Question: The difference between business plans and business planning is one that you highlight in your book. Can you give an example of why this distinction is important?
Answer: Recently a really smart guy referred to business plans with what I consider the perfect word: currency. Business plans serve as a form of currency—a fluid and temporary repository of information (and imagination) that fuels conversations between the players and potential players in any venture. Business plans have two fundamental purposes: to engender meaningful dialogue among participants about how to move the venture forward, and to foster real learning about how to achieve the goals.
Therefore business plans must be realistic. Any seasoned investor will fail to be swayed by outrageous promises of return on investment if the players lack credibility. Having great numbers only makes sense if the plan displays a seasoned and well-reasoned explanation of how the particular business plan author will achieve the stated goals. This means having the right resources (people, strategy, context, etc.) to make this plan happen.
Planning is a constant process of conversation and testing and reflection and action and learning. Business plans are static documents that may or may not be proven accurate. In fact they will invariably be proven inaccurate, for few if any business plans are ever fully realized in terms of financial projections. The important function of the plan is to guide the principle players towards high-leverage action.
Oh yeah, a slick and credible business plan can help someone raise money, which is a good thing. But again, this usually generally benefits individuals who were already well-positioned to receive funding in the first place.
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