I was reading an article on the New York Times blog today that breaks down why all entrepreneurs should write business plans.
Careful academic research on the business start-up process reveals that many entrepreneurs never write a business plan.
These studies also show that writing a business plan helps entrepreneurs in a number of ways, including improving their odds of successfully developing a new product, organizing a company, accessing external capital, obtaining raw materials, generating sales and surviving over time. Regardless of what measure of performance academics have looked at, research shows that writing a business plan has a positive impact.
I am not a fan of writing business plans! I have started a fair amount of companies and have never written a business plan. Now you could say that is the reason why a lot of my businesses failed, but I could make the argument that financially I’ve still came ahead.
Here is why I think you shouldn’t write a business plan:
Business plans ≠ Funding
If you are trying to raise money, you’re probably considering writing a business plan, right? Well I hate to be the bearer of bad news, but I don’t know anyone who has raised money from writing a business plan.
Roughly 30 of my close friends have taken some sort of venture capital or private equity financing. And none of them raised that money by writing a business plan.
Most of them did make a power point presentation and a few even wrote executive summaries, but they didn’t write business plans.
Remember, most investors don’t want to invest in a “plan” they want to invest in a business that is up and running. You don’t have to be making money, but they want to see something more than just a piece of paper.
And if a potential investor happens to request a business plan from you, ask them if they are actually going to take the time to carefully read through it. The chances are, they won’t even skim it.
You can’t predict the future
You can try and plan for the future, but your plan will never account for everything. Things change, so why would you waste your time writing a document that won’t be up-to-date.
Or if you want to take it to the next level, why would you start writing a plan that will never be complete? Your business will constantly evolve and change, and if you want your business plan to stay up-to-date, you’ll constantly have to modify it.
Once you start your company, you’ll soon realize that a lot of decisions will have to be made on the fly and that you are going to have to rely on your intuition. There is no a written document can help you with any of this.
Time is money
According to the U.S. Small Business Administration over 50% of small businesses fail in the first 5 years because of lack of capital and lack of entrepreneurial experience.
As I mentioned above, writing a plan isn’t going to help you get capital. And if you are looking to gain experience, you are better off spending time working on your business than writing a plan.
The biggest reason I never wrote a business plan is that it takes my time away from the business. I am a doer and spending weeks on something that has no proof on impacting the success of my company is a waste of time.
If you have somewhat of an understanding of what you are going to do and where you plan on taking your business, you should spend all of your time acting on it. Writing a plan will just slow you down from succeeding.
The businesses world has changed
For a moment, think about all of the things that have changed in the past year. A lot has changed, right?
And now, take a moment and think about all of the things that have changed in the past ten years. So many things have probably changed that you take a lot of them for granted.
Technology is constantly evolving and the way you go about operating your business isn’t the same as it used to be. But the problem with business plans is that they haven’t evolved with the business world. So why would you spend time on something that is old and out-dated?
Conclusion
If you think having a business plan is going to increase your odds of success, it won’t. There are no stats proving that writing a business plan is going to help you succeed… so do yourself a favor and save your time.
And on a closing note, I would like to leave you with a few words from Steve Rappaport.
Many successful businesses today would not withstand academic scrutiny. A perfect example is the company Red Bull. There are so many holes in the plan without the 20/20 hindsight. I can imagine what would have been the comments — didn’t we do this in the 80’s as “jolt cola” or “entrenched drink competitors will crush you if it ever becomes popular.” I think a plan is good, but serendipity and opening the business up for opportunities can be even better. In other words, diverting from the plan. Red Bull’s initial aim was a drink for long-haul truck drivers.
Do you think it’s worth creating a business plan?
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While I agree that you will learn much more from actually doing rather than planning, having the framework for your long-term objectives and core competencies is an important asset to your business.
Once a business forgets it’s focus and primary discipline then they risk losing any edge they might have had in their segment. So yes, spending time actually getting the business going is CRUCIAL. However, having a set list of objectives and direction for your business will do more to keep you on track and in line with your mission statement than simply a few powerpoints and and executive summary.
My point is that you shouldn’t rely on the business plan to get you the major deal you’re looking for. Your job should be to earn and create the business while someone else creates your bp
A business plan is an indispensable tool for an entrepreneur and not only because of its importance to the fundraising process, but because of how it helps businesspeople crystallize their strategy and evaluate their process.
Not so much… you don’t need a plan to get a VC to fund your company.
I tend to agree with Neil. A business plan is something that takes away our focus from where it has to be. To sit all day and to read a paper which says how to guide your business is waste of time. Spend that time by doing something that really helps your business.
Exactly… your time should be spent on how to build a business, make money, and successfully manage it.
Building and managing, whilst making money is the challenge. Our first business we never really made money, but after building the shop up for two years we were able to sell it on the basis of our accrued hard work, and made our profit then.
Building a business take a lot of time energy and effort, obviously you were able to see that and have proven it to be a concept that’s true.
Neil,
But isn’t a business plan a plan for “how to build a business, make money and successfully manage it.”?
Business plans are not useful in and of themselves for raising money in the “Hey read my business plan and then give me money.”.
Instead they are the “exercise” you engage in before raising money to build confidence and depth of knowledge in your idea and your target market so that when you pitch your concept to investors you can answer all the questions.
Think of it as going to the gym and lifting weights and doing cardio workouts so when you start that triathalon you are competitive. At the starting line and during the race no-one wants to look at the workout schedule you completed leading up to the race. However that workout plan is in fact your “business plan” for winning that race.
Business plan writing is the workouts in the gym that get you in shape to compete.
Everyone entrepreneur should write one, understand it deeply and then put it in a drawer and get to the starting line ready to compete.
Roger
The problem is that people think that having one ensures success. People are only led to believe it because it’s the “right thing” to do. That’s not the case.
Neil I must say you are right on this. I have always hated business plans but was forced to learn it so as to know what they actually are suppose to look like.
You are so right that the time and hours I took learning how to prepare a proper plan that to me made no sense as a BP is so very static.
Also you cannot put the pulse of the market quarter by quarter in a BP. New info and knowledge gained from a blog not factored into your so called plan could sink it.
So if you have the capital forget a BP. If you do not have it, move on to something that you can fund yourself. Sitting there waiting for the capital to arrive will not help.
My first biz which lead to the technical knowledge for my first real biz idea my second company is up and running and a biz plan only took off my eyes from the prize by about a year or so. Trying to convince logger heads to see your concept working is a waste of time. If they cannot get it in the first 2-5 minutes split.
That’s true we never write business plans, we just execute our ideas, and thats why we’re called entrepeneours, allright!
lol… exactly! Be prepared for the unexpected! It’s good to prepare yourself, but a b.p. won’t take it to a new level or anything.
Yes I totally agree wit you. A lot of people think you need everything perfect to get started. I like to get started and tweak things up as they go. Yes definitely have a business model but it does not have to be perfect.
Things will definitely change… especially during the beginning. Have a model sure, but don’t expect to have it make or break your business.
The thing is that you can’t raise a business by following a model or a piece of paper. You make that business successful by adapting to the market conditions.
Adapt and overcome is the motto for any successful entrepreneur. A plan is a great place to jott down your thoughts and ideas, but it won’t be anything more than that.
Media decks are also good – which is what I think Neil is referring to regarding PowerPoint presentations.
But to your point above, I would agree that it’s vital to have a clear set of objectives for everyone to follow. But spending the time to put a business plan together may only provide a good picture into where a business came from because 99% of the time they never stay the same due to changes in strategy.
