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Learnin's From My MBA Part 25: Chapter 3: Drafting a Business Plan, Part 9: Operating Systems and Growth


This is Part 9 in a series that discusses the drafting of an effective business plan for use in promoting a scientific idea or start-up company to the business community. Each month, a different section of the business plan is discussed. This week, we discuss the very last two sections of the business plan: Operating Systems and Growth.

The last thing a budding entrepreneur wants to talk about are operating systems, the boring but important administrative details that make a company work. Which is why we're lumping this section in with the section we've entitled "Growth Plan," which is probably the most fun part of the business plan to write. You have to get through "Operating Systems" before we'll let you think about growth.

The Operating Plan

The Operating Plan is the step-by-step plan for getting from where the company is today to where you want it to be in 2 to 4 years. This plan should include an administrative plan and an operational timeline.

Administrative Plan

Running a business is all about making decisions. If you're a business with a lot of small customers, who is going to handle billing? What kinds of billing terms will be adopted (due in 30 days, 60 days, or immediately?) How are you going to handle bad debts? If your business requires a lot of equipment, who will purchase it? And how will they decide what gets purchased when? How are you going to handle employee raises? Who's going to handle unsatisfied customers? Who needs to know what information, and how do they get it? How do you determine what kind of expense account the salespeople get?

The administrative plan is a "big picture" account of how day-to-day issues like these will be resolved. It gives investors a look at how you plan to run the company. Small start-up companies should not spend too much time on it. It isn't necessary to list every potential decision and how it will be made; simply enumerate the processes your business will use to make those decisions. If the plan is too detailed, it'll scare investors off. No one wants an entrepreneur that's spending too much time figuring out who's in charge of sharpening the pencils.

This part of the plan may become more elaborate as your business matures. However, even the most elaborate administrative plan shouldn't be a big part of your overall business plan, unless you hope to make it one of your keys to success ... and it's hard to imagine "improved administrative design" as key to the success of a technology-based start-up.

Operational Timeline

The operational timeline details the different steps that need to happen--steps you've probably already explained in other sections of your business plan--and when they need to happen. For example, you need to buy the sequencing apparatus before you can sequence a gene. You need to sequence the gene before you can express it in cells. And you need to express the gene in cells or bacteria before you can make large quantities of its protein product.

Take the timeline seriously. Investors will hold you to your timeline and measure your progress against it. It's also a way of keeping everything in context. Why, for example, do you need $1,000,000 today? Why is your burn rate (the rate at which you go through cash) going up in your 4th month of operation? What percentage of the company will I own in 2 years? The operational timeline should at least try to answer these questions, by accounting for every operational requirement of the company.

The Growth Plan

The growth plan is almost the opposite of the administrative plan. Here, instead of worrying about all the intricate details of your business, you get to finally "blue sky" it--tell people where you see the company in 5 to 10 years. Here you get to pull all the pieces of the business plan together, to tell the story of how your company will become a success. Start with scientific success, and explain how this success will lead to financial success. Describe your sales force of thousands (or, alternatively, your five big cushy licensing arrangements with Merck or Bayer that are going to make you millions). Investors want to see that you have the vision to grow the company, and that you've already thought about how that will need to be done. Oh, and it can't hurt to mention how much money you'll need to do it.

The growth plan is where you want to leave your readers. It should link up all of the other sections of the business plan in a way that makes sense, and explain the real potential of your company--not just the product you're trying to create now, but the products and technologies that will come after that one. The growth plan should be consistent with every other section of the business plan and should leave the reader thinking, "this person knows what they're trying to achieve, and I should be a part of it."

Next month we sum up, and look at the whole business plan, one last time.