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Good planning isn't only for raising money--it can also save you hassles down the road.
When internist Brian Jacobs first thought up the idea for his company, HealthMatch-which provides pricing and other data to consumers with Health Savings Accounts-he knew that his potential investors needed more than just a smile and a handshake. "To get them as excited as I was, I had to hand them a formal plan," says Jacobs, who practices and runs his business in Indianapolis. After completing it, he came to regard the whole process as not just a way of attracting investors but as a "valuable exercise" in and of itself.
Not all would-be entrepreneurs are as savvy.
"In the medical world and the world-at-large, the entrepreneurial personality is more prone to action than reflection," says Mindi McKenna, director, Division of Continuing Medical Education, American Academy of Family Physicians in Leawood, KS. "Such people are eager to jump in and just start doing something."
For companies like Jacobs' that need investor money to get off the ground, a detailed, written business plan is a must. But even if your goal isn't to raise new capital but simply to introduce a new service or relocate to a new office, developing a business plan-albeit a more informal one-will force you to raise and address hard questions.
"More than anything, it's the process you must go through that can dramatically affect your success," says Rhonda Abrams, CEO of The Planning Shop ( http://www.planningshop.com) and author of one of the foremost books in the field (see the resource list at the end of this article).
No two plans are exactly the same
Business plans aimed at raising investment capital come in all flavors, with no two precisely alike.
Practice management consultant Jeff Denning, in La Jolla, CA, prefers the GOST planning format. Short for goals, objectives, strategies, and tactics, GOST moves readers from the sky to the ground-from concept and vision to the solidly concrete.
Denning recently developed such a plan for several California doctors whose overarching goal is to practice part time at some point in 2007, but in a self-employed capacity. Their goals identified up front, he listed the several objectives the doctors would have to achieve to reach those goals, including establishing their own pediatric practice. Then he identified the strategies involved in starting a new practice, including forming a professional corporation. And that, in turn, led him to list the nitty-gritty tactical steps required to form a new corporation, including selecting a name and hiring a joint business attorney and CPA.
A plan organized in this way, says Denning, forces doctors to think globally, something they're not inclined to do on their own. "Doctors like to start at the tactics level-so, for instance, they're ready to buy electronic health record software before they've even identified the problem they're trying to fix." Besides the potential waste of resources, the problem with this details-first approach, he says, is that it puts the cart before the horse. In fact, if doctors fishing for investment capital are unable to articulate their overarching concept or vision, chances are their prospective lenders won't be able to either.
GOST is one format for a business plan. Others follow more traditional formats, which may contain some, most, or all of the following elements (excluding those like cover page and table of contents, which are common to all business plans):