Some entrepreneurship advocates have suggested that would-be entrepreneurs abandon the writing of business plans. In the fast-paced world of entrepreneurship, business plans are obsolete, they say. To these observers, entrepreneurs are better off just acting, pivoting when they get something wrong, rather than taking the time to write plans.
But, before you give up on the idea of writing a business plan, you should consider the multitude of benefits that business plans provide. Careful academic research shows that writing a business plan helps entrepreneurs turn their business ideas into reality, more than doubling the odds that those beginning the start-up process will progress to becoming owners of up-and-running companies.
Writing business plans also helps entrepreneurs to create more successful companies. Writing plans accelerates product development, permits faster organization of businesses, improved access to financing, and quicker sales, academic research reveals. In particular, writing plans before initiating marketing improves start-up company performance.
Writing a business plan offers four benefits. First, it helps you to develop a strong business concept. Writing a plan forces you to ask critical questions about your business idea. It challenges you to confirm your beliefs about your products and markets and to understand your competitors’ strengths and weaknesses.
It also pushes you to look at the connections between the components of your business and put them together in a logical way. In particular, writing a plan forces you to verify your assumptions about the relationships between costs and revenues.
Business planning encourages you to create financial models of your business under different scenarios, which will help you to see how likely you are to achieve your goals. Subjecting your business concept to this kind of critical evaluation allows you to refine your business idea more cheaply than you can after you have opened up shop.
Second, writing a plan helps you to make better business decisions and to execute them more effectively. A business plan doesn’t just set your goals; it also offers your road map for achieving them. Because you put your objectives down on paper when you write a plan, the document can serve as a benchmarking tool, allowing you to see where your business meets and falls below your expectations over time. As a result, writing a business plan helps you to understand where to change and where to double down on what you’re doing.
Third, writing a business plan forces you to set deadlines and commit to choices. Unlike when you work for someone else, as an entrepreneur you have no boss checking up on you. By putting your timelines and decisions down on paper, you can make promises to yourself. This will help you become better organized and more likely to stay on track.
Finally, writing a business plan helps you to communicate your business idea to others. When a supplier, customer or prospective employee asks you about your business, you can give them an overview. Moreover, having a written business plan helps you to persuade key stakeholders to support your business because it signals the seriousness of your effort. You can also judge how well you are explaining your business concept by seeing if your stakeholders understand your plan. And if you are founding a business with others, writing a business plan together will help ensure that the group is in agreement about the idea and the future plans for the development of the company.
If you are starting a company, don’t skip the step of writing a business plan. At first it might seem as if the time you devote could be better spent on other things. But you are more likely to succeed if you write a plan than if you don’t.