Do New Start-Ups Really Need a 40-50 Page Business Plan to Get Funded?

Not long ago, I was talking to an individual who wanted to start up a fleet truck washing business in a Midwestern state. He knew several people that had the wealth needed to buy the equipment, reclaim devices, and provide him with enough cash flow and marketing monies to get going. He assumed that he…

Not long ago, I was talking to an individual who wanted to start up a fleet truck washing business in a Midwestern state. He knew several people that had the wealth needed to buy the equipment, reclaim devices, and provide him with enough cash flow and marketing monies to get going. He assumed that he needed a business plan, and therefore he hired someone to help him write it. He had contacted me because he wanted lots of information about the industry which I assumed would then go inside of his business plan, and he wished to make sure that his assumptions on his spreadsheets and pro forma were correct.

Interestingly enough, a month later he contacted me back and then, as I looked over the business plan, and as professional as it was, it made a number of false assumptions about the industry, and underestimated the competition, the current economics of the trucking industry, and the preference of owner operator drivers. Further, it asserts that the price points could remain quite high, while the vehicle counts or numbers of trucks cleaned would have been approximately from the first month of operations. Lastly, when it came to cash flow, they made false assumptions of how fast these trucking companies and government agencies might pay them.

Because I know a little bit about this, I explained to them the error of their ways, and explained it would take them probably another 4 to 6 months to get going, as they figured they could start the business within three months of getting funded. All of these false assumptions would lead someone to believe that their business model was superior, and they would start making a profit right away. In fact, judging by what I know, not only would they not make a profit right away, it could take six months before they even break even based on the cash flow, perhaps longer, and years to get a substantial return on investment.

After my 10 pages of notes, and after looking over their 45 page business plan I realize why so many investors these days are not interested in business plans, industry information, or spreadsheets. The reality is that much of that is just minutia and baloney. You may not need a MBA style business plan to get funded for your new start up, and do not be surprised if many investors are unmoved by your due diligence, creative writing, and brilliant strategic planning. For the simple reason; they know better. It is my hope you will please consider all this and think on it.