Are Business Plans a Waste of Time?
There’s a common misconception that business plans are rigid documents that lock you into a roadmap you can’t deviate from. It’s not surprising that people who believe that resist writing one.
Isn’t a startup supposed to be open and responsive to market forces — nimble and flexible? In a word, yes.
More than that, a business plan is essential to helping you build a business that will actually succeed over the long haul.
Yes, writing a business plan is a lot of work. And it demands a healthy dose of legwork and critical thinking, especially in some areas of business that may be unfamiliar to you.
But one thing is certain: Business plans are not a waste of time. They’re actually the best thing you can do for your startup, and here’s why.
1. A business plan can (quite literally) save your startup from failing.
One of the most valuable things a business plan gives you is the ability to test the viability of your concept before money and customers are on the line.
Building a new business involves a lot of moving parts. There’s the financial piece, the logistics piece, the marketing piece and more — and all of these pieces have to come together to function smoothly with each other, like the gears of a watch.
When you’re writing your business plan, you’re creating a blueprint that relies on all of these pieces. The plan is a test to see if all those moving parts actually can come together and work the way they do in your mind.
Sometimes they can, and it’s amazing. You write out your plan, and everything’s been considered and thought through and tested. You can explain and defend it to anyone who tries to poke holes in it, whether it’s an investor, a bank or your brother-in-law.
Other times the act of writing out your plan reveals a little bit of faulty thinking on your part — or wishful thinking rather than seeing the world and the market as they really are. Or… maybe you missed a really important piece. It’s kind of like planning a vacation — sometimes, when you look at all the pieces together, you realize it’s not quite going to work.
Better to discover that ahead of time from the comfort of your own home, rather than being stranded in Bali with an empty bank account and no way to get home. Writing things down makes it easier to see gaps, conflicts and errors ahead of time.
The business plans that investors and banks want to see force us to think harder about the details of our business, as well as our assumptions, in a way we tend not to do in our own heads.
On our own, we’re unlikely to take all of the moving parts into account. There are some we won’t think of in the first place, and some we’ll want to avoid because they’re scary or hard. Creating a complete, fleshed out business plan forces you to make sure everything is accounted for, so your business isn’t destined to fail before it starts.
2. A business plan functions as your roadmap.
Winging it is not a strategy.
A well-crafted business plan, on the other hand, serves as a roadmap for where you’re going and how you’re going to get there. During the year you’ll know what you’re doing, why you’re doing it, and most importantly, how you’re going to do it.
This allows you to be proactive instead of reactive because you’ve thought about all the important stuff ahead of time. You’ll be ready for the inevitable roadblocks, pitfalls, delays and unexpected setbacks that might occur, because you’re prepared.
Your plan also serves as the foundation for how you talk to the people who are essential to the success of your business: customers, partners, employees and investors. Things like website content, elevator pitches, investor pitches — even job descriptions — will all start with the content you’ve already written in your business plan. (Plus, it’s a lot easier to get your team to buy in to your vision and work towards the same goals when they’re written down.)
3. A business plan shows investors you’ve thought through the big picture and the details.
You wouldn’t get on an airplane if you knew the pilots hadn’t performed all of their preflight checks — in fact, I’m betting you’d run the other way. The same is true for investors and your business plan.
Investors want to see if your plan makes sense. They want to know that you’ve covered all the bases. Are your financial projections realistic? Are customers willing to pay for what you’re selling? When investors give you money, they are, in effect, getting on the plane with you, and they want to make sure it will stay in the air.
Naturally, they’re going to ask you a lot of questions. They’ve seen hundreds if not thousands of startups, and they’ll have questions you need to be ready to answer.
More than the answers themselves, they’ll want to see if your thought process makes sense to them. Even if they don’t read your plan (and they likely won’t), the process of crafting a strong business plan is like a startup bootcamp that helps you understand your business from top to bottom and inside out — so you’ll be ready for anything they throw your way.
And one more thing? Investors don’t really invest in ideas, they invest in people. Your ability to explain your vision and the reasoning behind your assumptions will set you apart from the crowd and go a long way towards impressing the people holding the purse strings.
4. A business plan is a living document.
As Eisenhower said, “Plans are worthless, but planning is everything.”
Your business plan will inevitably evolve after you open your doors — that’s their nature. Done right, a business plan is a flexible roadmap built to incorporate changing circumstances, whether it be shifts in the market, new information, new opportunities or because your annual review has made you realize that you want (or need) to make course corrections.
The key is the planning process… that’s where the magic happens — the document itself is less important. That’s because the planning process is where you make the discoveries and realizations that lead to improvements and innovation that can move your business forward.
Writing (and revisiting!) your plan is where you get in touch — and stay in touch — with your core vision, your core goals and the benchmarks you want to hit. From the first draft to your yearly update, you’re building a framework that will help you know exactly which direction to move your business.
5. And finally, you will be ready to adapt quickly and take advantage of opportunities.
Your business plan will serve as your baseline, your reality check. It will be your touchstone when it comes to what helps your bottom line (and what doesn’t). You’ll refer back to your plan again and again.
And when things change (as they naturally do), you’ll be ready to adapt quickly and take advantage of opportunities because you’re prepared.
Need some help with your business plan?
If you could use some help writing your business plan (or making sure that it’s the best plan it can be), you’ve got options.
You can take a look at my all-in-one Business Plan Kit if you’d like to write your own, or you can talk to me about writing a custom business plan for you.
Take a look at both options and see which looks like the best fit for you.
For more details or to get in touch, click here.