You should always keep your plan with you at all times… Making changes etc. are perfectly fine and only really tells you that your’re focused and committed.
Having to write down the strategy also creates an opportunity to make sure all of the founders are literally on the same page about what they intend to do. If they are not, fruitful discussions can be started which are better to get out of the way at this early stage while plans are still much more flexible.
Ideally, thats how it use to work, but you gotta understand that all these elaborate business plans don’t mean squat. You need a powerful idea with amazing skills to sell it.
The market has changed and so did businesses. I am very curious if the person that wrote that article actually has a business going and if so I wonder if he has a business plan. It’s easy to write about something that you have no idea how it really works.
You know what, they may or they just may not… but either way, it’s what will make or break what they have going on.
Neil, I absolutely think it is worth creating a business plan. The positive is that you will have a piece of paper /something written that will keep you accountable of what you set out to accomplish from the beginning.
Of course products, services, and strategies change but like you mentioned in a previous post reaching out “influential players” in your field and building those relationships should be a CONSTANT EFFORT. A business plan can be as a list of people and companies you would like to build successful relationships with.
Do you have any list like this?
Kayvan Mott
I don’t have any lists like that. I usually just “wing” my networking efforts.
How can a piece of paper add success to a business? You have to build a business by instincts and by market needs not by something that your wrote some time ago on a piece of paper…
You know, your guess is as good as mine as to why people think that it’s a good thing… it’s more hilarious than anything else. People need to shift their focus in the other direction.
PPT deck is a must. Business plans are a good exercise for collecting your thoughts nothing more. Not a roadmap.
Yes… it allows you to become more clear about what you have locked up in your mind.
When kinks are worked out, the plan becomes an excellent tool to direct the company with. It should include the high level actions the firm must take, which can then be broken down into specific schedules and actions by the company’s manager or managers. As time goes on, managers can return to the plan and its financial projections to judge the progress of the company, how successful the planning was, and whether company is following the plan well.
Yes, the plan could be a great tool, but what I’m talking about is that a formal plan isn’t necessary for you to launch a company. It’s not something you as an entrepreneur must create… your focus needs to be on how you’ll make the company money.
If you start a business and you focus just on the business plan than you will have a problem. A business plan is not something you need to rely on. The market, the clients, your instant ideas are what really count if you want to succeed. As I said before, a piece of paper will not make your business going.
People unfortunately belive that, that piece of paper will get them massive amounts of funding to start of their next project. It’s actually a very common misconception people have.
Excellent post, Neil. As a corporate lawyer specializing in the representation of entrepreneurs, I give my clients the same advice that Brian Halligan, the founder & CEO of HubSpot, gave to his audience last week in a speech at the Puerto Rico Venture Forum: “don’t waste your time with a business plan.” (You can find a brief video of his speech here: http://bit.ly/4Bnibo.) As Brian points out, there are three documents that start-ups need when raising venture capital for the first time: (i) a PowerPoint presentation; (ii) a one-page executive summary; and (iii) a “fictitious” pro forma income statement. Many thanks, Scott
Exactly! Thanks for the input Scott… it fits in perfectly with what we’re talking about here.
This post makes everything more clear for those that didn’t understood until now why you don’t really need a business plan. A business is relying on money, clients and market conditions. If you write a piece of paper before you start that business and the market changes with time how can that old and obsolete piece of paper help you then? You write another one, and then another and so on? Try spending that time by doing something that makes money instead.
Your time and focus should be on what you need to do RIGHT NOW to build a consistent cash stream to flow in your direction for the many months ahead.
biz plans are for finance dorks and accounting geeks. i tried to start a business with my friend, he wanted me to write a business plan, and get a lawyer to legaly form a company. oh and he wanted half the idiot, but dident want to contribute any time money or effort. all this before we actually had a money making endevor underway.
needless to say i started it with out a busines plan, with out a lawyer and with out him! some people just don’t get it.
(oh and the biz is NOT the hyperlinked blog, its another one of my projects.)
Interesting… well that’s fantastic that you were able to catch him before he would have ruined what you’re working on. Smart move!
I can completely understand your argument and will not spend my time writing a business plan.
Glad I was able to convince you so easily
Love the graphic for this post. Business plans are good to test the amount of money you will make on a business. If you go through the business plan and in the end it will take you three years to make $25,000, you might want to pass. But you are right, most business plans are just “here’s what we think would be awesome.” Most VC’s just want an executive summary and an awesome presentation.
That’s why I say that shouldn’t bother wasting your time trying to create one… If you really need one, hire a professional to do so. Just like you said, it’s not something that’ll make you a ton of money. Yes it’s great to have a focus on exactly what you want… but a 20 page plan isn’t necessary.
Agreed. I haven’t really invested much time in creating business plans. oh well.
Good for you! Don’t! Focus on having a clear focus on what you want and take action!
If you didn’t do that than you haven’t lost much
Keep that business working by other means. Good luck!
Yep, you said it right Catalin!
I have also said so a few weks ago infact (http://wp.me/pav0V-eQ) and as a consequence ‘lost’ a few readers of our membership site because they disagreed strongly.
Next topic: BRAND…?
hmm… well you can’t ever win em all…and you never should either way. Your goal isn’t to make everyone happy… just some people very happy.
You can’t please them all but maybe you will win other readers to replace those that left. Anyway, you should write what you feel and what you experienced through life most people will like you for your sincerity and life lessons you give them.
People usually like people who are genuine and down to earth… those are the types of people (people) like to deal with.
Having a Business plan is probably worth something, it’s sure not a most have but it helps you think on things like revenues, money, profit, the most important thing when creating your business is to ask yourself, how you can make money out of it, if you can answer that question on the fly, don’t bore yourself with a business plan, if you can’t! Boy, take a piece of paper, turn on your computer, get a pen, and make a business plan, at the end of the day, you may know if there’s any chance for you to make money or not, this is not bullet proof but, at least you will always keep in mind “I’m on this to make money”. I don’t write Business plans, because the first question I use to ask my self after getting the idea is: “ok, great, how can I make the most money out of this? “
It’s a great way for you to take ideas out of your head and put them on paper but that’s about it… In order for a plan to work successful, it’ll need be altered changed, and altered some more during your business’s journey. Like I mentioned before, don’t expect it to be the reason why your company becomes successful.
On the surface, I would say yes, it is worth it. But then, I am not Neal Patel, nor have I been nearly as successful as a business person. It’s healthy to hear another perspective that challenges the status quo. I have viewed a couple of YouTube videos on the subject of the one page business plan, and I found that to be very helpful. It’s a lot shorter, and it serves to help keep the entrepeneur focused, or at least that’s what the video said
You can also just buy a pre-maid business plan and throw in your info there… but the point is that it’s not what’s going to take your company from zero-60.
I know it’s probably not the way most web-entrepreneurs go, but if you want an SBA loan, you need what amounts to a business plan to apply. We’ve seriously considered applying for them this year because of interest rates and the alleged push to spur SBA lending, and I had to write one. I tell you, it sucked writing it and I don’t think it did a thing for me. But the SBA requires it. What else do you expect from the government?
Yes, like in your particular situation, it was something required. There are actually several sites out there that give you the platform to write something up for situations like these.
This article rings very true, there are too many things you can’t predict in business. If something comes up and appears to be an obstacle, you might avoid it because it’s not part of your business plan, but if you are malleable in your business then any obstacle can become an opportunity.
