"If you fail to plan, you plan to fail."
"A goal without a plan is just a wish."
"If we do not choose to plan, then we choose to have others plan for us."
Everyone has heard some or all of these bons mots, and probably many more, about the importance of planning. And you'd be hard-pressed to find a book about entrepreneurship that doesn't start with an admonition about writing a business plan. But for most people, and in most start-up situations, the value of the classic business plan -- particularly the excessively long, minutely detailed, chart-laden variety -- is overrated.
Of course, that's not to say would-be entrepreneurs should just dive recklessly into an endeavor with nothing but a dollar and a dream. It simply suggests understanding what business plans are good for and what they aren't, and investing time and effort accordingly:
Business plans are good for:
Envisioning: The immediate value of a business plan is that it takes your dreams, inventions, ideas, aspirations and expectations out of your head and commits them to paper, where they start to become something a little more "real." Your thoughts get organized and malleable, you can focus and refocus, step away and revisit, and in general start to see what your business might really look like.
Vetting: Similarly, putting things in writing gives you the opportunity to more seriously and professionally consider whether your ideas, assumptions, intentions and expectations are realistic. More important, crafting a plan makes it possible for others to participate in the process. The nature of an entrepreneur is to believe passionately in his or her ideas, but also often be blind to -- or refuse to accept -- anything that challenges them. A well-written plan should keep you honest with yourself and elicit honest feedback from others.
Learning: A plan (at least one of any value) requires research, and writing one should be an education. It should ensure that you are intimately familiar with your industry, competition, customer demographics and anything else on the landscape in which you plan to stake your claim. More than a few times an aspiring entrepreneur has excitedly shared with me what he was positive was a new and unique idea, only to have me burst his bubble by telling him that exact product or business already existed. (I've had a few of those bright ideas myself.) Information as basic as that should never come as a surprise.
Financing: People who are considering lending to or investing in a new business want to see a plan and some "numbers," even though those numbers are usually pure conjecture and rarely bear out. They want to see that you have done your homework, determine whether your vision and projections seem realistic, understand how you plan to achieve them and inevitably decide whether you represent an acceptable risk (in the case of a lender) or a potential reward (in the case of an investor).
But don't fall into the common trap of letting the need for money lead you off the straight and narrow in your business planning. If you back into numbers to support the financing you want, your puffed-up plan can come back to bite you.
What business plans are not good for:
Business planning: By their very nature, business plans are based on assumptions, which lead to other assumptions, used to make even more assumptions. ("If the market size is X, and we get just Y% of it, our sales will be Z.") I don't think I've ever met an entrepreneur whose assumptions or projections wound up being accurate, much less anyone whose business chugged ahead according to plan. Most business owners will tell you that (for better or worse), their businesses wound up being very different than what they had planned or expected, sometimes bearing no resemblance at all to where they started.
I hate buzzwords, but the pervasive use of the word "pivot" is just a jargony way of saying things often don't go as planned.
The bottom line is that unless you're beholden to someone (bank, investor, director, key business partner, etc.) who's demanding a business plan, think twice about how much time and energy to put into doing one. Rather than impressing yourself or others with a bound volume or stunning PowerPoint, produce a fat-free, realistic and usable brief that can serve as a road map for getting started. Then get to the business of getting started.
You can bet that your road map will take unexpected turns very early in the game, and you'll be glad you hadn't wasted time trying to turn that map into an atlas.
Concluding with one more quote on the subject, no more profound a philosopher than Mike Tyson may have said it best: "Everybody has a plan until they get punched in the face."
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