Everyone knows that the first thing you have to do before you start a business is to create a business plan, right? At least that’s what one school of thought tells us. I’ve seen everything from comments on blogs to entire books dedicated to the belief that no business can succeed without a business plan. Some people even get a little heated over the mere suggestion that creating a business plan might not always be absolutely necessary. And these business plan purists do raise a valid point. Without any planning, your chances of success in anything are slim to none.
So the question isn’t whether or not planning needs to take place before starting a business. The question really is – what should that planning look like? Is a formal business plan always a must, or can something less comprehensive be just as effective? In our new book, Small Business, BIG Vision: Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who did it Right, my brother Matthew and I dedicate a chapter to this very question. We explore the pros and cons of creating business plans, and we detail options for formal business plan and one-page business plan models.
The bottom line is that the research (as well as our personal experience) supports the fact that whether or not an entrepreneur creates a business plan is not a determining factor in his or her success or failure. Again, we’re not suggesting that planning itself isn’t useful. What we advocate is taking a serious look at your needs and what you hope to accomplish with your planning, and then deciding what form your planning will take, based on your findings.
For example, if you plan on trying to get outside financing for your business, there is no doubt you need to create a killer business plan, designed to assure your potential funders that your idea is sound, that you’ve thought of every contingency, and that you and your team have what it takes to execute. This sort of formal plan is primarily intended to appeal to people outside your business.
On the other hand, if you plan on bootstrapping rather than trying for financing (something we also discuss at length in our book), you want a practical plan that can serve as a roadmap for your business. This type of plan is a working document that’s actually useful in the day to day operation of your company. It doesn’t have all the information that a formal plan does, and in many cases, it can be as brief as one page. Think about it: If you and your team are the only people who will see this document, do you really need to detail everyone’s qualifications and experience in the plan? Does it need to contain detailed financial projections and a feasibility study? Not likely. Of course you’ll want to create financial projections and determine your product or service’s feasibility, but there’s no reason to include that level of detail in an internal business plan document.
So, what’s the straight scoop on business plans? A business plan should serve a real purpose. And that purpose should be to support your company’s goals. If you make the mistake of putting off launching your company because you think you have to spend an extraordinary amount of time creating a formal, 50-page business plan document, the planning process can be a detriment to your momentum and creativity. If, on the other hand, you “wing it” without any planning, you’re not likely to get very far. So rather than taking sides on this issue, look at your individual situation and do what makes the most sense for you and your business. After all, as an entrepreneur, isn’t that your most important job?
About the author: Adam Toren is a serial entrepreneur, mentor, investor, award winning author of the book Kidpreneurs, and co-founder of YoungEntrepreneur.com. Adam and his brother Matthew are authors of Small Business, BIG Vision: Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right (Wiley, 2011).