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.
100% agree. I think a lot of people are just stuck in the mindset that a business plan is an 80-page tome packed with market data that’s about to be irrelevant and financial projections that are works of fiction. It’s really the process of writing the plan that is so valuable – that, and having the support of someone who has written a lot of them to keep you pointed in the most profitable direction.
Yes. They tend to forget what it is for and that is to plan every aspect of the business before getting started. It sets the direction and the tone of the business right from the beginning.
You are right on. I call what you describe as a strategic plan versus a business plan, not that the title matters. The distinction I make is that a strategic plan is focused primarily internally (yourself as the owner, employees, vendors, strategic partners, etc.) and a business plan is focused externally (i.e. what you would use to show a banker or investor if you needed a loan or investment for your business).
As a result, I am a fan of a modification of the Verne Harnish one page strategic plan, so that everything necessarily to know and to communicate can be on one page. It really can work. I have seen statistics that one of the reasons businesses fail so quickly is the lack of a plan. It does not have to be complicated and the only way to have any chance to do the right things to move your business forward is with a plan that is well executed.
Thanks for offering up your comments.
Bingo! It’s always helpful when you have a business plan in order for you to conquer that straight path on what you want.
Great to see this in amongst the ‘you don’t need a plan’ advice. Agree with the comments too – it’s about the type of plan.
I too am a fan of the 1-page strategic plan. I use an approach called a Values-Based Business Plan – based on an OGSM but more focused towards a certain type of field – which has a person’s/business’ core values baked into it. At it’s most basic level it’s a simple framework for helping people identify an capture the intentional activities they want to take, to achieve a desired outcome.
You all have it wrong. what the advocates of doing business without business plan talk about is that starting a Start Up you do not need a business plan. You need a business plan when expanding an existing business. They do not say don’t use business plan at all