Business Plan vs Napkin Plan
There are two kinds of Business plans — a formal plan used for seeking funding, and what we call a “napkin” plan that is used to keep an entrepreneur on track in working through preliminary aspects of a new business, a new product, a new idea.
The formal business plan is mostly used for funding purposes. It details the overall picture of the business including items such as:
• The management team
• The target customer
• How you plan to launch
• Your primary, secondary and sometimes even a third market
• Your customer segments
• How much money you think you can make over a three-to-five-year period
• Can you support the business 100% through sales? Do you do you need money from outside funders? If so, how much?
In our experience, most entrepreneurs have a “Napkin” plan. They are working out the very basics, such as:
• How much money can I make on this opportunity?
• How much do I need to sell to make a profit?
• How long will it take me to break even and go beyond?
Obviously, this is simplified, but should give you a clear understanding of the difference between a formal business plan, and the day-to-day planning you can do for your business.
BEFORE YOU GO:
We see our blogs as opportunities for dialogue. Please share your thoughts as comments.
• What are some best practices you have used to plan for your business?
• Which would you choose — a business plan or a “Napkin” plan?
• What other tools have you used to write a plan of any kind?
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Faris Alami is Founder and CEO of International Strategic Management, Inc. (ISM). He works internationally, presenting Exploring Entrepreneurship Workshops and other entrepreneurial ecosystem — related ventures.
