Business plans are an essential component in the development of new specialty insurance businesses, although one might draw a different conclusion reading a recent post by one of my favorite bloggers (see here). Guy Kawasaki (infamous hockey player and well known author & VC) cites a Wall Street Journal article based on a study by Babson College (the article and the study are linked on Guy’s blog), which found:
The analysis revealed that there was no difference between the performance of new businesses launched with or without written business plans
The point of a business plan is simply the intellectual exercise of crossing the t's and dotting the i's. No investor really believes that it's a rigid plan, but investors do want to have confidence that you have figured out the moving parts and have a well formed idea of the direction you need to go in.
I agree. My experience is that business plans are essential in getting people to adequately develop and collectively agree to a strategy. Ideas and talk are the easy part. For some reason plans are not precise until they are on paper.
We would not consider an opportunity in the specialty insurance business without a well conceived business plan. Whether it is a new organization seeking venture capital, a new specialty insurance program or a marketing effort in a new class of business, we review a plan. Plans will never be perfect and will change, but management and investors need to be comfortable that the overall strategy is well thought out, the pieces fit together and the numbers make some sense. All of this is spelled out in a business plan.
Guy has a prior post on business plans (see here) which is right on the money, and his comments on how business plans should be used are important reading for any budding entrepreneur.
Specialty Insurance Expertise: Tennant Risk Services
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