One good reason to write a business plan though is to do it for yourself. Going through the process might help you uncover things you didn’t think about. It can be used as an exploration into whether or not you even want to begin a particular business.
Yes, if you must write it, know that you’re writing it for yourself. Don’t expect it to be what makes you a ton of cash.
The thing is that if you write a business plan today for example and you follow it until a point where what is written there don’t apply to the market anymore. What then? Write another? It’s ok to have a business plan for helping you remember some ideas but do not think that a business plan will make your business profitable.
Business plans are great for writing down your ideas and stuff, but then when it comes to taking action… just go do it!
Nicely written post, and you make some good points, but I think you’re missing the point of business planning: It’s about managing better, dealing with uncertainty by breaking it down into specific points, and then tracking the differences and relationships as things change.
It’s not at all about guessing right; it’s about laying out the steps and relationships between the different factors, so that as assumptions change, and plan is different from actual — and it always will be — you can relate back to what you thought would happen to simplify the adjustments for what actually did happen.
And it’s not about the document. The document, if there is one, is only the latest output of the plan. And if you don’t have a plan, your pitch, and your investors, will know it. Not that they want to read it, but they can tell whether or not you have it.
I admit I’m biased on this topic, and it’s getting to be trendy these days, because it seems so delightfully contrarian. But your examples here aren’t business planning, but rather misuse of business planning. It’s like knocking good eating habits and regular exercise because some people do crazy diets and crazy exercise.
I get what you are saying, but I still think you can lay things out without creating a business plan. Maybe I am just one of those people that never really writes anything down.
Business planning needs great flexibility and business leaders who have their sights on the ‘big picture’, the long term goal, will invariably be willing to respond to setbacks, with an attitude of “what can I learn from this?’ This is something that great medical practitioners attest to. Doctors learn about the patient and their disease when they apply their skills to the situation. There would be no learning if they did nothing. Commodity traders make plenty of mistakes but they learn from their mistakes and move on. Business planning is like any discipline: it’s a learning ‘curve’.
Look, business planning is great and essential, but what I’m saying here is that it’s not what’s going to “sell” the investor on the idea… they just don’t have the time to look everyone’s plans.
I agree with not writing a business plan. Action speaks louder than words. And that’s already tested and proven.
Of course, indiscriminate action is not an effective way to produce your desired results. You can run around like crazy, climb 100 mountains, cut down forests full of trees and be generally frenetic enough to power up a small city without producing the exact results you wish to have. You must do the correct things in the correct way. That is why you must get the knowledge…so that you will know what to do. Become more, so that you are capable of more. Then, do more of what needs doing. Then, and only then, will you get to have more of what you want.
Yes you must get the knowledge, do the research etc… but your idea doesn’t have to be laid out in a nice detailed business plan format for it to ring a bell in a VC’s head.
Right… you need to have something, but not necessarily a structured “business plan”
It seriously does not make sense for VCs to invest based on business plans.. what is more important is of course how you do it and your ability to manage the business. Business plans, in my opinion too are a waste of time. People should concentrate more on setting up the business at some small scale first.
I’ve always tended to think similarly when people tell me I should take the time to write out a business plan.. I always tell them that if I write a business plan today, tomorrow it could be outdated when I come up with a new twist or feature that changes how it makes money.
So while it’s good to have a general plan, it should be allowed to morph. Great post!
With business plans, you need to understand that you have to change it almost every single day. It may simply be a waste of time for you to have to do that. There other ways to create structure… do that instead.
i couldn’t agree more, anyone pushing a business plan on you has a vested interest in some service or product that helps you to write one. whether it’s some sham consultant, a crappy piece of software, or an industry template, it’s all pushing their own product. THEIR VERY OWN BUSINESS PLAN IS TO MAKE YOU HAVE ONE USING THEIR SERVICE/PRODUCT! this is all over the place, tons of consultants and multiple software companies all offering total crap ’solutions’ to take your money.
“oh you need a business plan! i just happen to be able to write one for you, for $1000!” – STFU
“oh you really need a business plan! you will fail without one! buy our shitty software that just fills out a template for you for $200!” – STFU
“if you don’t have a business plan you will fail! here, follow my template for your industry, it’s only $50!” – STFU
actually DOING your business is far more useful than writing about a plan, on any day!
LMAO You’re totally right.. a lot of people who are preaching that kind of advice have a conflict of interest going on…
The post that said everything. Most people that say business plans are a must probably have a consulting company or something that gets money from writing those plans and of course they will not be satisfied if someone says that a business plan is not necessary.
Yes very true Catalin… just like I said before, it’s in their best interest to say that because it’s how they make their money.
Business plan do have their role. It is important to know where you are going else you may lose sight.
Yes, but you can do that in other ways… the problem with business plan’s now is that they are easily outdated within even a few days. Most people aren’t willing to continuously update it… you need to spend your time in other areas… areas that help you make money.
I totally agree with you Niel, business plans are really a huge waste of time. All we need to have is a clear idea of what we are going to do. A PPT is more than enough to follow up the plan.
Exactly, I’m glad you see where I’m going with this… There really isn’t any point in spending too much time creating that plan… you’re better off building a connection with a VC.
Hi Neil,
I must say I don’t agree. A business plan does not need to be a 200 page, detailed post-mortum of your thinking – but having somewhere a written down idea of where you are, where you want to be, and how you are going to try and get there IS an advantage.
On your 4 points:
1) Don’t need one for funding – more often than not you do. It enspires confidence, and let investors understand risk levels. You might not call what your friends presented a ‘business plan’ but I suspect it had all the elements of one.
2) Can’t predict the future – No, but that doesn’t mean you shouldn’t have an idea where you are heading. ‘Winging it’ is an important part of business, but if you can plan the normal direction, you save time on decision making.
3) Time is money – yup, so don’t spend 2 months writing it. Do a high-level Power Point plan. Or pay someone else to do it.
4) Business world has changed – it has indeed, and the appetite for risk has diminished. This only increases the need for some type of planning. The better you can manage yours and your investors risk, them more chance of surviving you have.
Cheers
Rich
No businesses are the same, just as no plans are the same. Your business plan might seem like a daunting task but the results it will produce will be worth it and if you are having trouble writing the plan yourself there are many websites that offer help and, along with your help, will actually write the business plan for you.
I agree Rich. I tell my coaching clients – ALL the time to write things down in Black and White and it will make it more tangable and real. Not all venture capitalist will buy a song and dance anymore – they want numbers.
It also makes a big difference with the type of business your setting up. You should not personally write the plan, as an entrepreneur, your job should be focused on the company’s money model… leave the plan to someone else.
Your business plan is something you need to change… every single day practically. Regardless, as an entrepreneur, don’t spend your time on it… like you said, utilize websites that help streamline the process. Just don’t expect it to get you your funding.
Those website don’t offer to help you because they care about you. Their goal is to make money. I am sure they do not have any business plan wrote, but instead they are thinking how to convince people to choose their services. What business plan they could have? Write business plans for other, write business plans for other, write business plans for others…and that is how they make money.
Very true… that’s why you can’t really go by what they say, there’s a conflict of interest.
The idea, Rich, is not to spend your time creating the plan for one, and two, not relying on the plan to be what pushes a decision maker to make the decision on your idea.
I guess you are right. But the situation changes when something you have started has grown tremendously. We all have brilliant ideas but to implement them effectively we need a plan.
yes, but a plan isn’t necessary to get a VC to fund you… it’s just a common challenge that many people think they have. You’re job isn’t to write a detailed plan, it’s to focus on making money faster.
