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Share Your Viewpoint on Business Plans: Are They Necessary?

By July 5, 2010

We've gotten a lot of feedback on our recent post, "Death to the Business Plan," in which small business CPA Michael Hanley said business plans are mostly unnecessary:  They hold back entrepreneurs, who use the lack of a plan as an excuse to not get their venture going. We've created a place for you to weigh in. Let us know whether you have a business plan for your entrepreneurial venture, and if so whether it's something you actually run your business with. Or does it sit in a file somewhere gathering dust? If you don't have a plan, what impact has that had on your business's success. Share your experience here.

Comments
July 6, 2010 at 12:31 pm
(1) Del Chatterson says:

Wow, such heresy!
What happened to “Fail to plan, Plan to fail .”
Every business needs a plan for many good reasons – primarily to communicate strategic direction and goals so that management and staff are making decisions that support the plan. Even if not required for financing.
Maybe not well documented, but at least thought through and applied. Of course reality will be different from the plan, but if the direction and goals are clear the path taken is less important.

July 6, 2010 at 12:42 pm
(2) Del Chatterson says:

Hanley is right that “no business plan” may be an excuse for not getting started, but it is not a reason to start without one.
Entrepreneurs are by nature action-oriented and may “fire!” before the “ready, aim” work is done. But some knowledge and research is required before spending a lot of time and money feeling the way. That’s part of the incremental, iterative approach that works best for business plans. Get some ideas, concepts and strategies on paper then test them, review, re-write and expand the plan so that it leverages market strengths and avoids the risks.

July 6, 2010 at 2:00 pm
(3) Ryan K says:

What started as a side hustle has quickly become a thriving photography business. I definitely don’t use business plans. I know myself well enough to know that I would spend a lot of time refining it to only disregard it completely.

In the photography business being able to shoot in the dark quite literally is a strength.

July 6, 2010 at 3:35 pm
(4) Kim Castle says:

I agree the formal way a business plan has been taught in biz schools and passed down for years is no longer appropriate for today’s kind of business. I’ve been in biz for 20 years, and helped thousands of others grow there’s as well.

I was invited, along with 19 other successful entrepreneurs to speak to the graduating class of entrepreneur MBA’s at the USC Marshall School of Business. This subject came up and 100% of the successful entrepreneurs all agreed that a “formal business plan” is not helpful to be an entrepreneur in business today.

If you want to raise money, and that’s a different story. But to be in business you do need a plan to follow. We call it a living business plan, that provides; focus, accountability, strategy, stability, yet provides room for growth and expansion.

Bottom line: Don’t spend your precious energy on putting yourself into a box of a business plan, instead create a sustainable living plan for business.

July 7, 2010 at 10:47 am
(5) Geraldine Daly says:

Business plans are a must. However, not in the format that is applied by most businesses. Something to be done, filed and dusted off only when the bosses look for something or there is a need for the business to refinance. A business plan as a working document, constantly reviewed and updated is a formidable tool. Most formats are not user-friendly however. Whether it is a life plan/live plan/departmental plan/business plan – properly designed, utilised and updated it keeps one focused, with tangilbe goals, allocated responsibilities and deadlines as well as a measurement tool. Geraldine

July 9, 2010 at 12:53 pm
(6) Sandy Raddue says:

A business plan can be a one page document with goals and strategies outlined.
OR it can be the behemoth document that the business schools teach as necessary.
I think the truth is somewhere in the middle. I use one with the business we started 4.5 years ago. I’m still amazed at how staggeringly accurate it is – even sometimes IN SPITE of our actions.
If I had a hobby I wanted to use to make money, I wouldn’t use a business plan. However – to have a real business, with the goal of supporting MY family (and others) is too important to leave to chance.
Will some folks make it without one? YES.
Will some business fail with one? YES.
But I use one – and I have a successful business, ready to move to “the next level” just as outlined in “the plan”!

