This topic came to mind because I spent a considerable amount of time over the last few weeks preparing a formal, updated business plan for Quintessence, which is a private company thus far funded ($15M to date) by individual investors. We go through strategic planning on a regular basis, more formally annually but also as a side effect of quarterly meetings with our board of directors. We also communicate progress and priorities to shareholders on a regular basis. However, our written business plan had not been refreshed since early 2008 when the company was at the pre-clinical stage.
When I came to Quintessence in 2000, one of my first lessons was that any discussion of financing the company included a request for our business plan. Although I had written many primary literature articles, I had to figure out what was in a business plan before I could write one. I took a class, read up on the topic and talked with people who had done it before. At that point, most of the focus was on the nuts and bolts of the topics to cover.
What I have learned over the years is that the business plan is ultimately the story of the company you are growing. For me, the process I used this time highlights the shift in my thinking about a business plan. Knowing that our goal was to talk with investors, I developed a slide deck that told the story and then wrote a plan to fill in the details about the business. Since the slides told the story, I avoided the general writing trap of content with little relevance to the main storyline.
Writing our first business plan, I quickly came to the conclusion that you will never have all of the information needed to write a business plan that can be executed from start to finish. Unlike a research paper where you are reporting data on experiments already performed, the business plan is about the future. There are too many variables that are outside your control, such as the health of the US economy. At Quintessence, we were successful in raising money in early 2008 but had we been a few months later, we may have had different outcome.
Although you can’t predict the future, I believe two issues must be addressed: recognize and (if possible) address the risks in the plan and be transparent about how the company will be financed in the future. The unexpected will happen and people want to know your contingency plans. In my experience, describing alternatives in great detail is less important than being willing to identify potential problems. In terms of financing, if you know you’ll have to raise $20M after your current $2M round, prepare the investors. Creating the right expectations is good for the company and for the investors.
Another thing I learned is that while everyone wants to see your business plan, very few potential investors will actually read the document cover to cover, which is not to say they don’t care about the content. (Perhaps this is another similarity with a dissertation!) Thus using limited, critical resources to write a long, detailed plan rather than making progress can make you crazy. Use the process to your advantage. Take the time to test some of the assumptions you’ve developed but don’t have data to support. We have been interested in non-small cell lung and ovarian cancers for our next clinical trial and have heard a ton in the popular press about development of targeted therapies in NSCLC but not ovarian cancer. After evaluating pipeline data and the primary literature for genetic mutations in NSCL and ovarian cancers, we confirmed our experimental approach was appropriately designed.
When done correctly, planning and communicating helps management better understand their goals and challenges and helps ensure focus. As a leader, you should always know where your company is headed and be ready to tell people your story. The extension of that story is the formal business plan, which can be valuable if you allocate your resources well during its development.