All great points. To me anyone who thoughts big and works extremely hard and smart while displaying strong leadership qualities is an entrepreneur.
People sometimes wrongly label such individuals as egotistic or lusting for power/money but more often than not they are simply misunderstood.
At last I can say, it is necessary for any business man to create perfect business plan to gain better value in future.
If we are not able to make right business plan then in future may be we are loose to achieve our goal.
It’s not what makes or breaks your business…. your ability to hustle and get yourself out there is what counts. VC’s aren’t looking for the best prepared plan, they are looking someone they can roll the dice on.
A business plan is the key to long term success for new and old businesses. Your business must have a foundation to start from and you have to give your business time as success will take longer then merely weeks.
If you must have a business plan, don’t spend your time creating one, have someone else do it. Your job as an entrepreneur should be making money.
Well it looks like most of the people think a plan is needed and so do I. The old saying of THOSE WITHOUT A VISION SHALL PERISH has to do with setting a plan and having goals. The study done I believe at Harvard found that the four percent who wrote their plans for the future got to them. While a plan does not have to be the 100 page business plan and include all points, I think it is safe to say that with out a map how the heck do you know where you are going. Sure you can get there but at what a loss of time. Even a simple mind map of the out line of what you hope to do is still a plan none the less. Great feedback from all. Thanks and have a great year
You need to understand that it’s not what will make or break your company. I can give you plenty of companies who have business plans who made didly squat and then plenty of them who didn’t and took over the world. What I mean by that is that it’s not necessary to get funding from a VC when you’re starting up a new company. When you want a plan, make it, but YOU need to focus on what’s important…. making money. If you need a plan, you hire someone to create one for you.
I agree with Neil. A business plan is a total waste of time.
A business plan assumes that anyone could step in and make the business succeed if they just “follow the plan”. Nothing could be further from the truth. It’s not the plan that counts, but the acumen and talent of the people involved.
I used to have a ‘71 Mustang – 8 cylinder 351 engine. Loved driving fast in that car. Being an entrepreneur is like driving a Mustang 130mph. Whether I survive depends on my driving skill. And maybe some luck!
Your skill is what you need to sell the VC on… not your “plan” you can have an amazing plan but if you don’t have the skill to execute it.. your SOL.
A good entrepreneur has all it in his mind. Things change, so is his thinking, but a written piece never changes!
I think the book “Black Swan” deals with such issues like “unpredictable” stuffs. (I haven’t read it! somebody told me so)
A business plan cannot remain the same through out the year… it would need to be altered and fixed to be with the times.
I would tend to disagree with you on this matter. Starting a business without a plan is like entering a sporting event and not having a game plan. Business like in sport…the best prepared team usually does the best.
Well it’s not that you’re not prepared… you don’t need to rely on that being the “sell” of your idea.
I agree with that point. But at the same time..You should have a business plan in order to succeed. If your whole reason for creating a business plan is to gain financial backing then you are really missing the real reason you should create a business plan. I believe if you don’t plan for success, then you can plan on failing.
You have to plan on what your business is going to do, but like you said, you can’t rely on it for financial backing. That’s where your brilliant mind with it’s concepts come into play.
I think it’s unwise to make a statment this general. Many people think a business “plan” means a multi-page document with a ton of crap in it – HOWEVER, the powerpoint you mention and excutive summaries ARE in fact business PLANS. Anyone who wants to go into business HAS to “do the numbers” so to speak and need a model – you HAVE to know your competition and how you are going to market. What’s your pupose? What’s your goal? Neil, you are probably, I’d bet, someone who can keep a lot of this info in thier head. My husband is one of those. BUT, if I want to bring in a certain amount of money I need to know how many clients/customers, etc that I need, I need to write it down AND I put it on my wall. I can’t keep it in my head – these are also my goals.
Doing some business research and making notes, can be a business plan. It really depends on your definition of what a buinsess plan is…you’ve been doing them, I’m sure – just not in a traditional way. Heck, even Southwest Airlines started with a buiness plan – yes, on a cocktail napkin but it was a plan.
You can advise people not to write a business plan but some may take this as “don’t plan.” Most companies fail becauase they don’t plan and don’t set up good systems. Be careful of the words you choose. (Of course, this sparks a great conversation!)
A plan is obviously essential, like with the cocktail napkin for Southwest airlines… what I’m saying is that creating a formal 20+ page bp to pitch investors with just won’t cut it. Those are almost never what they’re looking for.
I never raised money for a start up but did raise around 250k to grow a business I satrted in my early twenties. More specifically to fund payroll for a large commericial contruction project. I secured the contract and THEN went about my capital quest. I think that made all the difference in investors dolling out the cash.
My approach was simple. I told them I needed 250k and I already acquired a good portion. I looked for 30 to 50k per investor. Short term (3 months) and I paid sraight up 18 percent.
It wrent well.
My take away from the experience and this post:
People may be interested in investing in what you are doing… Not so much in what you’re thinking about doing.
Putting numbers on the board, showing any sign of growth or positive cashflow gets investors excited I think.
Thanks Neil,
Joe @ home business ideas
Thanks for the thorough insight Joe… I’m happy to hear that your project went well. Investors know that nothing will ever be sure-fire, but knowing that you’re already setup or ready to do something is definitely an easy sale for getting people on board.
This post couldn’t come at a better time! About a year ago I went in for financing and wrote up a 36-page BP. Everyone said it was the most thorough plan they’ve seen, except the guy handing out the money. For every valid point I detailed he created some critique and raised questions. Discouraged, I decided to revamp my entrepreneurial goals.
Now, 12 months later I am going back to him with a very successful business, an executive summary and a need for money for a bigger office and an expanded payroll… no more 36-pagers – ever!
lol…. well at least it was a great experience for you to go through. I’m curious to know how it goes for you the second time around… keep us posted.
good write.. i appreciate the clarity of this post..
i totally agree with..”actions speak louder then a business write up..”
are u sure.. about the 30 odd friends of urs never wrote a business plan..
Yes, it’s true… so it’s really not necessary for you to create a business.
I’ve always wondered about this, I am a “budding Entrepreneur” and I thought I was going to have to finally sit down and write a formal business plan; which was never going to happen, I don’t operate that way. My plans are most often by the seat of my pants with adjustments made on the fly.
Thank you for putting so much thought into this post and to help me come to some sort of understanding and self agreement that it is okay to or not to do a business plan.
I think everyone should do what works best for them when it is all said and done.
Hey your plans can be on a napkin for all people care… it comes down mainly to your ability to hustle and get yourself and brand out there. If something is working for you, don’t change it.
Ya not a big fan of business plans just go with my ways and what works out, works out.
Well that work if it works for y0u. But when you become a big company I think we can all agree that you need a business plan inorder to get important investments. Lay it out and hit your goals. People will invest if they think it is good.
Maybe during a certain level, but the people I’ve known were dealing with investments in the several millions of dollars… so it’s something to have, but just not to waste your time on.
Well if that works for you… don’t stop doing what works!
I think we are just redesigning what a business plan is or maybe I really am not sure what a business plan is. But if you are building a powerpoint on how your company is going to make a ton of money and you need to invest in me. To me that is a business plan. So you need some structure.
The power point is really where you’ll need to put your efforts… If that’s what you consider a business plan that’s perfect fine too.
I think it depends, if you’re starting up a web venture then no, you probably don’t need a business plan, you just need a great idea and some kind of start on it.