July 9, 2010 at 1:01 pm
(7) David E Y Sarna says:

Funders always require a business plan. All business plans overstate growth, understate ramp-up time, project losses followed by huge profits. So why are they still required?
The plan gives insight into the quality of thought, management, experience, degree of arrogance, etc. They are necessary but not sufficient to achieve funding.

July 9, 2010 at 1:21 pm
(8) Becky Sturm says:

If you don’t have the money to start your business, you most certainly need a business plan.

When I started my business in 2005 I walked right into a bank and was given a check before I left.

I have never defaulted on a loan, credit card or filed personal or professional bankruptcy and I cannot get anyone to lend me money now.
Hence, the reason I am almost done with the first business plan I have ever done.

It is very humbling.

July 9, 2010 at 2:21 pm
(9) Denise Beeson says:

I truly believe that a plan is vital for success. I teach small business management classes and students are required to write a feasibility analysis on their business idea. It is surprising how little some people think through their idea. We tend to spend more time planning on our summer vacations i.e where we are going, who we are going with, what flights to take or road to travel, sites to see, etc. than putting pen to paper and thinking through our business idea.
I start with a very simple premise “revenue-cost=profit”. Depending on their expectations on making money, this exercise can be very helpful. If the student decides that they can “afford” the time, energy and money to pursue their idea, I suggest they write a business plan.
There are many types of plans for different purposes. If this is a micro enterprise an extensive plan may not be needed. On the other hand if they are interested in seeking equity funding for the next “Google or EBay” from an angel investor or venture firm usually the investor wants to see a comprehensive executive summary and then the data to follow to substantiate the funding requested referred to as the “use of proceeds”.
So, in conclusion,
*examine how money do you want to make vs. how much will is cost you to make it resulting in your “profit”,
*what is the purpose of your plan
*and, then write the plan that will get you there!
Thank you for the opportunity to contribute.
Denise

July 9, 2010 at 2:35 pm
(10) Michael H. says:

So much time can be wasted with traditional business plans, especially if you are a new venture. Your goal as a new venture is to find a repeatable and scalable sales cycle by working with early customers (see Steve Blank’s Customer Development). If you are involved in writing a business plan for a new venture without paying customers, stop immediately. Initial business plans are sets of untested assumptions that need to be validated by people who will be using and/or paying for your product/service. The most reliable feedback that can be used to test these assumptions is by working with early customers. What matter’s is not what you think, or what investors think, it matter’s most about what customers think. There are several factors in play, however, one alternative to a traditional business plan in a company pre-product/market fit is to outline all of the thoughts and assumptions you are making. These may likely change over time as you learn more about your market. Some of the most sophisticated AND accredited early-stage investors in Silicon Valley do not require business plans (and do not read them), as they realize the old adage of “no business plan survives it’s first customers’. Investors may likely be betting on you as an entrepreneur to be able to pivot and adapt. One last thought, if you know your business well and have found your repeatable and scalable sales cycle, its’s important that all of your stakeholders are on the same page. Maybe some type of plan is helpful in this case for internal distribution.

July 9, 2010 at 3:29 pm
(11) Ann Latham says:

The main purpose of a business plan is to borrow money, attract investors, or win a business plan competition. Anyone going into business needs to think about how he/she can win at the game of business, but not everyone needs a business plan. The basic questions to consider are:
- What value can you provide for which customers are willing to pay?
- How will you reach those customers?
- Why you and not your competitors?
- How can you provide that value profitably?
- What investments and other resources are needed and how will you fund them?
The more people and money involved, the more thoroughly these questions must be answered. Few people are willing to hand out money based on a hunch and back-of-the-napkin calculations; most will want to see a business plan first. However, anyone chasing an idea, investing nothing more than personal time, and ready to take the plunge, should not feel compelled to follow someone else’s rules about planning and documentation.

