#startupchats: the #bizplan debate in microcosm
I just spent an hour as a guest on a Startup Canada Twitter forum. Lots of fun! It also highlighted three ongoing debates that are vitally important to new companies everywhere.
When should I think about cash flow?
Since business is all about generating revenue and, ultimately, profit, most people agree that cash flow needs to be a part of business thinking from very early on.
Cash flow is inherently included when thinking about “value proposition”, “business model” and “customer acquisition”. Every banker or investor wants to hear this when you speak to them – otherwise how will they get paid back?
A small minority believe that thinking about cash flow can be delayed. I wonder how they pay their bills? Or speak to their bank?
A survey by Intuit Canada found that 83% of small business owners couldn’t pass a basic financial test. And we all know that small businesses face a very high failure rate. These two statistics must be related.
Yes, creating financial projections has historically been a challenge. And the startup may not have a lot of clarity around their business model. But cash flow must still be uppermost in their minds. To say otherwise is irresponsible.
What IS a business plan?
Many people (and many traditional organizations) still think of a business plan as a long, detailed document. Thankfully for the small business, business plans have changed.
The modern business plan is short – as short as 2 or 4 pages. It’s really the executive summary of the traditional business plan. It must hit on all the key points and it must do so quickly, concisely and clearly.
A pitch deck tells the same story as a business plan (in fact, in some circles the pitch deck IS the business plan) and includes the same sections. The difference? It’s a different format and it won’t go into the same depth as a business plan will. Financial projections on a pitch deck, for example, will be on 1 slide whereas the biz plan may have 3-10 pages of financials.
Canvas vs business plan?
The rise of the canvas models and the lean approach have added very useful tools that help entrepreneurs think deeply about their business. In my view they beautifully supplement the modern business plan without replacing it. Entrepreneurs should understand both and understand how they work together.
A great discussion this morning – thanks again for inviting me, Startup Canada.