If you’re starting a restaurant or a brick and mortar then yeah, you probably will need a plan to secure funding.
When you need to present an idea to the bank (usually a b&m) then yes, it’s required… but for most web based businesses, it’s simply not necessary. Well put Rob
Neil-
Great article. I’m inclined to agree with you – though I think there’s value in some basic math due diligence aforehand. Like “how many units of X, at Y price, do I have to sell in Z timeframe to make this business self-funding?” The answer to that question, and all of the thinking that is necessary to make the (self-funding) equation work is the essential guts of a start-up business plan. Of course we could find exceptions to that assertion, like the case where some innovative but not yet monetizable IP is being created. But for most entrepreneurs, it’s about figuring out the combination of marketing, sales, product, and operations that get the business to self-funding.
That basic mathematical exercise is not a “business plan” per se, but it gets the job done and focuses the mind on the important work.
Again, great article!
Tom
Exactly… it’s just not reality… there really aren’t any facts. It’s hard to say hey look at this and roll the dice on me because it makes so much sense on paper. Thanks for the comment Tom
Hey Neil
It’s a great post. Whatever we do requires a great amount of planning. For example, take writingleaf.com. I didn’t plan anything when I started this blog, so left way behind.
Well it’s definitely important to have planned what your going to do… especially in your case with a blog. For almost every blog, a business card really isn’t necessary what so ever.
PPT deck is a must. Business plans are a good exercise for collecting your thoughts nothing more. Not a roadmap.
Exactly… for collecting your thoughts, it’s perfect, but to expect anything more than that is pointless.
I haven’t really had time to read many of the other comments on here, but I completely agree with you!!!
The only time I’ve ever written a business plan is when I was studying!!! My, somewhat bankrupt, business teacher went on and on about how business plans were a necessity to get loans, investments and to get anywhere – how wrong they were.
I’m not the most successful person in the world, but I’m also not poor. A friend of mine wanted to go into business with me and, whilst I was doing all of the hard work, he spent months writing a ‘killer’ business plan, that I still haven’t seen! All it seemed to do was make him doubt himself!
At this point all hosting, domains, placeholders, company sites and copy had been sorted by me – and all he had was a page of writing. Brilliant.
Business plans are good sometimes, but that’s it. You’re not going to start up a shampoo company by having a ‘killer’ business plan. You’re going to start up a shampoo company by making some great shampoo and marketing it well.
You said it right Luke… business plans are good, but it’s not what will make or break your chances on getting funding. It all depends on what you’ll do and how you’ll do it.
I think it is a bit hasty to say you “never” need a business plan. You are taking the opposite extreme and neither position is correct.
Drafting a two-page executive summary and or a 20 slide PPT can be just as difficult and useful as drafting a 20 page business plan. Both give you an idea into the the mind of the creators, good and bad. Additional information is useful if used appropriately.
Of course getting your product up, running, and making money can do much of the talking for you, no disputing that. But without a plan, good luck into the future. Its kind of like someone who lives paycheck to paycheck, eventually you lift your head up after 5 years of struggle and you have gotten nowhere.
In addition, your point about the future changing so rapidly it makes plans irrelevant relies on the assumption your business plan should be static. This is incorrect.
Your plan should change with the times and should be used as a guide post to whether you are hitting your markers along the way or making the necessary adjustments as things change.
I have written several business plans, executive summaries, and a few PPT decks and found them very useful in getting me to focus on what it was I was doing and what the objective was.
Did that equate to success, not yet, but did it further develop my skills, absolutely. It is a journey my friend.
There are many people who do not attend college and become successful, does that mean your bet should be on dropping out and winging it? Probably not.
Put in the time to develop a plan and you will benefit from it no matter what the outcome of your current venture is, I promise.
Thanks for all your input but you need to understand that business plans are great… but they just aren’t necessary. You don’t need to spend days, hours, weeks working on one and thinking that it’ll be the reason why you’ll get funding etc.
I never said it would be the reason but telling people essentially never to write one, is folly….
It’s not the plan that makes you money… you have an action plan, what to do , achieve etc. A formal plan won’t help you get anywhere when you’re trying to receive funding.
I agree. not relying on only a business plan can be a good idea. I do think its always good to take the time to develop a good overall plan before hand though!
Yes have a plan, understand your market, but it’s not necessary to form an organized formal report about it.
By the way the lesson I learned from being forced to write a business plan. Was that after I thrashed it I understood that I did not need one as long as I was able to meet my expenses and not seek capital from a bank. Also after thrashing it I was able to create something that looked like a large plan on 2 pages. Much easier to digest.
By the way Neil did you get a copy of it?
I did get a copy of it and hopefully the phone call we had helped too.
I liked guy Kawisoki’s position on this create your pitch first and them make a business plan around it that is what is more important is how you will present it. It’s a good Idea not no get stuck in the muck of business plan building.
That is the way to do it… since you shouldn’t expect any type of financial backing from a plan, focus on how to sell someone on how you can and will make them a ton of money.
That was the thing that was the hardest for me to get when I was building a business, instead of trying to raise capital focus on developing customers, even though we didn’t have a product. A customer base of people who want your product looks like gold to a potential investor.
It’s a lot more impactful then a detailed 20 page outline of what you can “expect” or “forecast” to happen within the next 5 years.
I think its good to have a plan/outline but its not completely neccesary to have a complete 30 page business plan with projections. I took a few entrepreurship courses and all of them stressed about how you NEED a business plan. I believed it and stressed myself trying to come up with 30 pages of wording, projections, graphs like it was a school term paper. Then I realized who the hell am I going to show this to? The allmighty business god who will approve my business plan and say you can now run your business?? I was treating it like a job application thinking after I get it done I will have a business. I realized that nobody has to approve of you to run a business. You dont have to follow certain steps to run a business its actually the trailblazers/mavericks that are the most successful not the people that go by the book.
i think u rightly pointed it out.. many courses might not stress much enough on how to present to the VCs..
They give you details on it, but the only experience or knowledge you’ll get is by actually putting it into action.
lol… business god. Yes, most people think the same way you do… write a solid plan and you’re in! Great way to put it… “You dont have to follow certain steps to run a business its actually the trailblazers/mavericks that are the most successful not the people that go by the book.”
I like that!
Very engaging conversation here. Personally, I have to agree that you don’t necessarily have to write a perfect business plan. Yes it’s ideal, but what you need is a good presentation of your business plan how you are going to persuade them to approve your loan. You need to know exactly what makes you so sure that it is feasible and work from there.
Yes, it’s a process and obviously a ton of hard work… but then no one ever said it would be a walk in the park, you know. Learn the art of selling and focus on what you’ll need to do to become successful.
I agree and not agree with the post.
As I hate it to sit down and write a business plan, I just don’t do it. It really is a bit of time wasting to do so as it blocks the creativity (and passion of the moment) to get out there and get dirty.
But you don’t have to write a business plan, a plan would just be fine. Better investigate a situation and think of the steps you want to follow to create the biggest impact rather then figuring out something new and then you would have to start over again to make sure those steps are incorporated.
Good stuff Neil, like the website and posts, keep it up.
“50% of small businesses fail in the first 5 years because of lack of CAPITAL and lack of entrepreneurial EXPERIENCE.”
–can you reference that? does the Small Biz Admin really mush those two causes into one, without providing a distinct stat for each?
Well it’s true because everyone thinks that they can start up their own business and make a lot of money… by putting in way too much into the business along with the “newbie” factor, most people just don’t end up making it.