July 9, 2010 at 3:30 pm
(12) Michael Chmura says:

Research by Babson professors William Bygrave and Julian Lange finds no difference between the preformance of new businesses launched with or without written business plans. See the study at http://elvis.sob.tulane.edu/Documents/Uniandes/BusPlans.pdf

July 9, 2010 at 4:21 pm
(13) Diane Helbig says:

If you are seeking funding for your business you will have to write a formalized business plan. Otherwise, I believe you need a vision and then a plan for achieving that vision.

The key elements of a ‘business plan’ are:
Vision that is Clear, Accountable, Realistic, Measurable, and Ambitious
Action Plan that you create by working backwards from your vision, and that you monitor consistently
Communication Strategy where you communicate your vision, expectations and consequences, and progress.

This is how you use a ‘business plan’ effectively to grow your business and keep yourself on track.

July 9, 2010 at 6:32 pm
(14) Derrick M. Guest says:

Business plans are very necessary, you need to start a road map for your business. It is great for a couple of reasons, it helps you learn your industry by researching your business ideas and two it gives you a plan in which to follow, yes after running your business you may change direction but that is the beauty of updating your business plan to fit your target market and to follow what works for your business.

July 9, 2010 at 6:48 pm
(15) Sanket Nadhani says:

Nope, not at all in our case. We started as a 17-year old’s plan to make some pocket money on the side and now have 16,000 customers and 280,000 users including a majority of the Fortune 500 companies.

Here’s a slide deck from our founder’s talk on our complete journey – http://www.slideshare.net/pallavn/the-fusioncharts-journey

July 9, 2010 at 8:22 pm
(16) Gary W Patterson says:

There is no need for a business plan, UNLESS you want to make money and succeed.

July 10, 2010 at 10:11 am
(17) Geri Stengel says:

I’m an adjunct professor, serial entrepreneur, coach and consultant.

A business plan is a road map showing how an entrepreneur is going to start and run his or her business. It gives the entrepreneur the ability to develop assumptions, consider alternatives before committing resources and it’s a sales tool for attracting investors among other things.

The benefits far outweigh the time it takes to write the plan because it gives the entrepreneur the ability to develop assumptions, consider alternatives before committing resources. It’s a sales tool for attracting investors and partners. And, the list goes on.

At its core a business plan is a description of the company and how to launch, run and grow it. Like any other journey things go a lot more smoothly if you prepare and bring a map. It doesn’t set out all the solutions to potential problems but because the process itself (http://ventureneer.com/sites/default/files/ventureneer-ebook-getting-ready-to-grow.pdf) makes you aware of opportunities and challenges. Fore-warned is fore-armed!

July 10, 2010 at 1:34 pm
(18) Helena Hauk says:

A business plan is good but I feel a strategic plan is critical to the success of a business. The business plan is necessary for financing or engaging investors or future partners. My opinion is the business plans tell the “who” and “what” of the business and the strategic plan tells the “how” and “when”. In order to get engaged with a lender, business owners need to remember that the lender/underwriter/loan committee know nothing of this business and the best way to ensure the right message is being communicated is to deliver a well written business plan. Even if you have been in business for years, prepare a brief business plan, again answering who and what you and your business are. Talk about your industry and why you stand out in it (this exercise ensures YOU as the business owner know your market and where you stand in it.) If you don’t think that is important, I question your being in business in the first place. To me the most important questions that can be answered is how and when you are going to build your business which is answered in your strategic plan. Know WHO you are before embarking on this exercise to ensure a focused and successfully implemented plan (that you actually follow). How else will you be able to measure your success?

July 10, 2010 at 8:42 pm
(19) Jim Hill says:

Isn’t it that strategic planning is a business plan itself?

July 12, 2010 at 5:49 am
(20) Jamie Woodridge says:

A business plan is necessary to every business. And this business plans should be done strategically.

July 15, 2010 at 7:42 pm
(21) Marc Anderson says:

I think business plans are not the ‘be all’ in business. Creating a business can be done in a myriad of ways and this is just one of the choices a new business can make…either to make one or skip it. I chose to skip it and haven’t looked back…maybe one day I will make one but right now I am too busy to even consider one.

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