This series takes concepts learned in an MBA program and adapts them for easy comprehension by scientists without a management background. This is currently the 17th part of the series and the first in the third chapter discussing how to draft a business plan.
In the last two chapters of this series, we've tackled both finance and marketing. If you're a regular reader, you now know how to read (and draft) a financial report, how to design a marketing strategy, and how to sell your product. Starting this week, we put those skills to use.
As you might guess from the title of this article, this week we're going to learn about drafting a business plan. Why, you might ask, would a scientist ever want to draft a business plan? There are three reasons I can think of. First, if you've got a million-dollar idea, have just patented something, or you want to start a company, a business plan is a great way to start. A business plan will help you get funding, partners, and support. It will legitimize your efforts. You should write one up for much the same reasons you'd write up a publication for peer review--to get the word out, to gain support and criticism for your ideas, and to show the world you're serious about what you're doing. Of course, this should be tempered with secrecy, in the same way a publication would be--after all, you don't want someone else stealing your idea in either world.
A business plan can help with funding once you've got a company up and running. Chances are, you're going to need to write up a new business plan for every single round of financing. When you're just starting out your company, the plan will be little more than the idea and the way you're going to go about making it real. But, like it or not, investors will need a business plan for first-round and second-round financing, and your underwriter will use your business plan as a template for their prospectus when you do your Initial Public Offering. So once you do start a business, even if you've done it without a business plan, you're going to need to continuously write and update your plan.
The third reason a scientist might want to write a business plan is more as an internal exercise. Even if you're not prepared to share your great idea with anyone yet, the discipline of writing a business plan might help you deal with some of the business challenges you might not have thought of. Although your idea might be brilliant, until you've thoroughly explored every facet of your new business, you might not want to devote your life to it. Writing a business plan, for yourself, may help you decide whether to take the plunge--hey, if investors need a business plan to figure out whether they're going to invest in your business, why shouldn't you need one yourself? After all, when you're starting your own business, you'll be the principal investor, investing your time, energy, and devotion, if not your money.
I hope I've now convinced you that writing a business plan is a good thing to do. In the next few months, we will be tackling the different sections of a typical business plan--what needs to go in it, what questions need to be answered, and what research needs to be done.
Next month, before we discuss any of the sections in a business plan, we're going to take a close look at its general formatting and style. This is something most scientists find frivolous, but it's really quite an important part of the plan. A lot of information is conveyed in the style and formatting you use, and the care and effort you put into the general presentation of the plan. Remember what you're using the plan for--the people you'll be sharing this plan with will be deciding whether they're going to invest in your idea. Part of that is an investment in you. And if they think your plan is a great idea but that it's presented unprofessionally, they're probably not going to invest in you.
Then, in the next few months, we'll discuss the actual content of the plan. We'll start with the executive summary and look at the difference between an executive summary and an introduction. Then we'll cover the "meat and potatoes" sections of the plan: the introduction to the concept, a discussion of management and organizational structure, and a look at the uniqueness of your product and its intellectual property. Then we'll apply what we learned in the first two chapters of this series to look at your marketing plan and your financial plan.
Finally, we'll take a couple of stabs at your general operational plan and the resources you'll need to pull off your business idea. And we'll discuss a necessary section I call "looking ahead"--this will illustrate to the readers your dream and where the company will be in 5 to 10 years.
Through the use of these sections, we'll discuss just about everything that should go into a business plan. Of course, you might want to use your own sections and add information that is specific to your particular idea, but these sections will allow us to build a general framework for discussion.
By the end of this chapter, we'll have learned most of what you need to know to write a good business plan. You might ask: "How do I know what makes a good plan?" My experience in this comes from more than just courses in my MBA (although I've taken a course on writing a business plan). It also comes from working as a biotech venture capitalist, where I read dozens of business plans written by scientists. I've also, on occasion, ghost-written business plans for other people and other businesses. And I've won an award for a business plan submitted to a business plan contest. So I'll be basing this chapter on a whole bunch of research and experience I have on the writing of plans. And I'll be using a lot of the material we've learned together in the last two chapters of this series. So if you're considering starting a business, or you've already got one up and running and you need a business plan for your next round of financing, stay tuned. This chapter should prove to be full of information that's worth "learnin'."