Tuesday, October 18, 2011

What's in a business plan?

When I started asking around for advice about working for a start-up, everyone said "Look at the Business Plan." That's nice seeming advice, but considering my first experience with one is the one I am making a career choice on, I'm not sure if that actually puts me in a good position to judge.  Seriously, what is normally in one of these?

A business plan (esp for a company looking for investors, or anticipating growth), should include everything from the mission statement to the revenue streams and expected profitability timeline, and provide an indication that each of the major issues for the business have been considered and addressed.  There should be some indication that both the Market (who will buy what you have to sell?) and Finances (can you make it for less than you'll sell it? How much outlay is required to make it?) have been considered. For example, it might include the expected clients, or investors, predicted areas of growth or challenges.  In a science field (I'm clearly thinking about biofuels, but this holds true for biotech as well), these is probably some oblique reference to the whiz-bang science that is going to move the company forward.  If it doesn't sound believable, you should be able to get references about it.

The part that is a little confusing is that a business plan is normally written for investors, either the bank that will make a loan or venture capitalists.  As a result, everything is couched in the language of "Potential Success and Profits!" It's hard to look past the "uniquely qualified team," and their "cutting edge approach," despite their "deep understanding of market realities" to see if there is a good idea down there. And working for a start up might not be like a normal job, where you know if you show up and do your thing, you'll have some stability.  It's riskier, and as someone who doesn't like job hunting much, I want to be sure the job I take is one I'll still have in a few months.

I'm not really sure how one balances all that, frankly.

The one other think I have to add was this funny acronym, EBITDA- earnings before interest, taxes, depreciation, and amortization which is a nice way of making earnings look as GIANT as possible, even  though that isn't a perfect reflection of the final take home.


  1. I'm not sure how closely you follow wall street or the investment world. But every company loves to throw out stuff like EBITDA and other metrics. You can be sure these, like most statistics, are manipulated to the max to make the company look like a home run. Many companies that completely collapsed in our various bubbles bursting looked great on paper, due to the paper valuation being heavily manipulated. None of this helps your job decision I realize. I have just been investing long enough to know that all this stuff is so doctored that I'm not sure i would even recommend looking at it. I would probably advise to just know it is a risk that could pay off big or could fail and find you looking for another job. If you are ok with rolling the dice I'd say make your choice on the job you will be doing and if you will like that day to day role. It will be hard to evaluate the companies financial health without insider information. You do have your husband's income as a safety net so if you are feeling like taking a risk you are not betting your entire life on giving it a try.

  2. Yeah Patrick, I don't follow the investment world- the whole thing was new to me. I'm glad to hear you say that it can be hard to parse out the important/relevant info. One more reason to dive in, I want to get familiar reading these types of documents. And yeah, I think I am ok taking the risk, mostly because I want to see where this goes.