprehensive plans were most frequently 10-25 pages long. Almost half of all comprehensive plans were at least 26 pages long as compared with just one-tenth of basic plans.

Plans under 10 pages long were most commonly prepared to assess viability or for internal/personal use whereas plans over 26 pages were most commonly used to raise venture capital/equity or secure approvals from shareholders/directors.

Figure 4 below indicates the number of drafts prepared of plans and highlights the following patterns:

• One-fifth of basis plans and one-tenth of comprehensive plans required just one draft.
• Almost two-thirds of both comprehensive and basic plans required between two and four drafts.
• Over a quarter of comprehensive plans went through five or more drafts.

Plans for internal/personal use tended to have the least number of drafts whereas plans for raising venture capital/equity had the most drafts.

For guidance on setting the length of a plan and tips on writing a plan, check the white paper on How to Write a Business Plan. Also, look at our free Business Plan Guide and Template here for additional guidance.

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6. Findings: Time Inputs & Elapsed Times for Business Planning

When asked about the elapsed time required to research and write their plans, about one-third of respondents completed these tasks within one month and a further one-third took two to three months. As indicated in Figure 5 below, the elapsed time to prepare comprehensive plans was considerably longer than that for basic plans.

Over one-third of all plans compiled within an elapsed time of one month were used to seek bank loans or approvals from shareholders/directors, or they were compiled for internal/personal use. In contrast, about one-third of all plans used to raise venture capital/equity took least three months to research and write.

Note: Elapsed time refers to the total time interval and not to the actual time expended on researching and writing a plan.

Figure 6 below indicates that about half of all respondents spent much more time researching than writing their plans. Only a small proportion devoted little or no time to researching their plans prior to writing them.

For almost two-thirds of plans used to assess the viability of business, the time was spent researching was much greater than that for writing. In the case of plans for the other specified purposes, time spent researching was usually somewhat greater than time spent writing.

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7. Findings: Use of External Advisers for Business Planning

About two-thirds of respondents used external advisers/consultants when preparing their plans. Figure 7 below shows that the use of external help was somewhat greater for comprehensive plans than for basic plans.

Use was made of external advisers by over two-thirds of respondents who prepared plans to raise bank loans or venture capital/equity. At the other end of the spectrum, respondents who compiled plans for internal/personal use, to assess viability or to secure approvals were least likely to use external advisers.

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8. Findings: Difficulties Encountered when Business Planning

As shown in Figure 8 below, financial projections and market analysis were the most difficult parts to research or write for both basic and comprehensive plans. Compilers of basic plans also encountered particular problems with their sales plan/forecasts.

For almost a quarter of the compilers of the basic plans, all parts of their plans were rated equally difficult whereas a much smaller proportion of comprehensive plan writers reported such general difficulties.

The planning of investment proposals, operations/management and technology/R&D were not seen generally as major areas of difficulty. Overall, only a small minority of respondents found no parts too difficult.

Market analysis was identified as the single most difficult area encountered by respondents preparing plans for internal/personal use, seeking venture capital/equity or assessing viability. Seekers of bank loans had most difficulty with financial projections. Respondents seeking the approval of shareholders/directors were most likely to find all parts equally difficult.

As shown in Figure 9 below, about two-thirds of the respondents thought that the process of preparing plans was much more difficult or somewhat more difficult than they had expected. Only 2% thought that the process was easier than anticipated and no respondent found it much easier than expected.

Over three-quarters of respondents seeking bank loans or preparing plans for internal/personal use found the task more difficult than expected. This proportion was a little lower for those planning to raise venture capital/equity or assessing the viability of a business.

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9. Findings: Importance of Business Plans

Over half of all respondents rated their plans as having been critically important and a further one-third rated them important. Only a minority of respondents attributed limited importance or no importance to their plans.

As shown in Figure 10 below, comprehensive plans were much more likely to have been viewed as critically important than basic plans.

Over half of all plans used to seek bank loans or venture capital/equity, or to assess viability was rated as having been critically important.

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10. Findings: Changes to Business Plans over Time

The following assessment of possible changes in respondents' views over the eighteen months covered by the survey must be approached with great care on the grounds that this interval was relatively short and the mix/backgrounds of respondents could have changed over the period.

Subject to these major qualifications, detailed analysis of the responses over time has suggested that the following relatively minor shifts may have occurred over the life of the survey:

• The proportion of business plans prepared to secure approvals from shareholders/directors may have declined and the proportions used for internal/personal purposes and to raise venture capital/equity may have increased slightly.
• Respondents may have been taking progressively more time over their plans as evidenced by a gradual decline in the proportion of plans taking less than a month to complete.
• Market analysis may have gradually replaced financial projections as the single most difficult part of a plan to prepare.
• Progressively, plans may have become even more difficult to prepare than had been originally anticipated.
• The proportion of plans considered critically important may have declined slightly and the proportion viewed as important may have increased to compensate.

For more detailed guidance on preparing a plan, check the white paper on How to Write a Business Plan and Free-Plan, our free 150-page Business Plan Guide and Template (Word format). Also, refer to the 30-point Checklist for Preparing a Business Plan.

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11. Introducing PlanWare

PlanWare develops and sells a range of financial planning packages - Exl-Plan and Cashflow Plan - for businesses of all sizes & types. Trial versions of all products can be downloaded from our PlanWare site and many other sources on the 'Net.

PlanWare also features:

• Papers on cashflow, financial, strategic and business planning topics.
• Advice on getting new business ideas, managing working capital, devising business strategies and much more.
• Free business plan template (Word format).
• Pages devoted to famous business quotations and examples of bad business advice and mistakes.

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12. Copyright & Legal Stuff

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