“Things change, so why would you waste your time writing a document that won’t be up-to-date.”
maybe true– but by then a biz plan will have done its job. its not supposed to be kept “up-to-date” for the life of the company.
It’s a great piece to have from time to time to be reminded of some of the stuff you wrote down, but a formal report isn’t what will make you money.
it is welcome news that a biz plan is not needed to raise capital. thanks for that, neil!
but i still think a plan of some sort is vital for other reasons– and maybe depends on the type of biz. i wish i had your gift of remembering everything that needs to be done!
A plan is great to have to have your thoughts in order, but it’s nothing more than that.
if a plan does not have the EXPECTATION of changing tech, changing market conditions, changing legal landscape, etc built into it, maybe its a poor plan.
There are very different expectations one can have when running a business, most of which are unpredictable. This indeed can be a sign of being unprepared.
The plan is not the answer. Your actions made at a particular time are the answer. Stop blaming a piece of paper and start blaming yourself if your business doe’s not succeed.
Exactly… it’s what you do…not what you write on a paper. Take the responsibility by going out there and taking action.
re the Red Bull comment, they HAD a plan– the right plan: ““The business plan was very much about a soft launch, seeding the product with key people and opinion leaders”
http://tr.im/IfNF
maybe it is important to make the distinction between ‘having a plan’ and ‘writing it down’. clearly you have built your biz’s with a plan in your head, at least.
It’s not a bad thing if you have a plan, it’s just that you need to be aware of the fact that a plan isn’t what will help you sell your ideas or concept.
Write a plan if you want, put on it your ideas, but don’t spend much time writing it or reading it every day because it will not help put those ideas in practice. You have to take action and know when to apply those ideas, and if new ideas come into your mind apply them also, but don’t waste your time by always writing down onto a piece of paper. Put them to work!
Spending too much time is really just an excuse to avoid doing the stuff that really matters.
“Time is Money” I agree with that’s but “Money needed Time” right?
Well the idea of money being able to buy you time doesn’t really work.
My mom told me a story about Abe Lincoln: he said that if he had 8 hours to chop down a tree, he’d spend 6 of those hours sharpening his axe.
My response was: yeah, but what if it turns out he only had 6 hours?
Neil, this post reminds me of “The Clock of the Long Now” — one of their conclusions about the shortening cycle of business was that it was basically evidence that we’re all headed towards some kind of singularity. This makes it hard to predict the future, and in particular how global resource constraints (think: oil, water, food) and connectivity expansion (think: the internet, the world is flat, distributed systems in technology) will play out against each other.
Great concept Jessica and I see where you’re going with it. Changing particular variations can drastically effect the out come in the sense that it’ll be completed either way. If we 6 hour work days compared to 8, the 8 hours amounts of work would still be completed….
the business plan lets us know our destination. So i think it has a role else we mat get lost on our way and forget what we have to achieve.
It’s really a great way to put your ideas on paper and prevent them from getting lost in your head. You can’t expect anything more to come from it though.
You may or may not be able to plan everything but I believe Business Plan would at least let you know what you are going to do and its a fact it can help you achieve your goals if developed properly and not just thinking about the stars.
A business plan is a fantastic way to write down your ideas and take them out of your head and onto a piece of paper… but they certainly aren’t necessary to help you gain funding for a potentially large company.
when i started my business everybody told me to write a bp too, but I didnt, my question was what for? things never roll out like u plan them cuz theres always the x factor that can hype or destroy ur business. its way more important to follow ur guts.
same goes for people telling u listen to him and her to get an advice, thats fine and alright, but its better to think for urself too.
it takes way more than a business plan to do business, aint the daily life everybodys business plan
It does… it takes action and results. Investors only care about the type of results you can produce… nothing more. A business plan can’t really sell a person on what the results will be…. not any more at least.
Hi,
defiantly i do! But only as pre-business phase, before you start rollin’, it defiantly answers some good questions; should you get involved in such a business? Maket, RIO… And when you start, fix things along the way…
It answers questions and allows you to take your ideas out of your head and onto a piece of paper… it won’t really do more than that. That’s what I’m going for here.
Thanks for this Neil. I think that sometimes business plans are good. I use them more as a ‘to do’ list when starting out in a new venture. They are also good for keeping direction and motivation.
Well good for you because they serve well as a to do list…. just don’t expect it to be much more than that though. What I mean by that is that you shouldn’t expect it to help in with investors or anything along those lines.
Better investigate a situation and think of the steps you want to follow to create the biggest impact rather then figuring out something new and then you would have to start over again to make sure those steps are incorporated.
Well having those steps is obviously ideal when starting any venture… you must prepare… no doubt! But the problem is that people expect unrealistic things from creating plans like the one we’re talking about.
Great blog Neil. As someone who didn’t really have any entrepreneurial experience and decided not to write a plan, I could say I successfully bootstrapped my business into earning close to six figures in our first year. Therefore, I can attest that running a business does not need a written plan.
However, it depends on who the person is…if you are great at adapting to the times and practicing flexibility you will do great without a plan. But if you are someone who needs a roadmap then writing a plan with a couple mentors and peers would help your business immensely.
I have seen companies (Marketing/PR firms) like mine operate in so many different ways that I find it ridiculous when people try to advise entrepreneurs about a right and wrong way of doing things.
The bottom line is that you have to be flexible. I will pass on the business plan…my time is better spent nurturing relationships and providing value to my community. I just did a blog post about the concept of FREE, instead of developing a business plan I would recommend creating your encyclopedia of knowledge.
http://su.pr/9uAgQD
Good for you Parham… you’ve been able to accomplish something with your business that probably 99% of entrepreneurs fail to do. Use your level of excitement and energy towards your next project or making the one you have bigger. A bp is only powerful for people who need help capturing info that’s in their head and putting it on paper. Great job on the blog post, it was interesting!
Business plan is also important of course it might not help you succeed if you miss to do it but plans serves as guidelines.
Sure… as guidelines it’s great, but people can’t expect it to be the reason why succeed.
I think what many here seem to be confusing is a formal business plan versus ongoing planning.
A formal plan isn’t necessary for starting many businesses, especially web-based ones. Knowing your mission and what direction you want/need to go in are what’s critical.
But I would advocate for ongoing planning in a business. That just simply means recording your business ideas, categorized, somewhere for potential use sooner or later in your business. We human beings are very good at coming up with ideas, and very good ones, but at the same time, if they are not recorded, they may tend to fall down the rabbit hole.
Not all planning ideas have to be used of course. Think of planning as “brainstorming for flexible future implementation”.
Very well put bud… especially for web based companies, your unique idea and what it will do is what will determine whether the decision from an investor is a yes or a no.
I’m really not sure how many people apart from yourself see this valuable guiding tool as a piece of marketing rather than what it actually is, a “plan”.
And those that do see it that way may actually benefit from writing a plan of their own because if they are lost enough to assume funding will come from a document, then they may actually realise what way they should be guiding their business whilst they are writing the plan.
I know your trying to give advice and save people time but don’t you think its a little irresponsible to post an article stating that you shouldn’t write a business plan when you have “never written a business”. For most of us and especially relative new comers to business, a business plan provides a way of checking your progress as well as a list things to done (meaning you won’t be sitting around thinking “hmm what can i do next?” and thus not wasting your time, since “Time is money”). Remember were using computers right now so once a plan is written it doesn’t mean it’s set in stone, it can be changed and updated as you like.
Although there are no stats proving a business plan helps, are there any to prove the small amount of time needed to write one will produce more for your business in the long term? No, and I think you need to realise any tool in business, or the world, is only as useful as the person using it.
