I haven’t written much about Pure Incubation in awhile – in fact, you may have noticed that for a couple of weeks, my posts (in general) were a bit sparse. This is because I was totally consumed with preparing for my first board meeting.

I haven’t been involved in a board meeting in years. The last time, I was working for Publish magazine, which was an IDG company, and the president of my group had to present to the board of IDG corporate on a quarterly basis. I didn’t attend the board meetings, but I always had a lot of work to do prior to the meeting, helping to write up the executive summary, reporting on my department’s activities and putting together plans for the quarter. In those days, all normal activity came to a screeching halt for three days as we worked on compiling all the data that was needed.

This time, I didn’t have a team of people helping me with the materials for the meeting. My bookkeeper helped with the budgeting, but I was on my own for all the presentations, handouts, strategy, vision, power points, printing, binding, etc. It was a lot of work. But I can’t say enough about how much it helped me with the focus and direction of the business.

There has been a lot of debate over the necessity of writing a business plan. And I’m not sure that writing a formal business plan is necessary at an early stage of the business, although formal plans may become necessary as the founders try to get investment, or try to sell their business. But I am a huge advocate of putting your plans on paper, in some form. Here’s why:

No matter how solid the plans are in your mind, you’ll find holes when you write things down. This is true in about 99.9% of the cases. I’m sure that there are exceptions, other people like Jack Kerouac who famously wrote On the Road on one long scroll, but in general, things get clearer when they are written down. I have talked extensively about my business with a number of advisors and board members in the past, but I hadn’t ever articulated the entire vision at once. (It’s a big vision!) Although I had all the ideas in my head, I hadn’t put them in a format that was concise and easy to explain. The process of putting everything on paper and editing things, I was able to see how certain concepts and ideas were confusing, and I was forced to clarify them so that they would make sense to someone outside my head. For this reason alone, the planning process was worthwhile.

You can give the plans to other people to get a different perspective. I have a lot of experience in a lot of areas, but I am weakest in the sales department. I have always worked on the product, I have never done sales. And I have always worked with sales geniuses in the past, so I haven’t needed to get involved in that aspect of the business. So I have filled my board with great sales strategists because they are able to give me ideas and insights about sales that are far beyond anything that I would ever come up with on my own. Not only does this help the business, but it helped me turn the board meeting – which would have been simply a day of me explaining things and reciting things that I already knew – into a huge learning experience. And this different perspective hopefully has me closer to revenue.

Quarterly revisions keep your plans current.One of the reasons that people give for not writing a business plan is that with a start-up, things change all the time. One of the best examples of a business changing is PayPal, which was started as a way to transfer money from PDA to PDA – they never envisioned transferring money on the Web as their business plan when they started out. As Max Levchin, cofounder of Paypal said (as reported in the book Founders at Work):

“Sometime by early 2000, we realized that all these people were trying to use the website for transactions, and the growth of that was actually more impressive than the growth of the handheld device one, which was inexplicable, because the handheld device one was cool and the website was just a demo…. We had the moment of epiphany, and for the next 12 months just iterated like crazy on the website version of the product which is today’s PayPal.”

With quarterly meetings, and quarterly revisions of the plans, I can always make sure that I’m never more than 3 months behind my current thinking.

Budget planning lets you know that you’re not going to run out of money. Although business plans are debatable, budget planning is not. Every business should be run based on a budget, period. This will go a long way to helping you make sure that your expenses don’t overwhelm your profits. And it will help you know when you need to make adjustments.

There are a lot of other benefits to putting together plans for a business, but these are the ones that were the biggest for me coming out of my board meeting. I currently don’t have a formal business plan for any of the businesses that I’m incubating. But I do have written plans that can quickly turn into a formal business plan. So when I’m ready to sell, or take on a new partner, I’ll be ready.