The challenge Abe that you may or may not understand is that people spend days, weeks, months trying to create the perfect business plan to pitch to investors… through my experience as well as the experience of many of my friends who have started up several different successful companies, a business plan just wasn’t what helped the investors decide to move forward or not. If you must create one… sure! It’s a great way to take ideas out of head and put them on paper, but you really can’t expect to do much more than that.
I agree that the business plan isn’t everything, and look, I’m definitely not a fan of them either. With that said, it is still very beneficial to have a plan of attack going into the business. I’m pretty sure stats show that more people fail when they don’t have a business plan than those who do.
You should, if you don’t already know what your going to do and actually do it… what else will you pitch the investors on. They need to be sold on you being able to do what you say…not a piece of paper that predicts what may or may not happen.
I think what many here seem to be confusing is a formal business plan versus ongoing planning.
Yes, you’re probably right on that… most people are confused with creating a formal plan with just the idea of overall planning
I would disagree that business plan is something not so necessary. I would say that it is essential element of planing future. Business plan is not to predict the future but to know what to do if some events will happen. It is impossible to predict all but surely we can predict that some troubles can happen.
The problem is that people form business plans in efforts to get investors to fund the company. I’ve dealt with many start ups and not one was chosen because of a spectacular business plan.
as a professional who has written business plans in the past for clients for a living i think its a cause & effect issue. writing a business plan wont make you successful. but whoever is handing out the money usually wants to see something in writing that shows you have thought through the scenarios that might lie ahead, whether that be expansion, trimming the business to generate stronger cashflows, whatever. it probably depends on what you mean by a business plan. at the most basic level some entrepreneurs would no doubt benefit from scribbling down some basic costs, revenues, and timings, and then trim them back to see what happens if sales are lower by 10, 25, & 50%. i.e. a fairly basic robust assessment. this is often enough to show you early on that the plan is unrealistic. this doesnt mean you should necessarily scrap it, but it might tell you not to throw to much money at it, but try to set up a low cost ‘pilot’ and see what happens. but on balance i am in agreement; the traditional ‘telephone book’ business plan is a waste of time unless your business happens to be writing them for someone
Great take on business plans! Even though I’m not a business plan guy either, I do write down objectives and goals so that I can keep my small business on track and I have a stick to measure with. It can also help organize ideas in the beginning stages of a business, but the promise of business plan = success, funding, etc. is usually blown out of proportion for sure.
Writing them down or planning it out is fine and great! If it keeps you motivated and moving forward, that’s perfect! And yes, bp=success,funding etc. is definitely a no go!
True… true… true… agree… agree… agree…
Very very interesting. Just DO IT and follow the flow…
I am also an Action-oriented… Just get a big picture of what I want… Than DO it, face it and enjoy the process.
BUDI Rachmat @ http://twitter.com/budi_rachmat
That’s perfect because it’s an attitude like that which will help you go very far in life.
Ummm….I totally disagree. I mean all of this is true if you are just writing a business plan to simply have one. That is the beauty of this document, it can be anything you want it to be. But you cannot discount the value of having all of your ideas and strategies on paper. It is from there you remember what worked and did not. In addition, a business plan may be dug up years later and a concept originally ditched can be what revives a dying company.
But more importantly, whether the business plan itself helped your friends obtain venture capital is not really the issue, were they even seen by a VC without 0ne?
The problem I have with creating one is that there is no possible way to write down all of your strategies or thoughts. You’ll always come up with new ones.
As for meeting with VCs, the majority of them will meet with you if you don’t have a business plan.
I have always thought that a business plan was necessary. That is what I learnt and university and during post-grad studies. But I use to hate doing them.
I totally agree with Neil on this one.
1 – they take to long, are too detailed and no-one is going to look at it (it’s not like a budget); and
2 – it always holds me back from doing what I actually want to do, which is start the company/ project.
I just use bullet points and flow diagrams to map out what I think is relevant. That way, I can always change it around and see where I can go next.
Thank you for confirming any doubts I had Neil.
Right.. they are definitely fine for taking info out of your head and on to paper, but don’t think it’ll help you achieve some type of funding.
Another reason is that entrepreneurs don’t feel like they have the time to waste on a business plan. They feel their time is better spent working hard and putting in long hours to ensure the business succeeds.
Exactly… an entrepreneurs time is best spent work their asses off trying to make money.
Awesome stuff man! I was thinking the same thing.
I was about to sit down for 2 weeks and just write out the business plan, but never did, i just kept working on the site.
Awesome words here!!
Good stuff
Well I’m glad you spent your time wisely! Great job!
I am generally a “Ready, Fire, Aim” kind of person. If you jump into something that you are passionate about, I believe you can have success.
But what about the people with poor ideas – businesses that should have never pursued? The beat you head against the pavement sort of person who never should have started. Would the process of planning have helped them realize that are making a mistake?
I would actually say NO! How many people are brutally honest when they make the plan? I would suggest most people will interpret what they see for their own purposes – self-delusion. The old “Well, there is a $10B market for widgets and we plan on capturing only 1% of that market. That is a potential revenue of $100M”
Yea, right.
Whether people plan or don’t, an idea can end up being as dud as a firework that landed in water. You really don’t know if you don’t take enough action… consistently.
I don’t think you need a business plan, but having a vision documented and a set of steps needed to realise that vision is helpful when starting up. I use little cards with dot points. It doesn’t have to be much, but it does make a difference!
Having a document where you can take the ideas out of your head and on to a piece of paper is a great idea. Like your system… little stuff like that works great.
I think Neil’s basically right — 80% of the time a business plan is a waste of time. Business Plans as they are currently understood and written (e.g. in any business plan template) are 100% a waste of time. But, sometimes you do need to coordinate the efforts of 5+ people and it helps to have a shared vision. I tend to follow the model of the Founding Fathers — I write a Declaration/Manifesto, and a Constitution/Loose Operating Plan. It’s often extremely successful and all I need to do. Read more here:
http://www.habtmprojects.com/articles/real-entrepreneurs-don-t-write-business-plans
Thanks for sharing that GK, we’ll definitely check it out.
Business plans are great if business was static and we know markets change so a plan should only be a frame to work within you must be willing to take risks and improvise.
lol….yes business and static don’t even fit on the same page.
As someone who has writing my share of business plans both academically and as an exception for various business that where I served as an executive, business plans are generally, overrated for most people and situations. Predicting the future is hard to do
Forecasting is difficult… it’s great to be prepared though. The point is that you shouldn’t expect it to be the reason you get financial backing.
They are not a complete waste of time either. In fact, some people need to write a plan just to get there thoughts together and provide focus and clarity.
It’s fine to write your ideas and stuff down so you take them out of your head and all, but just don’t think of it being reason why get investors.
It is obvious that not planning raises money, but actions. However a business plan is required when opening a company. Then you can just burn it because it will not be useful any more. You are right world changes and entrepreneurs have to introduce changes into their companies.
Exactly… it just doesn’t work so text book as it was before… Times have drastically changed and investors are looking at projects and companies much more differently.
Wow!!! The business world has surely changed
Yes… you’re right, it definitely has.
Business plans just tend to take you off track with what’s really important.
Business plans, in my opinion too are a waste of time. People should concentrate more on setting up the business at some small scale first.
Yes, at least being able to take the thoughts out of your mind and putting them on paper helps drastically.
It depends on who you are.
If you are an average entrepreneur and do not know much you MUST make a business plan so won’t be homeless or something. Also if don’t have money you need a business plan to impress your investors.
If you are talanted entrepreneur or genious. You can make a huge profit without making a business plan.
Well the business plan is really only valuable for you to take the info out of your head and throw it on paper.
Enterpreneurs should have a strategy. From that strategy come strategic initiatives. You could call the initiatives you accomplish in the short term a business plan. Or a business strategy.
They should definitely have a strategy, but just not spend to the time trying to create the perfect business plan.
It is easy to have a business plan when the project is based on one or two specific ideas or USPs. Simply because that company can grow only in a limited number of ways. Say for example projects involving incremental innovations can be benchmarked using base line markets and technologies. This seems the easiest way to assess the commercial potential potential. However, I do not agree with the emphasis on elevated pitches in the business plan. In my view, these do not tell the true story. Perhaps, this the reason for the vast number of start up failures. I wish the fund managers were looking for substance and not glitter.
On the other hand, it is difficult to develop a clearcut business plan for projects that are based on a large number of new ideas or have much bigger business potential. In such cases, future, while assured because of the inherent technological foundations, cannot be clearly spelled out. Such companies could grow along any of the multiple options available to them. These companies are more likely to follow an evolutionary growth pattern.
Yes, mainly because it’s just too difficult to determine areas which are really unpredictable. It’s better to put focus on systems and are both predictable and duplicatable.
While I agree that you will learn much more from actually doing rather than planning, having the framework for your long-term objectives and core competencies is an important asset to your business.
Doing is much better than just planning… let me clarify that now. Experience in whatever you want to excel in is a lot more powerful than just reading about it. Playing golf is what will make you a good golfer, not reading about it.
That is an extremely apt example to illustrate your point, Neil. The only way to do it is to jump in and start swimming (or trying to anyways) Reading and talking about it is not going to do you any good whatsoever.
Talk is cheap
So you’re right!
I did get a copy of it and hopefully the phone call we had helped too.
Good, I’m glad it was helpful
So, what’s the real focus shoud have an Entrepreneur? A friend told me “just focus in people”.
Thanks,
Gaston.
If you help enough people get what they want, you’ll get whatever it is you want.
Well i didnt write one for my business i have now.
But if i was going to create a company i would. I need to lay out how im going to higher people to do all the work so the business becomes cashflow.
It’s great to get organized and stuff, but to have a business plan and think it will help you get investors for the company, think again. That’s what I mean.
I saw a video that was uploaded to one of your blogs and I was wondering if you could help me remember which it was.
the video had tips on how to draw lots of traffic in to a brand new website.
Thanks.
Mikey
all business plans should be wrote for the purpose to raise capital. That plan should layout how it will work like an engine that is micro manage by the owner.
They are and that’s usually where the problem lies… people are led to believe that it’s the end all to be all answer where it really isn’t.
indeed , i have been thinking about it, if you dont really have much control over what will happen, because of the external circumstances mainly, writing a plan is a waste of time , and time is money(and matter acording to einstein)
another great post
Exactly… you’re “plans” should consist of you just being action oriented.
Hiya Neil. I’ve been self employed in one way or the other since 1995, and have had businesses ranging from car audio fitment centres through to signage and even balloon decor. The one thing in common here is the total lack of business plans, except for one enterprise, where the business plan was presented to secure funding, and promptly steered away from
Well that’s an interesting thing to encounter!
Some great points there however you do need a plan. It gives you a sense of direction. Does not have to be a business plan.
I agree a plan will give you direction, a business however won’t guarantee you funding.
I never did a business plan for my internet marketing and im doing fine making a few hundred a week with no invest, no website, no nothing! So yes it can be done people.
I never said doing it wouldn’t make you money, I’m just saying that you can’t rely on it to get you investors.
I created a business plan and it made all of the difference in the world! Before I ran around from task to task without a plan. Wasted so much time. Now I plan my work and work my plan.
That’s the exact attitude you should have! Good job!
You are right that the business word has changed but don’t forget that we are doing business in this changed world and we know what is changed and how to deal with these situations.
You need to learn to adapt and overcome.
I think Business plans are always necessary for getting glance or achieving BEP. This is when you can start seeing your actual profit.
Not solely the concept anymore.
People buy from people they know, like, and trust, coupled with a REMARKABLE product or service… None of my clients have engaged with me, and asked for my business plan/s, all they want is value/results…. I liked this article… Entrepreneurs don’t play well in the “sand box”, they do things differntly than the “herd”…. Best, Brian-
That’s right… people buy from people who are like themselves. That comes down to your rapport building skills and sales skills.
The one good thing about a business plan is that it gives a potential business owner a look at expenses. However, the rest of the “projections” are mostly illusionist tricks and the expenses side isn’t always used or accurate. I once worked for an organization that wanted to create an advertising site. They created a business plan. They did not create a software plan. They did not understand the expenses in an e-commerce sit. They did not understand the time to turn a profit on an advertising site. They did not allow for time for testing the site. They did not research the willingness of their market to advertise online. They did not follow their own business plan and market the site. They did not allow for site maintenance, and expected the sales person to program.
But, they had a business plan! Needless to say, they did not succeed …
lol, at the end of the day, that’s what counts right.
I am on your side all the way Neil, because I use to advocate not writing a plan. If you are doing any startup on the internet, it’s not worth it. I wrote one for an e-commerce site I was running, it helps with organizing your thoughts about how your going to tackle certain situations, but after that quick thinking about that; I haven’t looked nor touched that thing. Internet startups evolve and change too quickly for a biz plan to be effective.
Because for the most part, writing a business plan is guessing.
Yes…. it is guessing. It’s better to take action and change accordingly.
My two cents:
In the movie City Slickers – what was the ONE thing?
You get what you focus on. – Tony Robbins
Recently I read Built to Sell by John Warwillow. In it is discussed the business plan centered on key competencies that is the linchpin of the organization. Maybe more than one business, or business unit, is necessary to accomplish it all? Without the focus it may be scattered results and a tattered looking enterprise.
Gerry
The point is that as far as investors go, you can’t expect them to help you just because you have one.
I definitely agree.
In my younger days, I must have written 40 or 50 different business plans for some good and many terrible ideas. The biggest problem with writing plans is that you are spending your time writing business plans and not building your business.
I have seen so many people (including myself) spend hundreds of hours writing business plans and many hundreds more trying to raise money, while at the same time, doing almost nothing to build the business.
Any online business requires so little capital to get started now that there is little reason to chase investment capital until you have gotten a few customers.
Also, many people seem to mistake a business plan for business planning. It is important to have clear goals and an understanding of the market but you definitely don’t need to follow the static plans of a document that is likely to be dated by the time you are finished.
Of course, every business plan is full of completely made up financial projections. Saying that you are going to be a $1oo million company if you can only capture 0.1 percent of the market is a bunch of meaningless crap.
Forget your business plan and go and get your first few customers. You might find yourself not needing that business plan in the first place.
Nice, very great insight, thanks for providing that! I agree with you in the sense that you need to pull the trigger and take action and change accordingly.
Writing business plans is just predictions about an unseen future. Most of these plans end up in Junk. Thats the reason i scrapped business plans and started to get into real actions.
I agree… what you do ends up being far from what you originally wanted to do. Especially with things changing so quickly.
I think we are just redesigning what a business plan is or maybe I really am not sure what a business plan is.
Lol, maybe it’s best you keep thinking that way
Especially with things changing so quickly.